Brewers foam over lost kegs

Tap it, don’t scrap it.

With metal prices rising, beer makers say they expect to lose hundreds of thousands of kegs and millions of dollars this year as those stainless steel holders of brew are stolen and sold for scrap.

“It’s definitely an issue – getting our kegs back,” said Phil Bannan Jr. of Scuttlebutt Brewing Co. in Everett. “A lot of people go to scrap yards.”

He said the brewing industry is working hard to get operators of scrap yards not to take the kegs unless they are scrapped by the brewers. “We need our kegs back so we can clean ‘em, fill ‘em and get them back out there,” Bannan said.

The beer industry’s main trade group, the Beer Institute, noticed the problem in the past few years as it saw more brewers reporting missing kegs, resulting in an industrywide loss of up to $50 million a year, said Jeff Becker, president of the Beer Institute.

“It really got people’s attention because that’s a significant flow of our kegs that we’ll never see again,” Becker said. “We know some of it’s very innocent but some of it’s not.”

Bannan said a new keg costs more than $100, so even the loss of a few can be a significant problem for a small business.

The theft problem is twofold, Becker said. Some average keg-buying customers opt to forgo their deposits, which can sometimes range from $10 to $30, because they can cover that expense, and then some, if they sell to scrap dealers. Given metal prices, a keg can fetch from $15 to $55 or more at scrap yards.

Bannan noted that Scuttlebutt typically takes a credit card number as security for a keg. He said some people using the keg for personal use might take a few months to return it. By that time, people can move and cards can either expire or be cancelled.

Becker said outright theft is also a problem if empty kegs are unsecured in alleys or in storage areas for restaurants, bars or distributors.

In the past few years, breweries have collectively lost about 300,000 kegs a year, Becker said, out of an estimated 10.7 million in circulation.

Craft brewers are anxious to solve the theft problem because as much as 40 percent of their business is tied up in keg sales, triple the industry average, said Ken Grossman, founder and owner of Sierra Nevada Brewing Co. in Chico, Calif.

Molson Coors Brewing Co. is studying its thefts and working with distributors to keep better track of kegs, said Al Timothy, vice president for government affairs. The Denver-based brewer saw its keg losses double from 2005 to last year. The company has about 800,000 kegs in circulation at any time and did not want to say how many kegs it expects to lose this year.

“The bottom line is it’s a big problem,” Timothy said.

Metal prices are high across the world now, partially because of increased demand caused by a spike in construction in growing economies, said Chuck Carr, spokesman for the Institute of Scrap Recycling Industries Inc., a trade group whose members run about 3,000 facilities in the U.S.

The price scrap yards pay for stainless steel has steadily grown for a year, peaking at about $1.50 to $1.70 a pound last month, said Marty Forman, president of Forman Metal Co. in Milwaukee. But that has dropped to about 50 to 70 cents a pound recently, which could provide some relief to frustrated brewers, he said.

Most empty barrels weigh about 30 pounds.

The Beer Institute supports legislation in states that require, for example, scrap metal buyers to ask for identification from would-be sellers of kegs, among other items. Ten states so far this year have passed such laws, including Colorado, Indiana, Kansas and Virginia.

Another option is to raise keg deposits, which are set by either states, brewers or distributors and wholesalers. Brewers charge their own deposits when they sell kegs to distributors and wholesalers, sometimes as small as $10. Then customers pay their own deposit for kegs.

But Becker said raising deposits is a last resort, because it could deter customers. They hope to curb thefts through awareness.

“We don’t want to point fingers. We want to make it reasonable for people but at the same time, we want it stop,” he said.

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