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The Angst of Brewing Costs

Monday, 22 Sep 2008 | 3:49 PM ET

CNBC.com's Kim Khan is temporarily hijacking Eurocentric to provide blogs on the business of brewing from Oktoberfest in Munich.

Sharon Lorimer

Talking to the beer producer at Oktoberfest there is definitely angst, as they say in Germany.

Input costs are hitting breweries and German weissbier (wheat beer) faces tough competition from breweries that use other ingredients like rice. In Germany there is a beer purity law – the Reinheitsgebot --- that demands all beer be made of only hops, barley, water and yeast. (American Budweiser, for example, is 33 percent rice.) The problem with the law is that the makers of wheat beers often claim to be compliant because they do not use artificial ingredients, but are still not technically compliant because they do not use barley.

But the dedication to purity is expensive. As this is written, wheat futures are up 3 percent.

And barley and wheat aren't the only commodities hitting breweries. Energy costs are taking their toll and it may not be too far fetched to imagine that some companies may be thinking about using the horse-drawn beer trucks so prevalent at Oktoberfest.

Trucking has been a savior for the beer industry before and higher gas prices are what beer representatives here say are the biggest cause of concern.

Only three breweries in the United States survived prohibition – Anheuser Busch, Miller and Coors – and that was because they had trucks to keep them in the black during the ban on booze.

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