Pretty much everything in a brewery that isn’t an ingredient or a stool is made of metal.
It’s a lesson Sam Masotto, the owner of Bonn Brewing, asmall brewing company on the south side of Bethlehem, Pennsylvania has learned well.
The end of the month will mark the two-year anniversary since he went from brewing beer in his kitchen with his wife to a small brewery with eight people on the payroll. In that time he’s become a father, seen his employees have kids. And like many business owners, he has dreams of a future where those kids will play together and eventually work in the brewery to carry on the tradition.
But rising costs, due to the brewing trade war, are threatening those dreams.
“We are very big on serving my community, and buying American products, and being a great representation of an American business,” he says. “We use a lot of metal here. When the price of metal goes up we definitely feel the ripple effects.”
FromUtahto Wisconsin, brewers like Masotto – many of which are small family-owned businesses – are facing steeper production costs due to the brewing trade war.
There are 6,300 breweries in the U.S, and craft breweries contributed $68 billion to the U.S. economy in 2016, according to the Brewers Association.
And the effects of the Trump administration's recent tariffs on steel and aluminum are fast making their way down the supply chain. The 10% tariff on aluminum from Mexico, Canada, and countries in the European Union is already having an effect on the industry, and the ripple effects are likely to feel much worse.
The tariffs are raising prices for a swatch of goods that use metal for product containers. According to an op-ed published by the Beer Institute, the aluminum tariffs affect up to 62% of all the beer made and sold in the US.
Metals like aluminum are beer brewers’ largest input costs, according to Jim McGreevy, president, and CEO of the Beer Institute.
“We estimate that the tariffs will costs beer brewers $347 million per year,” he said. “That’s nearly 40 billion aluminum cans and bottles bought by beer brewers in the United States in 2017.”
‘We just can’t do it’
“We have all these big plans to invest and hire more people, but when we get these extra costs, we just can’t do it,” said Isaac Showaki, CEO of Octopi Brewing in Waunakee, Wisconsin. He set up three years ago and has seen his craft brewery grew to one of the largest in the state.
Now, he’s struggling to adjust to higher operating costs after its U.S. supplier of aluminum cans hiked prices by 15%, citing tariffs.
“It’s hitting our bottom-line,” Showaki said. “We probably could have hired almost two people full-time,” he said.
Central Ohio, home to more than 40 craft breweries is also feeling the heat.
“We all have to buy cans by the truckload, so that’s actually already raised it a couple thousand,”said Collin Castore, the co-founder of Seventh Son Brewing in Columbus, Ohio. “I only see the craft beer industry and other industries ending up getting hurt from it,” he says.
John Hecker, owner of Briggs Distributing in Billing, Montana sees the tariffs having a huge trickle-down effect on local economies.
“Aluminum is a huge portion of what we sell,” said Decker. “Sixty percent of our business is aluminum can and about nine percent of it is keg business which is steel. So, they both have an impact on how much our product will cost eventually and cost the consumer.”
To learn more, visit www.TheWrongApproach.com to see a map showing how states are affected by tariffs from China, the European Union (EU), Mexico, and Canada.
About the authors
Cordell Eddings
Cordell was a senior editor and content strategist for the U.S. Chamber of Commerce's strategic communications team. He previously covered corporate finance, economics, foreign exchange and fixed income markets for Bloomberg News in New York during the heart of the financial crisis. Before that, he was a crime and politics reporter (as well as covering many, many country fairs) at the Indianapolis Star.
