The Dynamics of the Hops Industry

Abstract

Today the hops industry seems to be enjoying rising popularity. After decades of consolidation in the beer industry, the recent craft beer movement has resulted in a higher demand for hops. Historically used to increase the preservation and shelf life of beers, hops are nowadays essential for the more diverse tastes of certain craft beers. On the supply side, hop farmers have increased their production in recent years in response to the higher interest in their products. However, specialization of hop farmers in hops that are in demand by the craft beer sector can lead to higher price fluctuations in more segmented markets, where hop consumers and hop producers are tied to each other by longer future contracts and sunk costs of investment in cultivated areas. This might create problems were craft beers to lose their appeal to consumers.