Hops shortage: Established and craft breweries alike scramble to find limited supplies to make many favorite brews

On June 28, Sun King will begin selling one of its most popular beers — Grapefruit Jungle.

A few weeks later, the citrus-flavored India Pale Ale will be sold out at Sun King’s tap room, bars, restaurants and liquor stores — unavailable again until July 2015.

While that may sound like an astute marketing strategy, building anticipation for a unique and rare brew is not the intent. The guys at Sun King simply can’t find enough hops to brew even a month’s supply of one of their fastest-selling beers.

A national shortage of hops is causing craft brewers across the country to scramble to find the crop that adds aroma and flavor to their brews, especially the varieties that add exotic citrus flavors. The shortage is so acute that the average price of hops has nearly tripled in recent years, and some of the most favored varieties sell for $20 a pound.

“Grapefruit Jungle has the most sought-after hops that there are,” said Sun King co-owner/brewer Clay Robinson. “Every year we make probably twice as much as before, and we spend the entire year begging, borrowing and stealing the varieties of hops we need.”

The shortage — which is driving up the cost of some specialty beers and could slow the record growth of the craft beer industry — has even prompted Purdue University researchers to study Indiana’s hops-growing potential. And a few entrepreneurial Hoosier growers are jumping into the market, hoping to cash in on the boom. But the reality is that effort could take years, if ever, to come to fruition.

And so established breweries struggle to find limited supplies to make many of their fans’ favorite brews. And new brewers — including more than a dozen in the Indianapolis metro area — will be challenged by the hops shortage as they try to survive the often rough first few years of business.

What’s driving the shortage?

Hops farmers used to have it pretty simple.

Historically, the large brewers — such as MillerCoors, Anheuser-Busch and Heineken— entered into multiyear contracts for hops with growers in Washington, Oregon and Idaho. The brewers have made the same beers for decades and wanted the same types of hops every year.

Smaller, local brewers who comprised a fraction of the market 10 years ago, had been able to get what they needed on the fly, either leftover from hops growers or on the resale market from the big brewers.

That steady demand from big brewers provides the perfect market for hops growers. But the craft beer boom changed that market and the types of hops in demand.

In 2013, craft beer sales were up 20 percent by dollars, according to the Brewers’ Association. More than 400 breweries opened in 2013 alone, growth that has propelled craft beer to a 14.3 percent share of the total beer sales market by dollars.

Flavor is king in the beer boom. Ann George, administrator of Washington-based Hop Growers of America, said craft brewers average 1.2 pounds of hops per barrel, compared to just a fifth of a pound for the big production brewers.

And, she said, craft brewers are now purchasing contracts for a large variety of hops found in all of those IPAs, especially the citrus-flavored Cascade, Chinook, Citra, Centennial, Simcoe and Amarillo hops. Largely untapped by large production brewers, those hop styles only make up 28 percent of the total U.S. hops yield. Most of those hops didn’t even exist 20 years ago.

Growers, George said, are unwilling to step out too far on a limb to grow the new styles of hops. Hops vines, like grape vines, are planted once and then harvested annually. They need three to five years to mature.

Farmers spend about $5 million in production costs the first year, George said, to add about 300 acres of hops, or $16,666 per acre. Growers could rip out and replace existing hops to grow more popular types — such as citrus-flavored IPAs — but they fear they may turn out to be only the latest fad. Craft beer drinkers, George noted, are especially finicky and prone to switching both brands and styles of beer to try as many as possible.

Growers have been burned before. They added about 10,000 acres for a total of 40,898 in 2008 to meet demand of the last craft beer boom, but were left with a pricey surplus when the economy went into recession. By 2010, they were planting hops on only 31,289 acres.

“The growers want to make sure the price is maintained at a level that covers the cost of production,” George said, “so they are not going to overplant just to make sure everybody who wants hops gets it by tomorrow.”

That’s not to say the growers don’t respond at all to demand. The investment can be profitable if the demand is truly long term. Once the new vines mature, growers can make $8,000 per acre every year. This craft boom has convinced growers to slowly ramp up to 35,224 acres in 2013, but it’s still short of the peak production six years ago.

And so the boom has driven up hops prices, from an average of $1.88 a pound in 2004 to $3.59 a pound in 2013, according to the Hop Growers of America. Brewers are willing to pay top dollar for the most popular varieties such as Amarillo and Citra hops, which in such limited amounts sell upward of $20 per pound.

The brewers pass that cost on to customers, which is part of the reason the six-pack of craft brew at your local liquor store costs twice as much, or more, as traditional beer styles.

Brewers navigate shortage

Sun King, the region’s largest brewer, has built much of its business plan around the hops shortage.

Robinson decided to make the Osiris pale ale a year round selection when Sun King opened five years ago, because the recipe uses fewer hops than an IPA.

They’ve been able to buy enough hops to make Grapefruit Jungle a summer seasonal, but it’s a struggle. Robinson traded with a local home brewing store for 40 pounds of hard-to-find Amarillo hops to brew a larger batch of Grapefruit Jungle this year. The beer still will be sold out inside of three weeks, he believes.

And consider this: Triton brewer Jon Lang entered into a hops contract three years ago to buy Citra hops — that’s a half a year before he even opened the Fort Harrison brewery to customers.

Lang received his first shipment of Citra hops this spring. He brewed up Grand Citra Station, which is hitting Indy-area palates hard and is selling out as fast as he can brew it. Which won’t be long.

Startup brewers — and there are a lot — are finding even more difficulties. In the metro area alone, more than a dozen breweries plan openings this year — a 50 percent market bump.

Andrew Castner, head brewer at Mashcraft Brewing Co., plans three year-round beers, and by design he only needs a large amount of hops for one.

He was lucky to buy a variety of harder-to-find hops on the resale market last fall — enough to sprinkle into IPAs backed by other hops for some added flavoring.

That’s the strategy many are being forced to use. In McCordsville, Scarlet Lane owner Nick Servies says the company’s brewers didn’t even bother trying to make IPAs with the most popular hops. He’s signing contracts for hops through 2016.

Servies, like many area brewers, has begun exploring the local hops market.

Indiana growers hope to plant relief

About a half dozen entrepreneurs are attempting to grow hops in Indiana.

It’s a growing trend across the nation. Hops farms also are cropping up in states such as Michigan, North Carolina and Virginia.

But neither brewers nor growers are sure what to expect. Like grapes, each type of hops tastes different depending on the soil and climate in which it is grown.

Natasha Cerruti, a researcher at Purdue University, has begun growing nearly a dozen hops varieties on a half acre to determine which varieties will work well in the Hoosier state.

Results could take years to determine, but Purdue is behind the effort, funding a $10,000 university grant.

“We’ll see if hops can be as big (a business) here as they are in the Pacific Northwest,” she said. “We’re hoping it will do so well, we can have a local flavor to Indiana beers.”

Ryan Hammer, the owner of Three Hammers Farms in Knightstown, planted hops three years ago.

He’s sold limited amounts of hops — having yet to establish a full yield — to Sun King, Flat 12 Bierwerks and Indiana City, but it’s a time consuming process. He cajoles family and friends to help him hand-pick a quarter-acre of crops. He’s selling the hops to the brewers raw, which they can make work for small batches of seasonals. To produce hops to flavor a large quantity of beer, he’d have to invest in equipment to mill the hops into the pellets used for brewing like the growers in the Pacific Northwest.

Justin Kratoska and Matt Crankshaw are trying to establish an urban hops farm on the East Side. They haven’t started to sell crops yet, but, like Hammer, are hopeful to fill the void in the marketplace. They’ve already fielded calls from local brewers eager to find new sources of hops.

“When we’ve talked with brewers,” Crankshaw said, “we’ve kind of made the point that the hops may not be exactly the same. But that may not be a bad thing, just different.”

Sun King has been brewing specialty beers with local hops for a couple years, but don’t expect Robinson to be brewing up Grapefruit Jungle anytime soon with local hops.

The local brewers are years — and maybe decades — away from having growing and processing capacity to rival even a small hops farm in the Pacific Northwest.

For now, Robinson, like the majority of craft brewers, will keep scrounging for hops, knowing relief, if it comes, is years away.

“Every year, we make as much Grapefruit Jungle as we can,” he said. “Every year, we find a way to make more.”