Jul 22, 2007

Beer in a Box: The Answer to Keg Theft?

Stop the presses! Keg thefts are on the rise! An AP article making the rounds over the past couple of weeks reported that the going rate for scrap metal has climbed dramatically, and as a result beer kegs have been disappearing left and right. On the surface, this might not seem like a big deal, but for craft brewers it can be a significant blow to the bottom line. And consumers may be the ones who end up paying for it.

The problem lies squarely with the keg system: breweries send their beer-filled kegs to distributors, who sell them to stores and bars. The stores and bars must return the empty kegs to the distributors, who in turn send 'em back to the breweries to be cleaned and refilled. It's a great system when it works, because it ensures fresh beer for consumers and it's more environmentally conscious than single-use bottles and cans (kegs can last for decades). But consumers need only put down a small deposit (generally $10-$30) when "buying" a keg at, say, BevMo. This means they can turn it around and sell it to a scrap yard at a profit if the amount they get for the metal exceeds their deposit.

Even the big boys are feeling the pain. Molson Coors won't say how many kegs they expect to lose this year, but they've got 800,000 kegs in circulation and the number of losses doubled last year over 2005. Sierra Nevada chalks up about 3% of their kegs to the black market every year. Considering that a replacement keg costs around $150, that's a lot of money being pulled from their pocket.

So what's the solution? The typical short-sighted response being offered by the Beer Institute and other industry groups is to lobby for higher keg deposits and ID requirements at the scrap house. But let's face it: this ain't gonna do much. Even if we embark on a state-by-state mission to pass laws, who's really going to enforce them? And how effective is it really going to be?

But what if there were another solution? Turns out, there might be. But I highly doubt the industry is ready for it (and hell, it may not even be ready for the industry). The Beer-in-Box system dispenses with the keg entirely. Functioning exactly the way wine-in-a-box does, the system decarbonates the beer prior to bagging and recarbonates it at dispensing with a special tap.

There are, of course, hurdles to overcome. First of all, industry hates change. The keg system is nationally understood and dispensing outlets (i.e. bars) are already equipped to handle traditional keg lines. The cost of implementing a new system could, for some, be prohibitive. On the supply end, breweries would have to convince distributors to take on this new system (good luck with that), and distributors would have to then convince outlets to re-equip.

There's also the issue of consumer perception; one critic described the concept of beer-in-a-box as "the Velveeta of beer" (mmmm...processed cheese). But is this a significant hurdle? Wine consumers have long fought the notion that boxed wines could actually be of decent quality, but a quick look at the numbers (and store shelves) reveals that boxed wine sales are up 70% over the last two years (of course, boxed wine represents just 1% of wine sales but some have estimated that they could eventually account for 10-15% of sales).* I personally think we're going to see huge growth of premium boxed wines as environmental concerns (and fuel costs) continue to grow, knocking the perception issue on its ass. And as we know (though hate to admit), the typical mass-market consumer just doesn't apply the same standards of quality to beer that they do to wine.

But the Beer-in-Box system begs an even more significant question: what the hell does it do to the beer? Issues of flavor, appearance, head retention and temperature all need to be considered. According to the inventors, the beer is less prone to bacteria and spoilage. They also claim that the system produces a "more consistent, more compact head of foam."* And every bartender will tell you that consistent head is a really good thing. As for flavor, there is only one bar in all the world (from what I can tell) currently using the system, and they're in Germany. So I can't tell you if it affects the flavor or not. One concern might be the effect of the plastic bag, but I suspect if the wineries have figured it out, this is really a non-issue.

The benefits of the Beer-in-Box system seem like they'd be well worth the effort of convincing the beer trade to adopt it. Assuming that quality is at worst unaffected and at best improved, the system also leaves us better off environmentally. Although switching to disposable packaging seems like a bad idea, it needs to be weighed against the energy/fuel consumption created by keg production, shipping and cleaning (bag-in-box packaging can be produced using recycled materials which themselves are recyclable, and they require less volume/fuel to transport).

There are logistical conveniences, too. Sizing would be incredibly flexible; bars could easily stock twice the number of draft beers, offering customers a wider selection. Bartenders and their barbacks (not to mention the hard-working delivery guys) wouldn't have to lift an additional 30 pounds when hauling kegs.

And finally, Bag-in-Box would flat-out solve the stolen keg problem. Breweries end up with a lot of money tied up in kegs floating through the various lanes of distribution. It's hard to keep filling kegs if the ones you've sent out previously aren't coming back to you quickly (or at all). The system could very likely pay for itself in lost keg savings.

So is it viable? You'll have to ask the inventors. They use it in their bar now, and have applied for the appropriate patents. But if it is, then perhaps, someday, you'll be drinking beer from a bag in a box yourself.

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