USA: Stainless steel keg maker is struggling to survive

The only company in the United States that produces stainless steel kegs is struggling to survive. American Keg Company in Pottstown, Pennsylvana, has already laid off one third of its workforce earlier this year and claims that US president DonaldTrump’s new 25 percent tariff on imported steel and aluminum will further decrease competitiveness of domestically build kegs.

“The cost of an imported keg just barely covers the raw materials on one of ours,” said American Keg CEO Paul Czachor. “It’s very difficult to compete.”

“Tariffs will inadvertently drive the price of American steel higher,” Czachor added. “Within a year, we might have to raise our prices so our kegs cost 30 percent more than an import. That puts the whole business in jeopardy.” Czachor believes “if there were no tariffs that would keep the domestic steel prices lower.”

American Keg Co. was founded in 2007 by John Giannopolous, who was also running together with his brother Pete Giannopolous a craft brewery in Pottstown, Pennsylvania, called Sly Fox Brewing Co.Geemacher, as American Keg was originally called, imported kegs from overseas. In 2015 the company started an own keg production in Pottstown but was soon running out of money. The company was sold one year later to Scott Bentley, CEO of VideoRay, a company also based in in Pottstown, which is according to its top executive “the largest volume underwater robotics company in the world.”

“John Giannopolous was looking for somebody who could put more money into it,” Bentley said at that time. “It seemed like an interesting business. Their cash situation was terrible, but the people and the potential were huge.” He hired Paul Czachor as new CEO, who was before a consultant for Geemacher, and he pumped more than $1.5 into the business to ramp up production. However it looks like the business environment for producers of beer kegs in the United State are not favorable.

Already as early as 2006, the last keg production in the US was closed. That year, Swiss firm Franke Beverage Containers bough the unprofitable keg division of Spartanburg Stainless Products (SSP) and transferred it to overseas. In the years preceding the sale, SSP already experienced declining profits in the keg market and focused on the higher margin automotive business, supplying mainly German car maker BMW with steel framework and structure parts for their sport activity vehicles, which are exclusively produced in Spartanburg County for the worldwide market.

In order to fight rising costs for stainless steel some producers tried to establish PET plastic kegs in the keg beer market. After an instant success, the industry experienced a drawback when 26-year-old worker Benjamin Harris died in April 2012 while pressurizing a plastic beer keg with air at the Redhook Ale Brewery in Portsmouth, New Hampshire.  In 2013 the Brewers Association filed a report saying it had received “reports from 18 breweries involving 38 kegs that did not ‘fail safe’ and exploded, created dangerous situations for brewery employees.”

In 2015 a $1.2 million settlement, which benefitted Harris’ sister, his son born after his death and the boy’s mother, could  be reached with Plastic Kegs America (PKA) a manufacturing operation for full-sized beer kegs headquartered in Georgetown, Texas, and two other companies, which were involved in the distribution of the exploded keg.

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