Keg Theft Pushes Deposits Up

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The first time I bought a keg—right about the time Jimmy Carter left the White House—I paid $32 for a half-barrel of smooth, easy-drinking Genesee Cream Ale, plus 10 bucks for a deposit. Since then the price of the beer has gone up and up, but the deposit has remained the same.

Then last month, I got a 1/6 barrel keg of Victory HopDevil and was looking forward to enjoying an afternoon of its ripplingly intense hop nose and solid malt backbone . . . but the deposit was 30 bucks. It wasn’t the money, it was the shock. Keg deposits are $10, period. I think it was one of the Ten Commandments. Of course, so is “Thou Shalt Not Steal,” and that’s where the problem arises: Kegs are being stolen at a quickening rate.

Though the beer business has changed rapidly over the last 20 years, the kegs haven’t. They’re made of sturdy stainless steel, have few moving parts, and are the ultimate reusable containers: A keg’s service life is 30 to 40 years. New technology, like the more easily cleaned and handled “Sankey-type” keg with its ball valve, phased in slowly over years. No changes in kegs, no change in the deposit.

Until now. Keg prices have increased with the cost of stainless steel, which has risen in response to demand from China and India. When I called Bill Covaleski, the president of Victory Brewing in Downingtown, Pennsylvania, to confirm that $30 deposit, he explained that they had to protect their investment. “When we opened in 1996, kegs were $90, because we were buying in small amounts,” he said. “When we started buying in quantity, they were about $75. But our last purchase cost us $146 apiece.”

Victory, and every other brewery, has a lot of money tied up in their kegs. The rule of thumb is that a brewery’s “float,” or total keg inventory, is eight kegs for every bar tap. A hundred-draft account means 800 kegs: some in transit, backup kegs at the bars, kegs in wholesaler and brewery coldrooms, and empties waiting to be returned.

That worked for years, with a steady, small loss of kegs, mostly deterred by the $10 deposit. Kegs eventually wore out; some were out of circulation in fraternity basements and under floating boat docks. But most came back to the brewery.

Stainless scrap prices have gone up, though, and kegs are now an easy score for theft and resale to scrap dealers. “The last time I checked, about 10 months ago, a half-barrel keg brought $32 as scrap,” Covaleski said. “When the deposit’s $10, that’s a problem. Down in North Carolina, about a year and a half ago, our wholesaler had a trailer-load of empty kegs driven off his lot at night.” That hurts a lot when you lose a six-month-old keg you’d figured on using for the next 30 years.

Last year, 386,053 kegs were stolen in the U.S., representing 3.6 percent of the total float, at an approximate total replacement cost to the breweries of $52.6 million, according to the Beer Institute’s chief economist, Lester Jones. Jones noted several reasons why this hits small brewers harder, chief among them that small brewers tend to sell more draft than bottled beer compared with the large brewers, approximately 40 percent versus 9 percent of total sales.

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