Clark County’s craft brewers are bucking a nationwide trend of increasing costs and declining sales, but they’re still being forced to rethink their business plans and are taking a cue from coffee shops as a possible future path.
Key to local challenges is a 30 percent increase in the price of malt, an essential element in every glass of beer. Prices for hops have also risen.
At Fortside Brewing, 2200 N.E. Andresen Road, Vancouver, Mike DiFabio said he has seen the price of everything from carbon dioxide to restroom supplies increase, but the steep increase in malt price has created the greatest impact on his business.
Malt is a processed grain (typically barley) that provides sugar for the yeast allowing for fermentation. Local brewers get most of their malt from two large companies — Great Western Malting, which is part of The Country Malt Group, and BSG Craft Brewing.
Nate Choma, marketing director at BSG, said the 2021 barley crop was the poorest in decades in both quality and quantity. The problem has been compounded by the war in Ukraine and the rapid increase of energy and transportation costs in Europe.
One bright spot for local craft brewers is that at least they aren’t seeing the decrease in sales experienced on the national level. Michael Perozzo, owner of Vice Beer, 705 S.E. Park Crest Ave., Vancouver, blames the national drop in sales on grocery store transactions where craft brewers compete with larger companies that can more easily absorb increases in the cost of production.
A craft brewer makes about $1 on a six pack at the grocery store. “If you guarantee Safeway and Albertsons at a price and costs go up, it’s a problem,” said Perozzo.
Selling the experience
Perozzo said he thinks craft brewers should take a cue from the coffee industry.
“Breweries are going to a coffee shop model that was adopted in the 90s with beer being like an afternoon coffee,” he said. “Coffee shops created a brand based on having an experience. That’s what beer is doing more and more.”
Trap Door Brewing, 2315 Main St., Vancouver; 54:40 Brewing, 3801 S. Truman St., 1, Washougal; Backwoods Brewing Company, in Carson and Portland, and Heathen Brewing, 1109 Washington St., Vancouver, have all opened additional spaces recently. Vice Beer just signed a lease to open a spot in downtown Vancouver.
Creating unique taprooms is the key. At Vice Beer, Perozzo steered away from the typical Pacific Northwest taproom theme with drab colors, lots of wood, murals of trees and Edison bulbs to a more colorful palette and retro theme inspired by places in San Francisco and San Diego.
One major benefit of taprooms: brewers get 100 percent of the profits from every beer they sell. They can also adjust prices based on costs of production.
Some craft brewers are also mimicking coffee roasters by shifting craft beer from the commodity category to the specialty category.
“Once you’re a commodity, everyone wants you to be cheap and affordable. When you’re a specialty product, they seek you out and will pay a premium,” said Perozzo.
He used the example of Portland’s Oakshire Brewing, which reinvented its whole brand by “growing down,” moving away from mass sales to making less beer but focusing on creating a high quality product.
It seems counterintuitive that brewing less beer would increase the bottom line, but scarcity and quality can increase profit, he said.
Costs should ebb
The Brewers Association predicted that in 2023 the supply chain will remain rocky, but average prices will come down from the extremely high prices of 2022. Nate Choma at BSG said it’s difficult to predict the future of malt prices. The better barley crop of 2022 followed by a high yielding crop in 2023 could stabilize pricing, but it will also depend on improved global logistics, geopolitical issues, and the overall cost of doing business.
Quintin Maruchin, owner of Bader Beer & Wine Supply, 711 Grand Blvd., Vancouver, recently received new price sheets from BSG and Country Malt with more modest price increases, but he’s not willing to guess what this means for the near future.
“I’ve stopped trying to forecast prices,” Maruchin said. “Customers are used to increases these days.”