April was supposed to be a month of celebration for Bill Spence and his 10 employees at St. George Brewing in Hampton as they mark 27 years in business.
Instead, the owner of the longest surviving microbrewery in Hampton Roads said he is waiting to see what happens with prices in the near- and long-term.
In mid-March, the Trump administration’s 25% tariff on all imports of aluminum and steel went into effect. On April 4, all imported beer and empty aluminum cans were included. Other goods from Canada and Mexico not compliant with the trilateral trade agreement with the U.S. also face 25% levies.
Separately, President Donald Trump enacted a 90-day pause this week for most of his recently announced higher “reciprocal” tariffs against dozens of countries, although he kept a 10% baseline tax on nearly all global imports. The pause did not include the aluminum, steel or beer can tariffs nor the 25% levies on Canadian and Mexican goods.
While most of the aluminum sheets used for U.S.-made beverage cans are produced domestically, according to the Can Manufacturers Institute, the Brewers Association estimates that 10% of U.S. cans are made from Canadian aluminum. The association, which represents 9,500 independent U.S. craft beer makers, also said tariffs on Canadian products such as barley and malt also would increase costs.
Spence wonders how various tariffs will affect the availability of materials. Right now, St. George bottles half and cans the other half of its product, he said. But the bottles the brewery gets from its supplier are made in a plant in Montreal.
The bulk of the brewery’s malted barley — typically the main ingredient used to brew beer — also comes from Canada, he said, while specialty grains are imported from Europe.
Fortunately, Spence said with his long-term operation, he maintains a good supply of steel kegs, but it is mainly the cost of consumables — cans and raw materials like malt and hops — that concerns him.
As for future production, Spence said he will have to look at what costs he can absorb and what he will have to pass on to customers.
“I do not know what the final results are going to be until I actually see what the starting point is going to be,” Spence said. “When they keep moving the starting line, you don’t know where the hell the finish line is going to be.”
Overall, he said it’s going to be a very turbulent time for breweries.
___
‘Shock to the system’
The tax burdens placed on craft breweries have gotten out of hand, said Brett Vassey, president and CEO of Virginia Craft Brewers Guild. Those include machinery and tools, business license, sales, meals, property, beer excise and income taxes.
“This tariff is a shock to the system, but it has pointed out how price-sensitive these companies have become,” he said.
The guild, according to its website, formed in December 2010 to help create the best environment for independent craft beer businesses to manufacture and headquarter their operations in the U.S. When the organization started, there were about 40 breweries in the commonwealth. Today, Virginia has more than 300 active breweries, although many operate multiple locations.
“It’s one of the greatest small business success stories in Virginia history,” Vassey said.
Folks in the industry already had a heightened sense of anxiety before the tariffs, Vassey said. The industry, already under stress because of changing economics and changing consumer behavior, has had a decline in sales for the past two years.
Gone are the days that independent craft brewers had the flexibility to internalize cost, Vassey said.
“They’re like every other manufacturer today: When raw material prices go up, their final product price has to go up,” he said. “Or, they have to become more efficient in something else and that just means they cut something else and that’s difficult.”
They have to take every little price increase — or the threat of one — seriously and move quickly, he said.
“These are small companies and they’re living month to month at this point,” he said.
On the flip side, Vassey said there may be an opportunity for domestic craft beer sales to make a resurgence over imported beer subject to the 25% tariff.
“It’s just a wild card,” Vassey said. “We just don’t know.”
___
Watching and waiting
Jared Smith has been the head brewer at Smartmouth Brewing in Norfolk for the past 12 years. Admitting he’s not a political person and not completely up to date with the tariffs, he said he thinks it’s too early to tell what’s ahead for craft breweries in wake of the latest obstacles.
“The last time I ordered cans was a few weeks ago, and those prices hadn’t gone up yet,” he said. “But, I do imagine our can prices will go up here pretty soon.”
Tim Smith, co-owner of Sly Clyde Ciderworks in the Phoebus section of Hampton, said he anticipates the cost of cans going up, but feels lucky the cidery has enough for the summer season.
While he hasn’t heard any news about the price of cans increasing, he has been receiving alerts from vendors to watch for changes.
“Lots of equipment comes from overseas and increases will surely come there,” Tim Smith said.
Chuck Shelsby’s initial response to the latest round of tariffs gives a glimpse into the Virginia Beach-based “beerstro” owner’s feelings.
“I can’t tell you what I really think because you can’t print that,” said Shelsby, owner of The Casual Pint.
He did say the business will have to take a serious look at the cost of bringing in canned beer. The Casual Pint has 35 beer and cider varieties on tap and four large coolers filled with 75% cold, canned beer with the rest in bottles.
“I expect very shortly you’re going to see a hefty price on cans of beer,” he said. “It’s going to be troubling for a while.”
In business for seven years, Shelsby has 23 employees but was recently forced to redo his budgets, put a freeze on new hires and halt plans on employee insurance policies. He’s noticed not only a decline in the number of customers coming into The Casual Pint, but also a decrease in how much they spend when they’re there.
Stressing that it’s small-business owners like him who are going to be hurt the most, Shelsby said it’s starting to get really scary.
“But we’re still working on doing our thing and making (sure) people have a good time,” he said.
The Associated Press contributed to this story.
Sandra J. Pennecke, 757-652-5836, sandra.pennecke@pilotonline.com
