Beer Shortages Looming

A potential beer shortage may be looming. Budweiser( BUD) Molson Coors (TAP) and SAB Miller (SBMRY.PK) as well as many smaller local craft beers may be affected. The worldwide Hops harvest is not in good shape. Certain hop growing regions have experienced drought and the yields are off. In the US hops had been in such over supply that last year the acreage planted with hops dropped by 30%. The US accounted for one quarter of hop production.

Larger brewers have been vexed by small craft and local brewers who have come up with better tasting and unique brews. The big guy's have even started to market pseudo small craft product to counter the trend. The small brewers do not have the financial clout to buy into big long term supply contracts. They have relied on an oversupply of hops to control their pricing. Now they may be forced to fiddle with the taste which is the primary reason for their success. The big brewers have been locking up long term supply contracts. The squeeze is on.

Also price competition may tone down as the supply realities eat up margins. We may be looking at price increases in the very near future. This could be the perfect storm for the big guys who have access to critical ingredients and may figure out that they do not need to beat their brains out in stupid price wars. The wine business as well as marketers of coolers may pick up some price sensitive volume.

The beer business is about to change. Just imagine; Global Warming and Climate Change issues are starting to influence how we drink beers. In a commodity squeeze the big guys have the financial clout. The little guys and the consumer do not have clout.