Trouble Brewing

January/February 2008

Keg theft is costing beer manufacturers more than $45 million a year, and they're looking for the scrap industry's cooperation to put a stop to it.

By Theodore Fischer

What did the thief say when he was caught stealing empty beer kegs? "I was looking for light beer."

Despite that bad joke, beer keg theft is no laughing matter to the beer industry. Thieves in the United States are stealing empty kegs at a rate of 300,000 a year, according to estimates from the Beer Institute (Washington, D.C.), which represents 1,600 U.S. breweries. That's about 2.7 percent of the 11 million kegs in use around the country. With new stainless steel kegs selling for about $150 apiece, the keg theft issue is costing beermakers about $45 million a year.

Kegs fall victim to the same market forces that spur the theft of copper wiring, highway guard­rails, and brass graveyard urns: high scrap metal prices. Last spring, full-sized stainless steel kegs had a scrap value of nearly $55, or about $1.80 a pound—triple the price they garnered only two years ago. Built to last for 30 to 40 years, "beer kegs are grade 18/8, which is type 304 stainless steel solids, and it's a primo grade," explains an executive for a major U.S. stainless processor that legitimately purchases loads of obsolete kegs directly from brewers. "It's the vanilla of stainless steel. They're nice and heavy and dense."

Though most stolen kegs come from major breweries, the thefts can hit the smaller companies the hardest, "mainly because of the economies of scale," says Paul Gatza, director of the Brewers Association (Boulder, Colo.), whose 1,400 members are primarily craft brewers. "It's a significant hit for someone who produces [fewer than] 500 barrels a year. A hundred dollars here or there can put them on the brink" between making and losing money, he says. Further, Gatza notes, draft beer is a greater proportion of craft brewers' total sales: roughly 30 percent, compared with about 8 percent for major brewers. Even when they have the money to replace stolen kegs, brewers face the additional problem of a limited supply. The one remaining domestic keg production facility expects to generate only about 300,000 kegs in 2008—barely enough to replace those stolen, let alone meet new needs. Brewers also import kegs from Asia and Europe.

To stop the keg kleptomania, the beer and scrap industries are taking a variety of measures to make kegs a less attractive target.

Getting the Word Out

For years scrapyards accepted kegs, especially those drilled, cut in half, or otherwise damaged. "Scrap dealers didn't know they were not supposed to take them," and brewers didn't tell them otherwise, says Chuck Carr, ReMA's vice president of member services, meetings, marketing, and communications. "Prior to the run-up in nickel prices, it wasn't an issue."

In 2006, however, the Brewers Association approached ISRI, asking for help in the fight against keg theft. Those two associations and the Beer Institute formed an alliance to make all of their members aware of the problem and exhort them to do the right thing.

At its 2006 convention, ReMA distributed a flier depicting a crossed-out keg and the absolutely unambiguous heading "DO NOT BUY BEER KEGS FOR SCRAP." Kegs are the property of brewers and importers, the flier stated, and their owners often can recondition and reuse damaged ones. Further, the deposits wholesalers, retailers, and consumers pay for kegs do not cover the cost of keg replacement. The flier urged scrap dealers to report those trying to sell kegs to the local police or beer distributor or to the Beer Institute (800/379-2739).

In early 2007, ReMA mailed to members a letter signed by the presidents of the three organizations that called keg theft their "common problem" and gave the same advice: Don't accept beer kegs. "Wholesalers, retailers, and individuals generally do not have the right to sell them," the letter stated. Enclosed with the letter was a sticker members could post in their yards stating "We Do Not Purchase Used or Damaged Kegs" and "Beer Keg Theft Is Against the Law." Scrap has run full-page advertisements carrying a similar message. ReMA members have continued the outreach in their communities. "I spent some real time communicating the desire of the brewers' group" to help scrapyards, says Marty Forman, owner of Forman Metal Co. (Milwaukee) and ReMA's Wisconsin Chapter president. Two years into the campaign, progress has been made, but work still needs to be done, ReMA's Carr says. "Have we reached every one of our members? Probably not yet, but we're going to continue to work to make sure everyone is educated, even at the scrapyard. Every new employee that comes in to work the scales has to be educated not to take kegs."

Party Crashers

In most cases of metals theft, "it is very difficult at the scrapyard to tell the difference between stolen material and legitimate material," Carr says. "But kegs are a good exception to this rule because they're easily identified."

First, they're a distinctive shape and size. Second, "kegs are very clearly marked," says Beer Institute president Jeff Becker. "The name stamped in the metal will be the name of the brewer, whether Anheuser-Busch, Heineken, or a craft beer."

Most in the industry believe keg theft is not an organized enterprise but a crime of opportunity: A customer who bought a keg of beer for a party realizes that its scrap value is significantly greater than the $15 or $25 deposit left at the liquor store. These people don't necessarily see themselves as criminals, explains Forman. "They paid their deposit and thought they had the right to do what they wanted with the keg."

But more often kegs fall victim to drive-by thieves who find them stacked up behind a bar or liquor store and toss them into a truck. Because wholesalers and retailers pay low deposits on the kegs, they don't have much incentive to store them more securely.

Keg theft only succeeds when the thief finds a buyer for the keg, and that's where the scrap industry comes in. Now that everyone should know better, "it would take a moron to ‘accidentally' buy a beer keg for scrap because everybody knows what a beer keg is," Forman says.

Randy Katz, co-owner of City Scrap & Salvage Co. (Akron, Ohio), says people approach his company at least twice a week attempting to sell kegs, and he always says no. Last July, a reporter from a local TV station showed up at his facility to do a story on keg thefts, and sure enough, "while he was in the office, a customer walks in and says, ‘I have a couple of beer kegs. Will you buy them?'" Katz recalls. "They got this whole exposé on television." After Katz refused to buy the kegs, the would-be seller claimed he'd have no problem selling them to someone else. "A big company on the other side of town told him if they were cut in half, they'd take them," Katz says. "That, to me, doesn't sound legit."

Another recycler describes it as a philosophical conundrum, however: When is a keg not a keg? "We do not buy kegs from individuals," he insists. "But if somebody's got them cut into tiny little pieces, they're not going to be used as kegs anymore, so we might take them."

Deposits and Other Disincentives

Another approach to discouraging keg theft is to raise the required deposit. Some believe a steep increase would make it uneconomical for customers to scrap them and motivate bar and store owners to upgrade security. "If you have something invested in them, you've got to put them behind a locked door," Carr says.

After Finland raised the nationwide keg deposit to €40 ($58), the loss rate dropped to 0.5 percent, according to the British beer industry group Keg Watch. In the United States, Michigan instituted a higher per-keg deposit last year, raising it from $10 to $30.

Victory Brewery, a craft brewer in Downing­town, Pa., has gone even further. It demands a $30-per-keg deposit from wholesalers; retail customers must charge a $90-per-keg deposit on a credit card. When they return the keg, however, they get $95 back. "Some of our customers balked at this [deposit] and accused us of speculating with their money," says Bill Covaleski, Victory's brewmaster and president. "We said, ‘Fine. You're going to get a 5.5 percent return on your investment in this keg.'"

Alternative keg materials might be another possible solution. Budweiser Budvar, a Czech brewer (unrelated to the U.S. brand), began thwarting thieves in Europe four years ago by enshrouding a light stainless steel keg with a thick, black plastic-and-rubber shell that makes chopping them up for scrap more trouble than it's worth. TrenStar, a container supplier in Europe, has worked with Coors to introduce kegs with plastic tops and bottoms, Keg Watch reports. ELG Haniel Metals (Sheffield, England) is the only authorized recycler of that keg. Brewers are cool to the idea of an all-plastic keg, though. "Some work has been done on a thick, high-density polyethylene," says the Brew-ers Association's Gatza, "but plastic isn't necessarily impermeable to air—it just holds it off for a period of time—so air would definitely have an impact."

States are attacking the keg theft problem either on its own or as a part of the larger metals theft issue. On Jan. 1, South Carolina became the 30th state to enact a keg registration or "keg tagging" law. Sellers must place a unique identifying number on each keg and record the purchaser's name, address, and driver's license information. In Indiana, it's against the law for scrap dealers to buy kegs inscribed with the name of a brewery. And nearly a dozen states have metals theft laws that now require scrap processors to collect information from sellers, keep records of sellers and their materials, or hold scrap for a certain period without processing or selling it.

Last Call

"Keg loss is a problem for Anheuser-Busch and our wholesalers that we would like to see resolved," says Joe Jedlicka, Anheuser-Busch vice president for legal and state affairs. Many hope that the combination of education, legal pressure, and cooperation among the concerned parties will bring it closer to resolution.

With the three associations' education campaign, "hopefully, we'll create enough awareness that scrap dealers will not want to accept kegs anymore," says the Beer Institute's Becker. "If we create the kind of environment where there's no market for these things, thieves will move on to something else."

One other factor will most likely play a significant role in reducing keg theft—declining stainless scrap prices. After peaking last summer at $1.80 a pound, the price fell to 70 cents in early fall before it began to regain ground. Because of the price drop, "and the fact that we have really gone out of our way to publicize [the problem] here in town, this particular story doesn't have a lot of legs right this minute," Forman says. And as a scrap dealer in Milwaukee—Brew City—he should know. •

Theodore Fischer is a writer in Silver Spring, Md.