advertisement

Follow Mint Lounge

Latest Issue

Home > Food> Drink > When inflation flattens the craft beer high

When inflation flattens the craft beer high

A war, pandemic and climate change have disrupted the happy hour of craft breweries in India

Malt gives craft beers body and a good head. (Istockphoto)

Listen to this article

What has the Russia-Ukraine war got to do with your neighbourhood craft brewer? Quite a lot, as you may know by now. But so do changing weather patterns and transportation and supply disruptions triggered by covid-19. For it’s all about malt, the one ingredient that determines the quality of beer, from flavour to froth.

It’s essentially barley, and some wheat, that lends the beer body and gives it a nice creamy head, says Nakul Bhonsle director of Great State Aleworks in Pune, Maharashtra. Good malt yields great beers, and home-grown craft brewers had been relying on barley from Europe.

Six months into the Ukraine-Russia war, already battered by covid-19 disruptions and changing weather patterns, they are finally beginning to look elsewhere, to countries like Australia, to retain their share in a competitive market and cope with the rising costs of Indian draught. Ironically, at least some craft brewers may be suffering more than the large-scale firms, since the kind of barley the latter use is grown in India. The kind that craft brewers use, with certain proteins and other nutrients, isn’t.

Mumbai-based Salil Palkar, co-founder of 2 Down Beer Co., explains that “the cost of barley has gone up around 40% for us”. They have been depending so far largely on Belgian and British malt and American hops.

Bengaluru-based Narayan Manepally, co-founder and CEO of Geist Brewing Co., notes that the shortage began even before the war-related supply crunch, owing to unfavourable weather conditions in Europe. Manepally points out that the cost of producing one litre of craft beer has gone up by 1.2x this year compared to 2019.

Russia, Ukraine, Germany and France are some of the largest producers of barley. India grows it too, but, as Bhonsle explains, craft brewers need two-row barley, whereas India cultivates six-row barley. “A craft brewer is looking for a certain amount of proteins to give a good head to the beer, and other nutrients to give a good body. Two-row barley has these characteristics, six-row barley pales in comparison,” Bhonsle says. Most of the barley produced in India is made for the big players so we have no option but to import, he rues, adding that two-three big malting companies in Europe, like The Boortmalt Group from Belgium, control 70% of malting in the world.

Within a month of war breaking out in Europe, Bhonsle’s distributors were telling him of the shortage in malt. About four months ago, Great State Aleworks increased prices by 10-15%.

The war still shows no signs of ending.

Each brewery has a different strategy to tackle inflationary pressures. But it isn’t always possible to raise prices, since state governments have a say in alcohol rates. “The beer industry has limited options to adjust to increased costs as liquor prices are routed via state excise departments in India,” says Ashwin Kak, procurement and sustainability head–India & South East Asia, AB InBev.

So far, 2 Down Beer Co., launched in 2019, has largely managed to hold on. As the strain begins to tell, Palkar’s concern is the intense competition in the microbrewery space, with newer players with deep pockets offering beers at competitive rates, undercutting the current market price. He hopes restaurants will be “more sensitive to cost pressures and don’t mind paying more to their brewers”.

The primary business model of 2 Down Beer Co., like most microbreweries in Maharashtra, is B2B, with craft beers being supplied to bars and restaurants. In Mumbai, it works with about 21 restaurants and bars, like The Bombay Canteen, Woodside Inn and The Sassy Spoon. In the immediate short term, Palkar’s team is attempting to ride the inflationary wave by increasing footprint and volumes. This has helped margins, even if slightly.

Industry experts don’t believe pressures will ease. “We do not expect commodity and non-commodity price challenges to abate anytime soon due to the global supply chain challenges as prices for raw materials like barley and packaging materials continue to remain high; that leads to a higher manufacturing cost of beer,” says Kak.

In fact, the global shortage in barley preceded the war. In the two years before the pandemic, barley farms across Europe were hit by drought. “Resulting losses in cereal yield pose a major risk to the global supply of barley, as more than 60% of global production is based in Europe,” noted a July 2021 article on the US-based National Library of Medicine website.

This affected the raw material supply for breweries like Geist. “It was almost a 15% jump in rates of wheat and barley. We import both from Germany. For us, it was the adverse weather conditions, more than the war, that added to our cost,” says Manepally. The war just made things worse.

The other factor that inflated costs is the disruption in global shipping due to covid-19. Geist imports hops in large, 20ft shipping containers from Europe and the US and their prices became “prohibitive”. “One container would cost us $900 (around 71,000 now) about three years ago, which shot up to $3,500 now,” says Manepally. Costs overall rose by 15-20%.

Geist hasn’t increased prices. “I don’t want to pass on the burden to our customers, with the hope that the war is going to end, inflation is going to cool off and things are going to get better.”

Whether that hope will be realised remains to be seen.

Also read | Why cocktail makers want you to drink less, not more

Next Story