Over a Barrel: The Rising Cost for a Specialty Beer

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Editor’s note: for additional background on this topic, see this post.

At its core, beer is just hops, barley, water and yeast. But as it’s always been, brewers find a way to make it more than that.

Exotic fruits, cat poop and bull testicles may help infuse today’s beers with an extra shot of flavor, but it’s an ongoing cask craze that is changing expectations for drinkers and businesses alike. While barrels have been used for hundreds of years (and longer), their purpose within the brewing industry has seen something of a renaissance in recent years.

Wooden tuns previously housing bourbon, rum, tequila and more are finding a welcoming market within craft beer and an even happier consumer base that craves the flavor-rich or high-ABV beers that often come along with their use.

In turn, the jump in use of barrels is shaping up a competitive marketplace that adds another layer to the business of beer.

“When I began planning three of four years ago, I set $220 per barrel as a limit,” said Matt Pennisi, president and brewer for Durty Bull Brewing Company, a brewery he plans to open this fall in Durham, N.C. “In the last year, prices have gone up $50, $80 a barrel.”

barrel-fillingPennisi is in a unique situation as he tries to finalize efforts for his 15-barrel brewery where he’ll create sour, high gravity and barrel-aged beers. He plans to offer a taproom-only lager, but most other beers he creates will be barrel-aged or include blending from barrel-aged beers.

Before a customer ever steps foot into his business, he’s spent countless hours studying estimates of barrel costs and researching where he can find the best deal. He’s even set up a daily Google Alert to send him emails with news stories of soon-to-open distilleries and avenues to explore. For brewers like Pennisi, finding inexpensive barrels can be something like a treasure hunt at a time when the price of used Jim Beam casks went up 34 percent over the past year from $160 in 2014 to $215 in 2015.

“I’m already in touch with a Massachusetts distillery that’s not looking to do bourbon aging for another year, but if I can form a relationship now and we’re able to agree on a good price, I’ll buy their barrels,” he said. “It’s all such a varying target to watch and can be really nerve-wracking.”

What makes Pennisi’s situation different is his search for a wide variety of barrels instead of only highly sought after tuns that once housed liquor like bourbon. His interest in blending makes $169 to $189 for rye whiskey or $152 to $165 for red wine barrels more palatable, even if the current price for some bourbon barrels sits just below the $220 expectation he originally planned.

But that might not be for long.

“Right now I’m telling people they could be $300 by end of this year,” said Noah Steingraeber, sales manager, marketing consultant and lead barrel slinger at Rocky Mountain Barrel Company. “Demand is always going up.”

google trends-barrel aged beer

There are many factors at play when it comes to market price for barrels, from weather to material costs and the location of a distillery where a barrel is used. But supply and demand still rules: “I understand that a lot of brewers see other people do it, so they want to do it, too,” Steingraeber said.

According to Steingraeber, that might push the price for a higher-end bourbon barrel to multiply as many as three times over in the span of two years to the $300 figure in 2015. Part of the reason can be attributed to the rise of U.S. craft distilleries, which have gone from from 70 to more than 600 in the past decade. Instead of bourbon barrels immediately becoming available for use on a secondary market after one use – per law – they’re snapped by other distilleries for aging other spirits and liquors.

Wine barrels, which are much more plentiful with about 8,300 wineries in the U.S., have only seen a slight cost increase over the past year. Red wine casks have gone up by as little as $25 to around $150, an increase of just over 20 percent from 2014. White wine barrels that held chardonnay recently fetched as much as $215, up about 27 percent from last year.

cognac barrel-beerThe direct impact on customers can vary, as the cost of ingredients, life of a barrel and labor all change beer-to-beer. The amount of space brewers dedicate to barrels instead of metal fermenters also comes into play, as time and literal space can mark up the value of one barrel-aged beer over another.

Regardless, the ongoing trend of higher material costs – from hops to barley and now barrels – has to get covered somewhere: customer’s wallets.

Why do prices seem destined to go up for barrel-aged beers along with the vessels themselves? Because businesses like Rocky Mountain Barrel Company, which wholesales barrels across the U.S., get 100 to 300 requests a week from brewers window shopping for price estimates. There may be no shortage of interest, but there may be a shortage of available barrels.

“My business has doubled in revenue in the last two-and-a-half years,” said John Gill, “chief barrel guy” at The Barrel Broker, which has provided barrels to more than 530 breweries in its six years of operation. “Across the board, I’ve seen 15 to 20 percent increases in wine barrel prices over the last four years. But tequila, bourbon, whiskey and rum? Demand for those is just as strong.”

Even with wine barrels most easily available, Gill sees prices potentially going up in the short term as access stays flat. He noted that because many wineries have had strong grape yields in recent years, they’re more likely to hold onto barrels to reuse and fill with wine from excess grape crop. Until there’s a significant drop in yield, barrels that would’ve otherwise hit the market are staying put at their source.

That’s bad for brewery demand right now, but could provide savings later. Older wine barrels can cost as much as about $80 less, depending on age and number of wines it’s been used to produce.

“The only way price will go down is if a large amount of barrels hits the market due to a bad harvest this year or next year,” Gill said.

barrel-warehouseThat doesn’t necessarily mean doom and gloom for all breweries. Matt Monahan, co-owner and brewer at Brooklyn’s Other Half Brewing Company, has found wine barrels plentiful for aging his Falsa Noctis saison or Absentia Luci imperial stout. He currently has 50 to 60 wine barrels in stock that cost between $175 and $195 for French oak burgundy casks or as little as $50 from a Long Island winery an hour away.

“Using wine barrels isn’t an advantage, it’s just what we like to do,” Monahan said of consumer demand. “But it’s better for us because we don’t have to pay a premium for something like cognac or rum barrels since wine barrels are plentiful and half the price. But our plan isn’t to use barrels to make money.”

When Other Half opened in December 2013, Monahan fronted the money for his first barrels himself, charging his credit card to buy French oak and California chardonnay barrels.

“We knew the beer going into them was a good investment,” he said. “We used the proceeds from those first fills to pay me back and purchase more barrels.”

Which is what Pennisi is banking on for his own endeavor with Durty Bull Brewing. He’s trying to stay flexible: going white American oak versus a French oak wine barrel could save as much as $150, while oak spirals and staves, the wooden planks used to make barrels, are also options to age with beer. He’s even looking into buying two foeders – giant wooden barrels – that are becoming more popular at breweries across the country.

“Obviously there’s a high demand for crafty, barrel-aged beers but they sell at such a premium,” Pennisi said. “I want rum, I want tequila, I want gin. I want all these barrels for variety. This is a niche market that’s going to get filled.”

Related: Why I Wanted to Write About Barrels

Photos courtesy of Noah Steingraeber.

+Bryan Roth
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac

7 thoughts on “Over a Barrel: The Rising Cost for a Specialty Beer

  1. I wonder what those 2 drops in barrel aged beer searches were. Was it seasonality with searches spiking in winter and dropping in summer, or something else?

    1. Here’s the link if you want to look.

      It seems to be throughout the year, but the biggest drop between 2015 and 2015 takes place from May to July. The one right after that is Dec/Jan and one at the beginning is Feb to April. “Barrel-aged beer week” is in October, which probably helps some.

  2. Great story… I had no idea there were that many craft distilleries now! Crazy.

    1. Thanks a bunch for reading! I knew the number had gone up, but to that degree, I never would have guessed.

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