What the heck is the beer grid? Well, if you think of those nutty people that put up a windmill to feed their electrical needs in the early 80s and who, as it turns out, paid off their capital costs in the late 90s, isn't the beer grid like that? Consider this brewer's plight:
Local brewery Ölgerd Egils Skallagrímssonar will increase the price of its beer as of March 1, though it has not been revealed by how much. According to CEO Andri Thór Gudmundsson, the price increase is necessary to meet higher production costs. "We are being bombarded with price increases on packaging and ingredients, like malt and hops. We have covered this increase in price ourselves, but now we have to raise the prices. The price also depends on the purchase price and our competitors..." Gudmundsson told 24 Stundir.Funny names? Of course, they are because it's Iceland. Most anywhere else craft brewers could hedge their bets by planting their own hops and malt their own barley - theoretically on their own but certainly through a co-op or a trade association. Far fetched? Look at yesterday's review: they grow their own grain just as they have for decades. This Canadian craft brewer provides for their own hop needs (and also sell to others) from a hop yard that is just 3/4s of an acre. It can be done.
What if your favorite craft brewer or brewers said to heck with these market fluctuations or the bleak promise that beer prices will never be the same? What if they decided to use the market just for their marginal demand and otherwise provide supplies for themselves and price stability for their customers though taking control of supply? Would you be loyal to them for getting of the market grid? If some craft brewers do that and can keep prices moderated, what would the others do? They'd have to join in the new level of organic and local revolution. They might even be able to do that in Iceland.






Comments
Ethan - February 22, 2008 10:05 PM
Oddly enough, though less unlikely than most people would surmise, I just happened to be listening to Bjork when I clicked over here. And anyway, anyone named Thor who *isn't* Icelandic, well... I blame the parents.
Have you checked out Black Star Brewery in Austin, TX? They're the first co-operative brewpub, or are anyway working on it.
http://www.blackstar.coop/
I have some delusions of starting the second here in Buffalo, but who am I kidding? I can hardly manage to keep my blog updated :)
Stan Hieronymus - February 23, 2008 12:33 PM
Alan, my interest would be in supporting a brewery that is morally responsible in an environmental sense. That might happen in the context you are suggesting. But fact is it the earth is ahead when a New Mexico brewer buys barley or wheat from places it can be grown more efficiently than here.
It's a long read, but this week's <i>New Yorker</i> has a great analysis:
Big Foot: In measuring carbon emissions, it’s easy to confuse morality and science.
Alan - February 23, 2008 1:03 PM
That is a good point. You are really in an area that never should have supported a grain crop - or are there crops that could be grown there from which beer could be made? Would it be more responsible, for example, for more the northernly to drink locally grown oat and barley beer and forget more southern crops like wheat?
Lew Bryson - February 23, 2008 7:07 PM
Isn't that going to cut down on variety rather severely? I like the idea, but I'd like the idea of a larger co-op growing different strains for a number of brewers...and that gets complicated. Isn't this where anarchy usually breaks down as a viable form of living?
Alan - February 23, 2008 7:16 PM
Dog and cats - living together! ;-)
I know but for the most part you are looking at the means to provide your base needs. And that BC hop yard has 8 varieties in 0.75 acres. We are not talking about a large investment or an unwieldy bureaucracy. If that replaces fickle or even closed off markets - wouldn't it be worth it to control one more cost input?
Stan Hieronymus - February 23, 2008 8:23 PM
Barley needs to be kilned to make malt.
Hops need to be dried, packaged, stored (and we haven't even got to the matter of if you want to pelletize them.
These are not small investments.
Alan - February 23, 2008 8:37 PM
Again, Stan: 3/4s of an acre. <p>Make sure you ask yourself why you find this a difficult concept for people to profitably take control of what are locally grown agricultural product. Could the New York or Ontario brewers Association set up a co-op to avoid being soaked? Can brewers rediscover their malting past?
Lew Bryson - February 23, 2008 9:41 PM
I think I object to the word "soaked." Unless you're talking about weather.
Alan - February 24, 2008 1:12 AM
I think you would need to back up that objection with at least a link if not some facts. To summarize, brewers individually or collectively have an opportunity in the face of inflation to take control of price inputs to minimize the soaking effect of temporary short supply. Not rocket science. Neither is the horticultural aspect given much of the brewing zone in North America is also a hop growing zone. Those of the school that says things will never be this cheap may not know to take advice from other analogous sectors but rest assured that the folk I know who grown their own grain for their pork production facilities, for example, do much better than those who are dependent on the market. The same goes, say, for the electricity companies I deal with - generation is much tidier than procurement. Extricate yourself from the market for commodity inputs and remove yourself from fluctuations. Achieve that and you will be ahead of the competition in 3 to 5 years. Or not.
Alan - February 24, 2008 9:31 AM
I've considered your resistance, Stan and Lew, and the more I do the more it strikes me as fundamentally anti-capitalistic. I was reminded of this tendency again when I read this passage from the introductory sections of Michael Jackson's <i>Great Beers of Belgium</i>:<blockquote class="smalltext">It wins me no bouquets from consumers when I say that "fine beer" should be more expensive, and brewers are reluctant to grasp that nettle. Like fine wine, these products offer an infinite variety, interest and pleasure. There is a growing demand for them, especially in the United States. If this opportunity is to be enjoyed, quality must satisfy a demanding consumer, and the price must be profitable to the brewer. If he tones down his beers in an attempt to be more "accessible", he will lost existing customers without gaining new ones for whom there are already bland beers a plenty. If he tries to compete with international giants, his demise will at least be mercifully quick. What can he offer to compete with their economies of scale and marketing power.</blockquote>Michael Jackson may have been a lot of things but he is clearly not a strong economist. As much as beer writers hate to admit it, craft beer while not a bulk commodity is a fungible. For the most part consumers can replace product X with product Y and have a similar enjoyment. That makes for downward price pressure as the consumer am going to buy to maximize in the same way that the brewer is going to sell to maximime.<p>Beyond that, it also seems to smack of the "deserving oligopolist" - like restrictive medieval state licensing of trades, those that have the means of production deserve to have control of the market. This is fundamentally anti-capitalistic for as prices rise (especially where they are speculative rather than cost based price rises) new players will come into the market to take advantage of their new increase in product profit. The expansion of supply will also create downward pressure on prices.<p>Also, there is a measure of conflict of interest in such a passage. No one does well as the world expert in an undervalued product. When I started this blog, there was a website covered I think on NPR or CBC radio on which frozen dinners were rated. It didn't last. The more precious and timely the subject matter, the more prestigious and profitable is the expertise in that subject matter. By advocating price rises which are not based on basic market forces, Jackson was also advocating for the increase in his own valuation, whether he was aware of that or not.<p>It behooves us all to examine our assumptions when we consider economics of a past time. It is related to the adage that one should not try to make a business of one's hobby. You can make a go of it but you also have to take into account that the market rarely takes your passion into account to provide the premium on price that you may feel you deserve.<p>Hmmm...I like this so much I think I will make it today's post.
Stan Hieronymus - February 24, 2008 11:57 AM
Alan - I realize you knew a straw dog to keep this moving along but I don't think asking practical questions is "resistance."
My first comment was meant to point to the link that questions whether "local" is automatically better for the environment. That's a lot more important than the price of beer.
The second was merely to ask if brewers becoming farmers means lower or even consistent prices.
I need to know more about this magic 3/4s of an acre. How many kilograms of alpha does it produce? Can it supply the hops for the 900-barrel brewpub up the hill from my house? What happens when there is a hail storm?
Practicial business (not hobby) stuff like that.
Alan - February 24, 2008 12:10 PM
I meant resistance in the electrical utility sense. ;-)<p>I am note really concerned about local in the sense of green so much as the ability to control one's own inputs. Your point about isolation is a good one but remember, I am suggesting more realistically that this is a trade association matter and this not so prone. You see joint marketing efforts and even, I think, some sharing of labs. What makes hops different? Scale is not really an issue as that is just a matter of forecasting. What matters is a point of diminishing return in the traditional sourcing of a raw material.