THE GIST
On Dec. 15, a member of the Facebook group Craft Beer Professionals shared a short post about their latest worry: “YIKES! New price increases from BSG coming in.” The text was overlaid on a brown background with cartoonish, floating, three-dimensional poop emojis. The images were meant to elicit a laugh. The general sentiment of the post and its replies were not.
The costs for just about everything it takes to make, package, and ship beer are rising, and malt is no exception. But for this particular ingredient, higher prices from big producers are opening the door further for America’s burgeoning “craft” malt industry. Long a premium ingredient, the price gap is shrinking between craft malt—barley and other grains malted by small, regional maltsters—and products offered by multinational companies. While their products are still, on the whole, more expensive, craft maltsters see current economic conditions as their best opportunity in a decade to make a dollars-and-cents pitch to breweries to choose their malt over what’s provided from some of the largest maltsters in the world.
As referenced by the Facebook post, BSG, or Brewers Supply Group, reportedly raised its price for two-row and pilsner base malts to roughly 70 cents per pound. This follows at least one prior price increase over the past year: BSG announced an unspecified “incremental price increase” in March 2021. One brewer, who asked not to be named discussing supplier relations, says that their brewery was paying 53 cents per pound for base malt from BSG roughly a year ago, but that the price increased to 67 cents in November. This figure isn’t the final tally for an order, as that price doesn’t include shipping costs, which the brewer says “fluctuate constantly.”
While BSG did not respond to requests for comment, pricing sheets reviewed by Good Beer Hunting reflect the current cost of 70 cents per pound, including one publicly available online. The higher price is a painful one because base malts are the ingredients that form the bulk of most beer recipes. Imported malt from Europe also now costs more due to higher freight and shipping costs as well as ripple effects from Russia’s invasion of Ukraine, a global barley-growing powerhouse.
Craft malt, meanwhile, remains a niche alternative, making up about 1% of total U.S. malt production, according to North American Craft Maltsters Guild (NACMG) executive director Jesse Bussard. But they’re growing: Craft malt production in North America has increased by 60% since 2019, according to the guild.
In 2022, craft malthouses estimate they produced 24.7 million pounds of malt, up from 15.1 million pounds three years ago.
They’re projected to grow production by another 30% in 2023.
There are 67 businesses designated as craft maltsters in the U.S. and Canada, up from eight in 2013, when the organization was founded.
At Valley Malt in Holyoke, Massachusetts, owner Andrea Stanley admits her company can’t typically compete on price with two-row malt from the biggest domestic producers like Rahr or Malteurop. However, Valley Malt’s base malt prices begin at 99 cents per pound—with discounts for large quantities—so the gap is closing.
“We are right there in the ballpark, and so now it’s plausible that buying [locally-produced malt] is competitive with these other malts,” Stanley says. “I’ve felt this ever since day one—if we can ever be competitive with European malt, that’s going to be a bit of a game-changer, a tipping of the scale.”
WHY IT MATTERS
The base price and shipping cost increases breweries have reported from commodity malt suppliers would probably elicit grumbling under any circumstances, but they’re especially unwelcome now. In November, breweries’ producer price index (PPI)—what companies on aggregate pay for things like malt, freight, carbon dioxide, and cardboard, as measured by the U.S. Bureau of Labor Statistics—rose to its highest level in at least three decades. Breweries were already contending with rising costs before BSG announced its increases. Malts—whether domestically produced or imported—had, on the whole, stayed steady in the PPI since spring. That appears to be changing.
Relief isn’t on the horizon, either, according to Bernstein alcoholic beverage research analyst Nadine Sarwat. As quoted in Beer Business Daily, Sarwat anticipates that U.S. malting barley prices will increase +36% in 2023, and that breweries will need to increase the price of their beer +2% as an offset. But raising prices at a time when beer is losing sales volume is risky: While alcohol overall has proven resilient to economic downturns, craft beer in particular may not be as lucky. These dynamics put more pressure than ever on breweries to control their bottom line through ingredients costs.
Stanley says Valley malt hasn’t raised its prices since it began operating in 2010, though her operating costs have increased. As European malt prices have risen this year, it’s made Valley Malt more attractive to breweries that previously could have seen local malt’s prices as out of reach. Stanley says the same week that BSG and another large maltster, Country Malt Group, increased prices, she heard from breweries who were suddenly interested in potentially working with Valley Malt.
“What I’m hearing is an openness to changing out a malt that they have built brands around, which brewers don’t usually do,” she says. “What I’m also hearing is ‘When is it going to stop?’ These price increases [from commodity malt] have been happening pretty rapidly and I think there’s a fear that if it’s 85 cents or 90 cents today, what’s it going to be in June? Because it’s probably not going down.”
In contrast to national and global suppliers like BSG or Country Malt Group, craft maltsters are generally focused on sourcing and supplying small-batch grains from within their region. For the past decade, craft maltsters have generally competed on what they say are intrinsic values over financial ones. Local maltsters tout their connection to family farmers, a commitment to responsible agricultural practices, and the unique flavor attributes of their products. For example, Gallatin Valley Malt, a craft maltster in Manhattan, Montana, touts low-temperature, high-airflow kilning for imbuing its Hyalite Pilsner Malt malt with “subtle, biscuity flavors of flour, hay, and honey.” Loveland, Colorado craft maltster Root Shoot Malting describes its Genie Pale Malt as “more flavorful” than standard 2-row, with notes of bread and honey.
The gulf in scale between craft and commodity malt is massive. The NACMG restricts its membership to malt houses that:
Produce between 5.5-11,000 tons annually.
Commit to using grains grown within a 500-mile radius of the malthouse for at least half of their output.
Are majority independently owned.
At the other end of the spectrum, Country Malt is one of the five largest commercial malt companies worldwide, and is a wholly owned subsidiary of United Malt Group Limited, a publicly traded company listed on the Australian Securities Exchange. United Malt has a global annual production capacity of roughly 1.4 million tons across 13 processing plants. (Country Malt Group did not respond to requests for comment. Briess, another international malt supplier, declined to discuss its pricing.)
Making the economic case for craft maltster’s higher-cost offerings has been difficult, especially when it’s not clear whether beer drinkers care about the provenance of malt. It’s easy to find beer brands in chain retail placements across the country that highlight Citra or Mosaic hops in a name or on a label, but breweries generally are not calling out barley malts like Maris Otter or Golden Promise by name. But this latest argument by craft maltsters isn’t focused on the marketing prowess a varietal can provide—it’s about bottom lines.
With the price gap between craft malt and commodity malt narrowing, some brewers and craft maltsters believe now is the time for craft malt to finally compete economically against its larger counterparts. Given high shipping costs, a brewery may save additional money by sourcing its malts from its region rather than from across the country or overseas.
David D’Angelo, co-owner and chief operations officer of Sidereal Farm Brewery in Vasselboro, Maine, says he’s seeing a change in his colleagues' thinking, albeit a subtle one. As a former salesperson for milling operation Maine Grains, D’Angelo has been an advocate of local malt for years. But it’s only recently that local maltsters have built up enough volume to offer competitive pricing and to service larger breweries.
“I have friends in the industry who will still buy some malt from the commodity [suppliers] just because … those malts were giving them the bottom line they’re looking for. But as we’re discussing, the gap is definitely narrowing,” D’Angelo says. “I see breweries who said they couldn't use this much local malt and now I see them using quite a bit of it.”
D’Angelo agrees that craft malt is still a premium product, but it’s becoming a more justifiable expense as its price differential with the commodity stuff rises.
The pilsner malt that Sidereal uses costs $47 per 50-pound bag (94 cents per pound).
Flaked wheat is $40 for a 50-pound bag (80 cents per pound).
For a small brewery like Sidereal, D’Angelo says paying 14-20% more for local malt (versus BSG’s 70 cents per pound) is a no-brainer, especially because it’s in line with the brewery’s overall commitment to regenerative agriculture and environmental stewardship. He likes to use beer ingredients as examples of the brewery’s ethos, stating on Sidereal’s website: “Our choice to source ingredients primarily from regional farms and growers stems from our love for the environment, and our experiences stewarding our own land in an organic and regenerative way. … The ingredients we choose and farmers we choose to support help shape the planet, either for the positive or negative.”
How many consumers are motivated by the brewery’s agricultural practices, though, is uncertain.
“The average beer consumer probably doesn't give a shit where your malt is coming from,” D’Angelo admits. “But then again, I think that consumers in general are starting to be a little bit more aware of where their products come from. They like to know that the vegetables at the restaurant are local or whatever. They realize it’s all this responsibility mumbo jumbo, but at the same time, it’s also key to getting good flavor. I don’t think that the enthusiasm is all there yet but I think that the brewers are the ones who are going to be telling that story.”
The larger U.S. economic picture is not rosy for craft malt, however. A looming recession, rising interest rates, and slowing sales for craft beer at chain retail are putting many breweries into belt-tightening mode.
“There’s been this bizarre inversion, and we have found ourselves being less expensive than a couple of the big malt suppliers in certain situations. The counterbalance is we are going into a recession and we’re at a time when craft beer consumption is down,” says Scott Hickman, CEO of Asheville, North Carolina’s Riverbend Malt House, a certified craft maltster. “Breweries are logically looking at ways to cut costs. They might, if they’re scrutinizing everything, say, ‘Let’s buy the cheapest malt.’ … I can understand that if you’re worried about making payroll this week, those are very real pressures.”
In his days as a craft grain salesman, D’Angelo says he debated brewers who asserted that quality ingredients simply weren’t as important as brewing technique. They could buy cheap malt, they argued, and with good equipment and processes, make a solid beer. D’Angelo pushed back a bit.
“I say to people: ‘Buying stuff from Country Malt is just like buying a sweater from a catalog.’ You go out to town and you realize, ‘Oh shit, that guy has the same fucking sweater I have,’” D’Angelo says. “Everybody is doing the same thing. Whereas if breweries are buying grain locally, you can actually start having a conversation about a sense of place.”
But there’s a cost for that sense of place. A brewery ordering one pallet of malt (roughly one ton) from a craft maltster at 99 cents per pound would pay $1,980, versus $1,400 for malt from a larger supplier at 70 cents per pound. At two pounds per gallon of beer, that’s a $90 price differential between craft and commodity malt for a 5-barrel batch of beer, a common production size for many craft breweries.
The push-pull of macroeconomic factors—rising commodity malt costs alongside the possibility of recession—raise a complex question for craft breweries: Do they upgrade to craft malt because its price differential with commodity malt is narrowing, or do they become more budget-conscious than ever in advance of a possible recession?
Both cost-cutting and a more local supply chain are top priorities for breweries recently surveyed by Bump Williams Consulting’s annual 3-Tier Growth Strategies Survey, released earlier this month. If craft malt can make a convincing argument on both fronts, it has greater opportunities than it’s had in a decade.
But craft malt isn’t immune from rising costs facing breweries and other suppliers. Both Valley Malt and Riverbend say utilities, labor, and freight are all more expensive now than a year ago. But their companies’ growth—Riverbend was named to Inc.’s list of the 5,000 fastest-growing privately held companies this year—has allowed them to achieve efficiencies that mean they don’t have to pass those costs on to brewery customers. Valley Malt hasn’t raised its prices this year, and while Riverbend has done so on select products, no increase has been greater than +5%.
Small maltsters hope this creates a cycle: Increased brewery orders allows them to keep growing, which in turn keeps their prices competitive with commodity malt, which makes them more attractive to new brewery customers, and on and on. In 2022, 70% of the craft malthouses who responded to a NACMG survey reported making substantial capital improvements or expansions to their facilities since 2020, with 21% making investments above $1 million.
“With any business, your overhead goes down as your production goes up,” Stanley says. “We’ve been able to ride that fine line.”
Words by Kate Bernot