Local keg maker feels squeezed by tariffs
American Keg feeling the squeeze from steel tariffs
POTTSTOWN » American Keg CEO Paul Czachor is looking for a level playing field when it comes to the imported steel and aluminum tariffs executive order signed by President Donald Trump March 8.
American Keg is the only company in the U.S. that makes beer kegs using only U.S. stainless steel. The company is starting to experience higher production costs and lower sales as a result of the tariffs.
Czachor said that while he recognizes the value of the tariffs for the U.S. steel industry, there is still work to be done.
“You have to take a holistic view on the tariffs. There are unintended consequences with these tariffs,” Czachor said.
What are those unintended consequences?
The steel tariffs apply only to raw materials being imported into the U.S. The tariffs do not apply to finished products — like beer kegs imported from Germany or China.
“The price of an import keg is not going to change — it’s going to use the same low cost steel and there is a zero dollar tariff on import kegs,” he said.
In addition, Czachor said that U.S. steel prices have already started going up as a result of the tariffs — up 20 percent since the fourth quarter of 2017.
“Our raw materials are going up, therefore driving the price of an American made keg up, while the import kegs are still the same,” he said.
Czachor added that a completed imported keg costs the same as just the raw materials for keg made by American Keg.
“Then we have to add in rent, labor, energy costs,” he added.
The way to level the playing field, he said, is to impose tariffs on imported, finished, steel kegs.
Czachor said before prices started going up on U.S. stainless steel, a stainless steel keg made by American Keg was about $10 to $12 more than an imported keg. Now, that cost difference is about $20.
Czachor said as the tariffs are implemented, he expects to see that price difference increase.
The increasing prices in raw materials and the need for American Keg to increase its prices have resulted in a loss of business for the Pottstownbased company.
“Any time you have an industry using high component of steel in its products, and you have an import competitor that
will still use low cost steel coming in, it’s going to be an issue,” Czachor said. “Ideally the administration would do a holistic view and say — ‘how do we address this for industries like this.’”
In addition, the company was recently forced to lay off 10 employees — onethird of its workforce — because of the business lost due to increasing prices.
“Customers were always willing to pay a little bit more for an American keg, but now it’s starting to get too high,” he said. “Now we are starting to lose business — as we raise prices.”
Czachor said he has confidence in American Keg’s engineers and production employees.
Since the tariffs order was signed, Czachor said American Keg has started to get proactive about the issue. The company is in the process of preparing paperwork to file with the U.S. Department of Commerce to argue for a tariff on imported kegs.
“We are not afraid of competition, not afraid to work hard and we’re excited, but you need a level
playing field. You cannot have subsidized products and low cost steel coming in,” Czachor said.
He said the company is working on its filing, but does not have a sense how long the process will take once the paperwork is filed with the Department of Commerce.
One challenge is that American Keg is the only
company that uses domestic stainless steel to make its product, so its appeal with the government is being made by the company alone — instead of through a larger association of similar business owners.
In addition to producing stainless steel kegs, American Keg imports kegs. Czachor acknowledges that if the company is successful
in getting a tariff placed on imported kegs, his company will be required to pay the tariff.
“That doesn’t bother us, as long as we have a level playing field,” he added.
The American Keg story has received some national attention in recent days. Czachor said he was contacted by a gentleman from Texas, “a veteran, who said he wanted to buy one keg and get all of his friends to buy a keg.” Czachor said while he appreciated the gesture, “that just won’t do it.”
American Keg has been operating at its 31 Robinson Street location since 2016. Before that the company was known as Geemacher. When the company began operating as American Keg, it had 15 employees working in its 30,000 square foot facility. Since 2016 the number of employees grew to a high of 30, before the February downsizing.
Last summer, the company expanded its space by 30,000 square feet when it relocated its warehouse operation as well as several operations including the keg screen printing. That warehouse currently stores about 26,000 kegs.
American Keg produces half-keg and 1/6-keg sizes, which hold 15.74 gallons and 5.25 gallons, respectively.