Why is beer so expensive?

Beer prices at restaurants continue climbing in 2025, with the median price reaching $6.47 in August, according to Toast data. 

Understanding why beer has become more expensive reveals a perfect storm of tariffs, supply constraints, and rising operational costs. Let’s dive in. 

Aluminum tariffs have dramatically increased packaging costs

The single biggest factor in rising beer prices in 2025 has been tariffs on aluminum cans and imported beer. In April 2025, the Trump administration implemented a 25% tariff on all imported canned beer and empty aluminum cans, adding to earlier aluminum tariffs imposed in February.

These tariffs have hit the industry hard;approximately 60% of U.S. beer is sold in cans, making aluminum packaging a significant cost factor. Canada supplies most aluminum used for U.S. beer cans, and in June 2025, tariffsincreased further from 25% to 50%, compounding costs for breweries already operating on razor-thin margins.

Carbon dioxide shortages continue to plague breweries

Breweries face persistent CO2 supply disruptions that have kept prices elevated since 2020. Carbon dioxide serves as both a processing aid and essential ingredient in beer production, used throughout the brewing, packaging, and serving processes.

Current commercial demand for CO2 equals production levels, meaning any disruption immediately impacts supply.Demand for CO2 is projected to grow 2% annually over the next five years, while supply grows more slowly. The shortage became even more of an issue when contamination at Jackson Dome, a major natural CO2 source in Mississippi, compounded existing supply problems.

Some breweries reported that CO2 costs had spiked from $0.11 to $1.20 per pound. While larger breweries can invest in expensive CO2 capture systems, smaller craft breweries often lack the resources to afford equipment that can cost $70,000 to $120,000.

Ingredient costs remain elevated

Raw material costs have surged due to multiple factors. Russia and Ukraine produce approximately 18% of the world's barley and account for 30% of global barley exports. Barley and malt prices spiked following Russia's invasion of Ukraine in 2022, causing malt prices to risemore than 30% between 2020 and 2021.

Hops have also experienced price volatility due to supply chain challenges and increasing tariffs on imports from countries like New Zealand and Germany. Specialty ingredients, such as fruits, herbs, and spices, used by craft breweries to distinguish their products, also contribute to their higher costs due to premium pricing.

Labor, transportation, and operational costs keep rising

Wages have risen throughout the brewing, distribution, and hospitality sectors. Transportation costs have surged due to trucking shortages and elevated fuel prices, rippling through the entire supply chain.

Restaurants face significant operational costs that contribute to the final price of beer. These expenses include maintaining draft beer lines, managing walk-in coolers and lowboy fridges, and handling kegs, all of which require trained staff and energy consumption.

Taxes make up a massive portion of beer prices

Taxes representthe single most expensive ingredient in beer, costing more than labor and raw materials combined. Various taxation layers can total as much as 40% of the retail price.

Federal excise taxes range from $0.11 to $0.58 per gallon, depending on production volume and whether the beer is imported. State excise taxes vary dramatically, from $0.019 per gallon in Wyoming to $1.287 per gallon in Tennessee. These taxes are built into the final retail price rather than appearing as separate line items, so consumers remain largely unaware of how much they're paying in taxes on each beer.

Craft beer takes the hardest hit

Craft beer has suffered one of the steepest declines. In 2025, the Beer Purchasers' Index for craft beer experienced a significant contraction, dropping from 35 to 20. For the first time in nearly 20 years, more craft breweries closed than opened in 2024.

Rising costs combined with tighter household budgets have made craft beers a tougher sell. Bars and restaurants respond by trimming craft tap lists or discounting underperforming brews. Smaller producers face mounting costs but have less leverage to pass increases to buyers.

Frequently asked questions

Why has beer gotten more expensive in 2025?

Beer prices increased primarily due to 25% tariffs on aluminum cans and imported beer implemented in April 2025, jumping to 50% in June. Additional factors include persistent CO2 shortages, elevated ingredient costs, and rising labor expenses. The median restaurant beer price reached $6.47 in August 2025.

How do tariffs affect beer prices?

The April 2025 tariffs imposed a 25% duty on all imported canned beer and empty aluminum cans, later increased to 50%. Sinceabout 60% of U.S. beer is sold in cans and most aluminum comes from Canada, these tariffs significantly increased packaging costs.

Why is craft beer so expensive compared to domestic beer?

Craft beer costs more due to specialty ingredients, smaller production batches, and complex recipes. The craft beer segment has been hit hardest by recent cost increases, with its Beer Purchasers' Indexplummeting from 35 to 20 in 2025, indicating severe market contraction.

What role do taxes play in beer prices?

Taxes arethe single most expensive ingredient in beer, accounting for up to 40% of the retail price. Federal excise taxes range from $0.11 to $0.58 per gallon, while state taxes vary from $0.019 per gallon in Wyoming to $1.287 per gallon in Tennessee.