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An Insufferable Beer Crisis Hits California

testosteronepit's picture




 

Wolf Richter   www.wolfstreet.com   www.amazon.com/author/wolfrichter

I need to disclose upfront that I’m biased: I’m a beer lover. And I live in beer-paradise, the crazy state of California. Kicking back with a brewski from a local craft brewer, of which we have over 450, can make even the Fed’s capers less aggravating. But soon that beer-induced smile on my face may dry up.

California’s enduring drought that has turned into a water crisis is hitting beer production. Turns out, to get one gallon of beer, breweries use about four to seven gallons of water in their processes, including rinsing of equipment, etc. And there isn’t enough water, or not enough of the right kind of water.

California’s craft brewing industry is big. In 2012, according to the most recent data available from the California Craft Brewers Association, the industry contributed $4.7 billion to the economy and employed 44,000 people who earned $1.7 billion in wages. So maybe not the highest-paid jobs, at about 39k per year on average. But it’s a cool industry with hot sales.

Overall, the beer industry in the US is sick. Total sales dropped 1.9% to 196.2 million barrels in 2013. Per-capita beer consumption has been dropping relentlessly since 1981, from 26 gallons per year to about 19 gallons. The statistics of a miserable industry.

But craft brewers use Yankee ingenuity to create the best beers in the world. And people are buying them! In 2013, according to the Brewers Association, craft brew sales in the US jumped 17.2% to 15.3 million barrels, and exports soared 49%. The world is catching on to our beers!

Of the stagnant $100 billion beer market in the US, craft brewers have conquered $14.3 billion, at the expense of industrial brewers and imports, giving them a market share in volume of 7.8% and in value of 14.3%. The difference between the two is largely due to the premium product.

The just-released 2014 midyear production data for the January-June periods require a good swig of perhaps an amber for full appreciation of the flavor: they more than doubled in five years!

US-brews-craft-midyear-production-2010-2014

That kind of growth, at the expense of industrial brewing companies and imports, is logical. The beer tastes awesome. The price, though higher, is fair. The product is genuinely American, brewed with the best, often American-grown hop. And breweries are popping up everywhere. Craft brewers range from tiny brewpubs that only sell to customers who walk through the door to California’s largest, Sierra Nevada. In 1975, there was just one of them in the US. By mid-2014, there were 3,040.

That said, this number changes constantly and is most likely already wrong. Just because you know how to brew an awesome beer doesn’t mean you get to stick around. And others open their taps even while I’m writing this. Over those three decades, industrial breweries in the US shrank from 54 to 20, now mostly owned by foreign multinational corporations.

This is not a business for the faint of heart! Note how the Great Recession decimated craft brewers. And note what has happened since:

US-Breweries-craft+industrial_1975-2014

In the midst of this frothy expansion drive, with sales booming, and with the world watching in rapt attention what is transpiring in the US beer market, my crazy state of California, the state with the most craft brewers, has been hit by a devastating water shortage.

“We are at the maximum growth threshold here in California because of water,” Leon Sharyon, CFO of Lagunitas Brewing Co, told the LA Times. Lagunitas, which makes one of my many favorite IPAs at its Petaluma brewery, less than an hour north of San Francisco, uses about 2 million gallons of water a year from the Russian River that has been reduced to a trickle.

Solution for Lagunitas? Heresy! It expanded to … Chicago! Next to Lake Michigan, so that brewery won’t run out of water for a while. Sierra Nevada opened a brewery in Asheville, North Carolina, with plenty of water from the Smokey Mountains. Others are following the same strategy.

California brewers are trying to conserve water in their processes. Sharyon told the Times that they’d reduced water consumption by 10% over the last two years. And they’re doing something risky: they’re watering down, so to speak, the water from the Russian River with well water. If the water crisis continues to get worse, water regulators might require them to switch to well water entirely.

But there’s a hitch: the water from the Russian River is excellent for beer. Groundwater has an odd taste and is rich in minerals that impact the color and, God forbid, the flavor of my favorite brew.

“Grainy and hoppy styles could taste more astringent,” Sharyon explained. The hoppiest of these hoppy styles? My favorite, the India Pale Ale (IPA). So the company spent some money on a filtration system, hoping to get rid of the odd tastes.

Bear Republic in Cloverdale, a little over an hour north of San Francisco, also uses the Russian River for its water. But the water district capped it to 8 million gallons a year. “And that’s really affected our growth,” said Master Brewer Peter Kruger. They’d planned on growth of 35%, now cut to 15%.

So Bear Republic is also watering down Russian River water with groundwater. It’s installing filtration systems, in the hope of getting rid of the odd flavors. And they’re thinking about opening a brewery somewhere else with a “more stable water supply,” Kruger said. But that too could mess up the taste of their brews.

“Our river’s mineral content creates really excellent beer, and we are afraid of losing that,” he said. “We are praying it rains next winter.”

Done that for three years, and it hasn’t worked.

“If this drought continues for two, three more years, that could greatly impact the production and growth of our breweries,” lamented California Craft Brewers Association executive director Tom McCormick.

Small brewers might be in trouble. They don’t always have the resources to invest in water-conserving equipment. And the water shortage might cut into their booming production. Cismontane Brewing in Rancho Santa Margarita, Southern California, produces only 3,000 barrels a year. Now the water district put in place a voluntary 20% reduction in water consumption, which soon might become mandatory.

“Small brewers waste more water than the big guys because our equipment is less efficient,” said cofounder Evan Weinberg. Unless there’s “a big influx of water soon,” he and other small brewers will face “some serious issues.” They’ll have to pass the cost of water onto the beer lover. “Otherwise we will go out of business.”

That’s the fate awaiting beer lovers in the crazy state of California. Your favorite brew might get more expensive, though the price increases will be laundered from the CPI via the government’s inflation reduction machine, called hedonic regression. Its original water is going to be watered down with groundwater. Or it’s brewed in another state. Some of it might go away altogether. And what we have on our hands is a full-blown beer crisis.

Everything is rigged, we found out: stock markets, Forex, interest rates, gold, silver, oil…. After battling that rigged world all day, you finally get to take that first big gulp of beer to heal the wounds, knowing that it’s the one thing that hasn’t been rigged against you. Or so you’d think. Read….Turns Out, Even The Price of Beer Is Rigged

 

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Fri, 08/01/2014 - 03:46 | 5031566 Jam Akin
Jam Akin's picture

Have lived in many parts of the US.  In my experience the best tasting tap water comes out of upstate NY.  Therefore was not surprised to find a good craft beer - Eurotrash Pilz - made by Southern Tier Brewery in that part of the country.  Only downside is that Eurotrash is seasonal otherwise would be enjoying it year-round.

Fri, 08/01/2014 - 02:45 | 5031508 kurt
kurt's picture

Slow Water Grift Alert

Program to "Enron" water in California in place.

Strategic actions taken: dump water in Rio Grande, dump water into Pacific via Sacramento, Constant media embedment into public mind.

 

 


Fri, 08/01/2014 - 02:07 | 5031468 theprofromdover
theprofromdover's picture

Here's a surprise -all water is recycled.

Mostly with sunlight and nature. Give a grant to the brewers to encourage them to think laterally, and

problem solved.

Fri, 08/01/2014 - 02:48 | 5031513 andrewp111
andrewp111's picture

Put that Budweiser back in the Clydesdale, that's not the right flavor for me.......

Fri, 08/01/2014 - 01:12 | 5031370 Nadine of Tyrol
Nadine of Tyrol's picture

I am not so sure about that Russian River water.  Get too far down river and the water is enhanced by all the antiquated septic systems that have roared back into life as the the transplants from the ultra inflated SF housing market migrate north and move into the old summer cabins along the river.  

Fri, 08/01/2014 - 00:27 | 5031284 potato
potato's picture

save water;

drink beer.

Thu, 07/31/2014 - 23:52 | 5031205 Dingleberry
Dingleberry's picture

F. U.C.K. California, and those enlightened socialists everwhere.

A state that was given (by God) unfathomable natural resources, breathtaking scenery, heavenly climate, etc. and all they could do was turn it into an utter cesspool with their idiocy.

It would be literally paradise on earth, if the populace were not so fucking retarded.

Fri, 08/01/2014 - 01:19 | 5031383 Gargoyle
Gargoyle's picture

Unfortunately they've turned their eyes north, towards the real micro brew nirvana, my beloved People's Republic of Oregon. We got water. And better beer.

Fri, 08/01/2014 - 01:47 | 5031426 Juno Rock
Juno Rock's picture

Try a little further north. Like north of the 49th! 

 

Canadian beer rocks! 'Old Stock' malt brewed. Deep, rich flavor with matching dark color. Very creamy with a finish that is "AHHhhh!" And at 6.75% a mule kick! Great stuff. 

Fri, 08/01/2014 - 03:04 | 5031530 BailoutBandit
BailoutBandit's picture

Been to Canadaeh many times, Oregon beer can go toe to toe with Canadian beer any day of the week.  Plus you know how much a beer costs in Canadaeh?  Might want to dial back the alcohol taxes just a touch, eh?  No but seriously, except for the Pliny and maybe Lagunitas, Oregon beer rules.  Canada isn't really in this conversation actually.  It is a tragedy that California is running out of water.  When the refugees from Grapes of Wrath run dry, where do they go? 

Fri, 08/01/2014 - 00:11 | 5031250 El Hosel
El Hosel's picture

Yes indeed,  " note what has happened since "  

Looks like a  Parabolic "craft beer" blow off top, Bitchez.

My favorite beer is "cold ones" (craft not withstanding). Truck in some Coors, plenty of rocky mountains spring water to go around.

Thu, 07/31/2014 - 23:59 | 5031225 the grateful un...
the grateful unemployed's picture

sorry you feel that way but just more beer for the rest of us

Thu, 07/31/2014 - 22:52 | 5031043 q99x2
q99x2's picture

AA membership is outgrowing available meeting places.

Thu, 07/31/2014 - 22:38 | 5031002 jonjon831983
jonjon831983's picture

"California drought: 'May have to migrate people'"

http://www.cnbc.com/id/101884085

 

"If the state continues on this path, there may have to be thoughts about moving people out, said Lynn Wilson, academic chair at Kaplan University and who serves on the climate change delegation in the United Nations.

"Civilizations in the past have had to migrate out of areas of drought," Wilson said. "We may have to migrate people out of California."

Wilson added that before that would happen, every option such as importing water to the state would likely occur— but "migration can't be taken off the table.""

Fri, 08/01/2014 - 05:17 | 5031643 Lin S
Lin S's picture

I hear there's lots of space suddenly available in Honduras...

Thu, 07/31/2014 - 22:33 | 5030980 ncdirtdigger
ncdirtdigger's picture

My son makes my beer for me. I think he's been raiding my wallet while I'm passed out. Kid is a genius.

Thu, 07/31/2014 - 22:33 | 5030970 SheHunter
SheHunter's picture

I was in CA working a project the last few months and spent way too much time cursing at how everyone on the road is in a flaming red hurry and lines at any store run out both of your ears.

That said, one of the very coolest things about the east central CA mountains were the many small breweries.

If you ever happen through Arnold, CA stop and give yourself plenty of time to sample the goods at the Snowshoe Brewing Company.

I do not miss the traffic or the linesof stressed out humanity..... but the brew?  Yes.

snowshoebrewing.com

 

Thu, 07/31/2014 - 22:14 | 5030827 Salsipuedes
Salsipuedes's picture

"...and so, in the end, it was BEER, children; brewskis, suds, coldies, grog, wobbily hops, liquid gold, cervezas, the Good Lord's Liquid Bread itself, that lit the candle, that lit the fuse, that lit the revolution that saved the planet, Earth."  -The End

Fri, 08/01/2014 - 00:29 | 5031289 Professorlocknload
Professorlocknload's picture

Nectar of the Gods.

Fri, 08/01/2014 - 00:40 | 5031308 Salsipuedes
Salsipuedes's picture

Precisely! "Magic elixir"... Can I have another?

Fri, 08/01/2014 - 06:36 | 5031732 StychoKiller
StychoKiller's picture

Sparkling barley wine!

Thu, 07/31/2014 - 21:34 | 5030729 crazybob369
crazybob369's picture

That does it, now I'm pissed!

Thu, 07/31/2014 - 21:11 | 5030606 pemdas
pemdas's picture

How come there are no down arrows on this thread? Beer is the one thing everyone can agree on?

Thu, 07/31/2014 - 21:46 | 5030797 homme
homme's picture

Effin lol! I swear you guys crack me up sometimes!

Thu, 07/31/2014 - 20:42 | 5030447 rsnoble
rsnoble's picture

NO!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 

I'm doing my part, although a rather light summer there's been many years my intake has been 300+gallons a year. No kidding. Years and years ago I was a traveling construction worker.  My average this year will probably be around half that.  Now granted we are talking commercial piss water.  The flip side to that argument is i've never met anyone that pounds down stouts 20 at a time they are rare, at least in the US.

Let's see........I have my own hops growing here(wild) mayb I should try filtering the dirty creek water?  Catfish beer.  With a slight aftertone of racoon turds.

 

 

 

 

 

Thu, 07/31/2014 - 20:41 | 5030437 nofluer
nofluer's picture

Everyone's talking about the effect that the water has on the taste of the brews... but no one even mentioned the effect a drought might be having on the hops. The taste of hops is dependent on the ground/dirt it's grown in. If there is no rain, hop growers would have to irrigate their fields, or the brewers would have to obtain their hops from a different supplier. If there is a shortgage of irrigation water, they'd have to truck the water in... and *poof* the hops will be different, depending on what's in the water they bring in. Or *poof* the hops are from a different area and the taste of the brew changes.

Craft brewing is dependent on so many factors I'd think it should be called artisan beer.

Thu, 07/31/2014 - 20:40 | 5030434 ebworthen
ebworthen's picture

Not the beer!  Anything but the beer!

Got a 12-pack of "Rainer" last week; pretty darn good.

Home brewing is a lot of work but worth the effort; my favorite so far has been an Imperial Stout.

Fri, 08/01/2014 - 03:11 | 5031537 August
August's picture

Back in the Old Days...  you knew you had become a Seattleite when you found that you actually liked drinking Rainier.

Thu, 07/31/2014 - 20:52 | 5030495 rsnoble
rsnoble's picture

I've done the kits but it's not really brewing.  If I had the time i'd do it completely from scratch.  I've known a few people to try but i've yet to taste anything good.  Nothing like a glass of vinegar @40% lol.

Thu, 07/31/2014 - 20:27 | 5030370 Jab Cross Hook
Jab Cross Hook's picture

Awesome, let that shortage unpack its bags and rest boots on the sand. These last few generations of rampant alcoholism really aided our thieves-in-charge, and the general stupefaction that marks the Golden State.

Local councils wet their pants about pot dispensaries. Shit, there's already a lobotomy available on every corner. Just follow the neon signs.

Thu, 07/31/2014 - 20:11 | 5030267 Duc888
Duc888's picture

 

 

Founders "Dirty Bastard" Scottish Ale. 

 

Sex in a bottle.

Thu, 07/31/2014 - 20:07 | 5030240 duo
duo's picture

Hmmmm, Milwaukee, next to 4 quadrillion gallons of water, might be a great place to make beer?  It seems some Germans figured that out a century ago.

The GMO laced, chemically enhanced (read the German label on Corona, or the Japanese label on Bud) traditional beers are toast.

Go Three Floyds, New Glarus, Wisco Diso, Hinterland....

Thu, 07/31/2014 - 17:39 | 5029567 the grateful un...
the grateful unemployed's picture

craft beer is expensive, more expensive than wine. i've been making beer for twenty years, and while the product is improving, its hard to justify the rising costs. many small breweries lose their edge when they go national. now sam adams is a lot better than budweiser, but most of that difference is an intangible, what makes a craft beer taste like a craft beer, and many crafts are ales. for my taste far too much has been made of craft beer ales, because lager is the high end product (apologies to the brits) a good pilsner is the standard in beer. there is of course a lot more time involved in making lagers, at the outset a list of ales will get a craft brewery up and running in a hurry. at the end of the day its going to cost you just about as much to make ale as lager, but the same size operation has less production. the problem will be solved as the industry matures. concerning water quality, a ready source of water appopriate the needs of the brewer is the most cost effective way to proceed, or brew a beer according to the water you have. we have colorado river water which is high in bicarbonates, hard water, and not well suited to many styles. and even if you buy from a spring water supplier, they often use public water supplies, and filter for taste, but the nasty hard stuff remains (people buy this water to drink not to wash clothes) the brewer can engineer their own water. when i take away all the water used for cleaning, and separate the water needed to actually make the product this solution is feasible. hard water is still okay for cleaning. as would be salt water. meanwhile the industry is really booming, in my town there are no more bars, and lots of microbreweries, which are friendlier, more social, like the old public house. its a nice change, and people arent getting hammered quite as much, but with some of these 8% crafts its doesnt take much!

Thu, 07/31/2014 - 23:54 | 5031212 Dingleberry
Dingleberry's picture

Here is what you do: buy German beer imported from Germany, using their purity laws.

Drinking a Hofbrau now (can't find the umlaut).

Problem sovled.

Thu, 07/31/2014 - 23:58 | 5031221 TahoeBilly2012
TahoeBilly2012's picture

Your handle says it all...beat it kook.

Fri, 08/01/2014 - 00:17 | 5031255 Dingleberry
Dingleberry's picture

See you at the bathhouse

Thu, 07/31/2014 - 20:25 | 5030365 IndianaJohn
IndianaJohn's picture

The price of quality beer. and being recently retired on a low income has forced me to brew my own beer. I adapted my wine skills to beer making. Currently I am using a Russian Imperial Stout, grain formula. Results are good while using primitive brewing equipment and methods. Prosit!

I wish to thank ZH and Wolf for this relief from the robbing and the killing. "All warfare is a large scale armed robbery" --- James Dines

Fri, 08/01/2014 - 06:33 | 5031724 StychoKiller
StychoKiller's picture

If you've made wine before, you should look into brewing Mead (honey wine).  It's a lot easier than wine and beer.  If I can do it, just about anyone can.

Thu, 07/31/2014 - 22:15 | 5030921 Dave Thomas
Dave Thomas's picture

Just wait till you start messing with the water salts to bring your local water like some river in englund. At a certain point you've gotta say fuck it, we're gonna brew with our own shitty water. Drink this bitches! And all will be good.

 

Thu, 07/31/2014 - 22:46 | 5031028 boogerbently
boogerbently's picture

Bring those micros to ID.

Fri, 08/01/2014 - 00:09 | 5031214 TahoeBilly2012
TahoeBilly2012's picture

Anyone who places a pint of double hopped IPA in my face for $6, deserves a tip. You people have all lost your fucking minds. I would pay $20 in a dollar collapse and do the dishes. Get a grip wussies.

Wolf is a greybeard, though he seems to know his Nor Cal beer history.

Top Nor Cal Breweries-

1. North Coast   Fort Bragg (hard to beat, Russian Imperial is legend, amongst others)

2. Sudwerk        Davis (ahhh bet you never been there Wolf or have you? Did a deal with Paulener Muchen years ago!)

3. Rubicon        Sac Midtown (read it weep Bay Area boy!)

4. Mendocino     (brewing, Red tail Ale bitches!)

I rest my case. San Francisco "posers" like Wolf, love to act like they know WTF is happening, but alas, they don't.

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