HOUSTON — The cost of war in Ukraine could soon trickle down to local breweries as the price of barley, a key ingredient in beer, skyrockets.
This comes on the heels of a challenging pandemic.
For the past two years, many small businesses have been trying to stay afloat as they dealt with shutdowns, capacity restrictions and the rising costs of goods due to supply chain issues.
Saint Arnold Brewery has weathered the pandemic, although not without cost.
“We’ve been seeing an increase in all of our costs,” explained Brock Wagner, co-founder and brewer at Saint Arnold. “Cans, barley, cardboard … we saw about a 50% increase in the cost of our cans.”
Wagner said they’ve been eating most of the costs and counting on their creativity to make up lost revenue. But finally, after an impacted bottom line, they had to raise praises.
“We, along with pretty much the entire industry, at the beginning of this year, bumped up our prices a little bit,” he said.
According to Wagner, their six-packs went up about 50 cents. However, he points out that the breweries' costs per six-pack went up more than $1. They’re still swallowing the costs to keep customers happy.
Recently, another problem arose.
“Our 2022 plan did not include Russia invading Ukraine,” he said.
Russia and Ukraine are large exporters of wheat and barley. Barley is a key ingredient in making beer.
“The typical price increases are 50% to 70%. That’s just unheard of,” Wagner said.
One of the recent challenges is the daily fluctuation in prices.
“We are already going to see businesses trying to absorb those costs and saying, ‘OK. We can’t absorb it anymore, now we have to pass this on to the consumer,’” said Dietrich von Biedenfeld, assistant professor of business law and supply chain management at the Marilyn Davies College of Business at the University of Houston Downtown.
Biedenfeld expects prices to keep rising. He said, currently, prices are high and economists anticipate shortages once those shortages truly arrive.
“That demand and the competition for those resources is going to explode in the pricing market,” Biedenfeld said.
For now, Saint Arnold plans to continue to eat those costs. Smaller breweries may not be able to do so. Wagner, referencing the Astros hat upon his head, admits the past two years have been challenging.
“I’m wearing this hat, not only because I’m going to the game later tonight, but also to hide all the hair that I’ve lost over the past two years,” he said.