Christmas may be over, but local businesses have been enjoying the 90-day moratorium on the trade war between the United States and China.
In particular, breweries have taken the opportunity to stock up on the necessary supplies while the tariffs are absent and prices are not as high.
Michael Marquess, the founder and CEO of Mother Road Brewing Company, said they have taken the opportunity to purchase $76,000 worth of kegs and are considering making another “sizable purchase again to get us through 2019.”
“Mother Road can’t take a 25 percent hit on kegs,” Marquess said. “I mean that’s huge; that’s real dollars.”
Wanderlust Brewing Company has also seen an increase in the price on kegs, owner Nathan Freidman said.
Freidman said they were lucky to have just ordered their annual shipment of kegs before the tariffs were announced, but since then, “pretty much all of our vendors have raised prices on those by 10 to 15 percent.”
They mostly buy kegs from foreign companies, but Freidman said even if they did buy domestic kegs, tariffs on importing raw materials means the cost of products made within the U.S. has also increased.
“I am the owner of a small business and even we have connections globally,” Freidman said.
Their kegs generally have a fairly long lifespan, Freidman said, but as kegs get lost and become damaged, they still have to replace some of them a few times a year.
Last year, Freidman said, Wanderlust increased production and expanded their brewing operation. That was before the tariffs had even been announced, but since they have expanded, the prices on the equipment they bought have all gone up.
If they had waited to expand this year, Freidman said, the tariffs probably wouldn’t have prevented them from expanding, but they would likely have had to delay their expansion.
Freidman said there are other factors that have hit them harder, specifically pointing at the increased minimum wage in Flagstaff as one example. He added that they generally raise their prices slightly every year and, although the tariffs haven’t influenced their decision this year, he could easily imagine a scenario in which that was the biggest factor.
Aluminum has also been touched by the tariffs but, unlike other local industries that have seen the price of aluminum nearly double, brewers have been less affected on this front, said Kelly Hanseth of Beaver Street Brewery and the Lumberyard.
This is because although aluminum has been affected by tariffs, one of the largest manufacturers and suppliers of beverage cans in the U.S., Ball Corporation, was exempt from the tariffs on aluminum in August, Hanseth said.
Nonetheless, Marquess said, at Mother Road they are still expecting the price of aluminum to go up slightly next year because of the tariffs. But even if aluminum prices go up by just a cent, Marquess said that adds up.
“I think we’re going to be fine, but (for) a lot of the smaller brewers that don’t have the economies of scale that we do, or say, a Lumberyard does, it may be a little tougher for the smaller guys to handle some of those price impacts," Marquess said.
The uncertainty caused by the tariffs have also changed the way they do business. Normally, Marquess said they looked about 10 to 12 months out on contracts, but now, they are starting to look 48 months out.
“When the federal government starts acting squirrelly, that hurts small business, and that’s just the fact of the matter,” Marquess said. “It doesn’t matter if it’s a Democrat or a Republican, uncertainty doesn’t help small business at all.”