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A Pilsner, an American pale ale, American IPA or a cold lager. However you like your beer, it's part of life in the United States and usually comes out on top as the most popular alcoholic drink in the country. I'm Hannah Bewley and in today's Business Daily, I'm looking at how US President Donald Trump's tariff policy is impacting a can of beer.
Could this all-American experience be affected by a desire to make America great again? Or will US businesses involved in beer manufacturing and packaging benefit? That's all coming up on Business Daily from the BBC World Service. So what am I looking at? All right, so right in front of us is our brew house, so our brewing system.
It's a three vessel, 20 barrel system. Before we meet the suppliers of raw ingredients for beer, reporter Kizzy Cox goes straight to the end product. She's at Talaya Brewery in Williamsburg, New York City, to speak to co-owner Leanne Darling about what goes into her beer.
The ingredients that go into a can of beer are, one, the aluminum that make up the can, and then the liquid itself is a combination of water, grain, hops, and yeast. There is a lot of overhead in beer production, so obviously the labor. Utilities are incredibly high, both the gas we need to heat the beer and the water. We have, you
you know, rent in New York City, which is not cheap. We've definitely noticed an increase in the cost of our raw materials for a while now. Definitely just the increase in the cost of shipping, but we are anticipating an increase in the cost of aluminum and our grain, because a decent amount of our grain comes from Canada and our aluminum, you know, we're a very small player across the aluminum commodity in the U.S., but
That's definitely not all coming from within the U.S. The aluminum and grain that goes into a can of beer represents about 20% of the cost of that can of beer. So an increase in those inputs is absolutely going to increase the cost of a case of beer. It's been a tough, challenging process.
few years for craft regardless and this kind of just feels like another headwind that we have to face in the coming years.
So have you had to change anything about how you've been making it to kind of absorb those costs? We have started to look for U.S. maltsters, or the grain that goes into beer is malted grain, usually malted barley. There's not much we can do for aluminum sourcing at this point. There's a couple big players that we can source from, but we are hopeful that if those tariffs are put into place,
place and impact us, that they'll be shared kind of across the entire supply chain. The full effect of the tariffs haven't been felt by us yet. One, because our suppliers are still working through their inventory. And once their entire inventory is now impacted by the tariffs, then we'll likely see that
But I think across the board, all people in our supply chain want people to keep buying beer. And we really can't afford increasing our prices because I think that will decrease our sales even further. Leanne Darling at Talaya Brewery in New York. In April this year, U.S. President Donald Trump announced a suite of tariffs on imports to the U.S. from every country around the world.
The highest applied to China have since been reduced and a 90-day pause on other tariffs, due to be up in early July, has offered countries some relief. There's still a broad 10% tariff in place and exemptions on many goods coming from Canada and Mexico to the US. And as for tariffs on aluminium in particular, which obviously is crucial for making a can of beer, we'll come to that later. Businesses are dealing with the ever-changing landscape and it's been an uncertain time.
So we've heard from the end of the supply chain where the beer gets drunk, but where does it begin? I am Ryan Hopkins. I am the Chief Executive Officer for Yakima Chief Hops. I am speaking to you from the beautiful Yakima Valley, which is located in the center part of the state of Washington here in the United States. Almost all of the hops grown in the United States come from the Pacific Northwest. And according to Ryan, half of the world's hops come from America.
They end up in beers across the globe. This time of year, we're in spring season, so it's beautiful. It's a nice spring climate, no wind. There's still snow in the mountains and the fields are just beginning to sprout out of the ground. And they are hop plants. They're the most amazing plants, in my opinion, in the entire world. This is the most important ingredient in beer.
Are tariffs having an impact on this industry without which the bear couldn't be made? I would say tariffs in the world of hops are not more beneficial for one growing region or the other. It's a global industry and we aren't seeing the benefits one way or the other for tariffs for our hops. I
I would say we're seeing some of the challenges associated with just the costs in supply chain for our brewing customers when it involves tariffs. So those knock-on effects is where we see concerns is that those customers
world's finest brewers are having more and more challenges in their businesses with interest rates going up, inflationary cost of all materials rising. If you add on a tariff that's imposed, that just adds an extra layer, an extra cost for a business that is really trying to
remain healthy and viable. I think that's the stress that we hear from our brewing partners is just the economics of running their businesses. For Ryan, though, his business is about more than just numbers on a spreadsheet. I love the hop industry and I love the beer industry. And I do believe beer brings people together. And I do believe it allows for commonalities for people to come together.
and persevere, overcome. So beer has been in the globe for centuries. It will be here in the world for centuries moving forward. You're listening to Business Daily from the BBC World Service. ♪
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Enjoy savings on top of savings when you shop in-store or online for easy drive-up and go-pick-up or delivery. Subject to availability, restrictions apply. Visit Jewelosco.com for more details. I'm Hannah Bewley, and today I'm finding out how a can of craft beer in the U.S. could be impacted by an increase in tariffs on goods in and out of the country.
For your can of beer, you'll need a few more ingredients than just hops. We sell everything but water. So we sell cans, barley for malting. So that malt comes from Europe and the UK. Also hops and yeast and nutrients. A lot of this is sourced from around the world, put together in certain countries and then sold in the US. Terry Little is Senior Vice President for Commercial Operations for RAR BSG, one of the largest suppliers of raw materials for brewers in North America.
He summed up the last few months. I would say it's been a little bit chaotic. I mean, I hate to use that word, but reality is that's what our customers and our industry has been going through, and we're not the only ones. I think beer is supposed to be simple and fun, and these brewers in North America, especially in the U.S., are having a lot more challenges trying to figure out what tomorrow looks like, especially with raw material costs.
So for each product, are you navigating a different potential tariff with changes happening all the time? Yeah, that's been real challenging. And our approach has been to go a little bit slower how we communicate to market to understand as we've all witnessed, things can change within 48 hours. And so we've just really taken a pause to our approach. But now that we've come to, let's call it,
I think a more clear picture on import cost of tariffs, we're deciding how to go to market with those cost increases. Eventually, the consumer will pick that up. But how that shifts and plays itself out is supplier by supplier, working with our partners to figure out the best approach for them and for our business.
And how do you think that might be impacted? Will there be quite steep rises on the price of a can of beer across the states? Well, you'd be surprised when you talk about raw materials, let's say malt, which is probably the majority of the cost of a barrel of beer in the United States.
If a brewer is dependent on import malts to diversify their portfolio, bring different flavors to the U.S. market, then yes. And again, it's about size. And those costs can be really challenging right now when we look at the U.S. beer market and the cost of labor, insurance, overhead costs for small family ran businesses.
Small impacts, even $100 or $200 more a month can really put a dampener on a business and potentially push down labor within that business itself. Because payroll is, again, the second largest cost our brewers have to ingredients and their overall operating costs. So if this led to brewers buying a less wide array of malts or hops...
does that mean that could lead to more boring beer in the US? Potentially. I guess it's the lens you look through it. If you're a beer connoisseur and you understand styles and the beer origination stories of these styles, then yes, in the eyes of that consumer. But we're also facing consumer trends that are changing. So our markets...
in the US are impacted pretty heavily by tariffs because it's just one more straw on the camel's back for these brewers to handle as people switch to low alcohol or no alcohol or alternative beverages better for you. Terry agrees with Ryan it's going to take more than the impact of tariffs to stop people doing what they love. I mean this is really a resilient industry based on passion. We have over 9,000 brewers in the United States, small family-owned businesses and
These owners of the brewers, they have everything into it. Their families are invested. They have investors that they are working for. And so at the end of the day, the only option they really have is to continue to move forward and find new ways to bring their beer and their products to market and diversify their offerings as well into these new alt beverages. Terry Little of Raw BSG.
People don't understand that the aluminum can is one of the most highly engineered containers on the face of the earth. Steel and aluminium imports to the US have attracted special attention from President Trump, and it's changed frequently. From March, they were subject to a 25% import tariff, but recently this was hiked up to 50% for those materials coming from almost every country. My name is Charles Johnson. I'm the president and CEO of the Aluminum Association based in Washington, D.C.,
We are the trade association for the integrated aluminum industry serving the North American market. We represent about north of 70% of the aluminum that is sold in the United States market.
It's a complicated and very global process to make an aluminium can, but to simplify, the US gets most of its aluminium from Canada, which is then rolled in the US. Charles told me what it's been like navigating the last few months. It's been a very hectic time. This has introduced a lot of uncertainty in the world of aluminium and in the world of manufacturing in general. Our industry is...
excited to see an American president that is focused on American manufacturing. And we want to partner with this administration to make sure that what they do is good for our industry and good for American manufacturing in general. At the end of the first quarter, our members are turning in good first quarters, solid first quarters. So the material impact in the first quarter has been net positive for our industry.
Now, uncertainty remains. Are tariffs the right way to go about what you're hoping this will achieve to bring back manufacturing in the U.S.?
Why not, say, subsidize a smelting plant or channel the money and support into other areas? First and foremost, the aluminum industry globally is a pretty globally aligned international supply chain industry. And the U.S. industry has always been somewhat free trade aligned globally.
That, however, changed in the, I would say, the 2010s. The problem that we ran into was a precipitous run-up of state-subsidized production in China. And so we went to our government and we partnered with our government to look for solutions to make sure that unfairly traded Chinese aluminum did not negatively impact U.S. manufacturers. And so tariffs were the solution.
When it comes to reshoring upstream aluminum manufacturing, you know, the result of that unfair trade with China was that the American smelting sector was largely hollowed out. We went from more than 20 smelters to four today in just a few decades. Now, to reverse that trend, tariffs can help. But we've been very clear with the administration, though, that it will take more than just tariffs to bring aluminum smelting back to the United States. Most notably, it will take power.
Your average aluminum plant, smelting plant, uses the same amount of power as a mid-sized city, so Cleveland, let's say. And American energy policy has not been in a place in the last few decades to make a smelter economically viable in the United States. Tariffs can help, but we'll need energy and we'll need time.
And also several billion dollars. So, yes, it takes money, time and we have to have those energy commitments. Is it the smaller companies further downstream that are maybe being the ones who are affected most by this at the moment? It might be that, say, a smaller brewery who needs cans for their beer.
they're going to be the ones seeing the price increases? Well, so within our membership, within the Aluminum Association's membership, we represent everything from the mine rolling or extrusion or forging.
What we heard when we met together for our spring meeting was that everyone is doing reasonably well. And so we did not hear a large amount of pain from our smaller members or our niche producers. There is a lot of uncertainty in the world that could change. We could see, for instance, if there is a prolonged trade war, we could see some downstream demand destruction for final products. And that's something that we are concerned about and watching. But in the meantime, from our members, we are not hearing that.
So there have been winners and losers and a lot of uncertainty for business. But what about consumers? Leanne Darling at Talaya Brewery again. So the tariffs have obviously increased our cogs. But beyond that, I think the decline in consumer sentiment is the bigger issue. People are uncertain about where the market is heading, uncertain on where the tariffs will land. There's market volatility constantly. And I think...
As people become more conservative with their discretionary spend, they're likely to spend less on premium craft beer. Alcohol is recession-proof, but premium alcohol, not so much. People tend to downshift to cheaper alternatives. And so it's been a really tough year for us so far, year over year. We're only about five years old, but it's really the first year we've seen a decline in growth on wholesale and in our own taprooms.
And what do the beer drinkers think? Kizzy Cox canvassed opinions. Do you think tariffs are a good idea if more things are made in the US? I mean, I think for something like...
beers, no. I also just think that the U.S. isn't set up to necessarily manufacture absolutely everything. I don't think we have the resources to manufacture everything. That's why we have imported things for many, many years. But, you know, if they want to continue on supporting the auto business, of course. But I think realistically speaking, trying to bring stuff here when we have never had it isn't the best idea. So, speaking of being in a local brewery, if the prices were to go up, would that affect
you know, whether or not you came here or not. I love it here, so I think it would have to go up quite a bit for it to affect whether or not I come here. That being said, when I'm just at a bar and I notice that, you know, whatever beer on draft has gone up by a couple dollars, it would definitely affect the likelihood that I would order it.
Well, yeah. So in terms of tariffs, do you think it could be a good thing, for example, if more things were made in the United States? I'm pro-world. So, like, yeah, I'm not for the tariffs. Like, I want everybody to be exposed to different cultures and products and everything. And I think that we should encourage global trade. Even if ultimately the prices go down, for example? Yeah.
Let the consumer decide what they want, you know? Like, you can buy, obviously, beer imported from Mexico, but you can also buy beer made right in Brooklyn, right? And I like that there's both options. Thank you to reporter Kizzy Cox in New York. That's it for this edition of Business Daily from BBC World Service, produced and presented by me, Hannah Bewley. To hear more, go to wherever you get your BBC podcasts. Cheers. Cheers.
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