Tuesday, June 12, 2007


Kegs are just about impossible to come by these days. When you can find them, they go for $150 a pop. I'll try to explain why this is, and what it means for me.

I've mentioned it before, and you can bet I'll keep mentioning it, stainless steel is at historically high prices. Check out http://www.meps.co.uk/Stainless%20Prices.htm for a summary of how prices have gone up in the last year. This is affecting the cost of most of my new equipment, especially fermenters and kegs.

At the same time we're hitting records for stainless, craft beer is more popular than ever. Last year craft beer grew 12%, and it looks like this year will be even stronger. There's very little used keg inventory, if any at all, as craft brewers are buying up any kegs they can get their hands on.

To make matters worse for keg supply, a major manufacturer, Spartanburg, sold its keg production business, and the new manufacturer doesn't seem to be cranking out any new product.

As stainless prices keep going up, the value of kegs to scrap yards has obviously gone up as well. Keg theft is at an all time high. A brewer can expect to lose 10-15% of their kegs in a year unless they take measures to prevent this.

One solution is higher keg deposits. Current deposit amounts in California are about $15 per keg, about 10% of the cost of a replacement keg. This is not high enough to thwart theft, but charging $50 or even $100 is impractical when other brewers continue charging a nominal amount. Deposit fees are generally set by the big guys, as retailers don't see why craft brewers can charge $50 keg deposits while Budweiser is charging only $15 for the same keg. As a large multinational corporation, Budweiser and other large brewers are better able to absorb the cost than the local craft brewer. Many retailers are just concerned with cost, and charging a higher keg deposit makes craft beer a less profitable prospect as it ties up their cash.

Another solution would be to sell kegs to only those retailers who you trust. I have many good relationships with beer bar owners and I trust them to take good care of my kegs. I would be reluctant to sell beer in a keg to a retailer who I do not trust. This will impact my growth, but losing $150 on a keg for a $120 sale doesn't make sense to me.

Keg leasing and logistic companies, such as Microstar, are a good alternative to buying kegs. However, they are feeling the crunch too. They can't keep up with craft brewers demand and can't afford to buy new cooperage. Microstar isn't taking any new customers until early 2008, and they are requiring breweries to sell them their current keg inventory.

On the bright side, Sly Fox's John Giannopoulos and Christian Messmacher have plans to produce stainless kegs in China by the end of summer. This will increase the supply of new kegs, but they will likely be sold at the same rate as US and European keg suppliers. There are also new plastic kegs and aluminum kegs that might be feasible alternatives, but most brewers would like to stick with the predictable stainless keg.

What does this mean for me? Well, I probably won't be able to find used kegs to buy. Used kegs are going for about $90-110 for a 1/2 barrel keg. This is a significant savings over new keg prices, which are currently going for $150. When I put my budget together, I anticipated spending $110 on new kegs. For 100 kegs, it'll cost about $4000 more now due to stainless prices. Don't even remind me that 2 years ago new kegs were going for $90 or less.

Ultimately, keg prices will affect the types of beers I'll release. I will bottle as much as possible, and brew beers that are best suited for bottle conditioning. This is probably a good thing as I'll be able to produce more interesting beers, but bottling is much more time and labor intensive. There are glass shortage issues I'll have to deal with, but I'll save my complaining on that matter for another day.

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