AB InBev is Coming for All Your Hops, Unless They Aren’t

If it’s not Wicked Weed, it’s something else, I suppose.

On the heels of a loud and wide outcry from industry professionals and drinkers over the purchase of Wicked Weed by AB InBev, the global conglomerate has offered another reason to pile on. Today, it was noted that AB InBev, post-merger with SABMiller, will use South Africa’s SAB Hop Farms with the goal, according to this memo, “to sell the hops internally to their acquired (former) craft breweries, even though they have not been able to sell all the hops as of yet.” To be clear, it seems this amount of hops is 20 metric tons, or roughly 44,100 pounds.

To put that in comparison, the US grew a reported 89 million pounds of hops in 2016.

But let’s go a step further. If I’m translating numbers correctly, the International Hop Growers Convention estimated the *entire* South African hop crop at 1.9 million pounds in 2016. It is projected to drop to 1.56 million pounds in 2017. There are 1,047 acres of hops expected to be harvested in South Africa this year, or a stone’s throw away than the acreage of *only* Cascade grown *just* in Oregon in 2016.

92% of all South African hops are set to be of the alpha variety, which we know is not as popular at the moment in the U.S., where aromatic and fruity hops reign supreme.

Is it unfortunate that American brewers won’t be able to get aroma hops like Southern Passion from South Africa or alpha hops like Southern Star? Sure. But these are varieties to play with, not with which you build a portfolio of brands.

Spoiler alert: those would be Citra, Amarillo, Mosaic and Simcoe.

The loss of South African hops is taking away a portion of the sandbox in which U.S. brewers play, but they can also log onto the Lupulin Exchange at any time to find a variety of hops for which they don’t have via contract. For further context, in a release, Willy Buholzer, global hops procurement director for AB InBev noted:

More than 90 percent of our South African-grown hops will be used in local brands Castle Lager and Castle Lite, beers we’ve committed to brewing with locally-grown ingredients. In support of the local industry, we additionally sell hops to South African craft breweries. This means that less than five percent can be allocated to other Anheuser-Busch InBev breweries outside of South Africa.

This comment carries extra weight when you consider the hoops AB InBev was forced to jump through by the South African government in order to gain approval for its merger with SAB Miller, which included a $69 million (U.S.) rand fund to support the local beer-making industry and supply chains in the country.

Yes, there is a story here in terms of new market fluctuations, but if you’re curious about the future of hop growth (and scarcity?) may I recommend giving a follow to the man who literally wrote the book on them (and his new newsletter) or poke through this collection of stories from last September.

Bryan Roth
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac

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Rumor Central: What Can We Learn from Brewery Buyouts?

rumor

Who doesn’t love a good rumor?

In our youth, school hallways were full of speculation of stolen kisses and scandalous breakups. As adults, our attention may be taken by tabloid magazines at the grocery store, but we refocus on what impacts our lives and interests, seeking out insight into the next plotlines and twists that will enliven the news of the day.

In recent years, beer lovers have followed this cycle with glee and horror as investments and brewery sales have become a regular part of the industry. Along the way, hearts are broken and curious minds churn, wondering what’s next for these businesses.

But there’s also the question of “who’s next?”

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Carlos Brito and the Fallacy of Too Much Choice

beer-shelf

What a terrifying world we live in. Two breweries opening up each day. Stores stocking week-old beer. Shelves lined with bottles and cans as far as the eye can see.

“Our customers are thinking, ‘how much more of an assortment can you carry?'” AB InBev CEO Carlos Brito recently told Just Drinks, adding that consumers are “a bit tired of choice and go for fewer brands.”

The end is nigh. Or, at least, that’s how the leader of the world’s largest beer company would like you to see it. Because let’s be honest, beer drinkers aren’t taking to the streets to protest the volume of what’s available to them. In many ways, they’re embracing it.

There are specific problems facing beer sales, from maintaining flagship brands to warding off wine and spirits, but the idea of choice seems more like a welcomed challenge than worrisome threat. Brito’s belief that “[t]here’s only so much shelf space that you can share and cold box that you can split,” is a factually accurate representation of store layout, but presenting an array of options isn’t as cut and dry as he’d like you to think.

Instead let’s focus on what’s getting the most attention: the brunt of Brito’s assertion. Are consumers “tired of choice”?

Evidence suggests he’s wrong.

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Some Details Forgotten in Latest AB InBev Buy

bosteels-ab-inbev-logos

Whenever one beer company takes over another, there is always reflection. Especially if it’s by someone like AB InBev.

What will happen to Brewery X? How will this impact their beer? Should I care about them any more?

From my American point of view, it’s been an interesting case trying to track the recent purchase of Belgium’s Bosteels by AB InBev, which was announced earlier this month. Bosteels, maker of Kwak, Karmeliet and Deus, is a 225-year old brewery.

Immediately after the announcement, people seemed to ask: but how much of the “family” aspect will be left?

During this week’s discussion on The Beer Temple, I got to chat with host Chris Quinn and others about the purchase. As is often the case, there’s plenty beyond the top-level assumptions or quick reactions.

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Numbers and Context Behind Beer’s ‘Next Frontier’

lone rider-west-cowboy

Beer enthusiasts from coast-to-coast spent a lot of time in 2015 talking about the hottest news topic of last year: mergers and acquisitions.

But when we weren’t talking about who was being bought, it seemed like the geekiest conversations about the future of the beer industry centered around the fight for distribution. Whether it was breweries trying to get the right to deliver their own beer (and deliver more of it) or Big Beer trying to take on larger roles within the space, the way beer arrives to our local stores seemed to be almost as contentious as the fight for who owns and ultimately makes what were drinking.

As Michael Kiser pointed out, “smart craft people need to get into the distro game. It’s the next frontier to be redefined.”

With buyouts and investments becoming more commonplace – and by extent becoming more commonly accepted, if only in understanding – turning our attention to this new space seems inevitable. We started toward the end of last year when AB InBev’s incentive program to encourage distributors to sell AB brands became a public talking point.

Now, as we eye what’s to come for 2016, it’s worth crunching the numbers to see what kind of impact distribution can have on the industry.

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Craft Brew Alliance and the Search for a New ‘Local’

growing importance of local points

There is great power in “local.”

It offers pride, ownership and often, a connection to intrinsic values. Between 2008 and 2014, sales of local food more than doubled to $11.7 billion. Local not only makes people feel good, but there’s money to be made in it, too.

So when it comes to the beer industry, the increasing attention paid to what’s local makes sense. Drinkers want a deeper connection to the product they love, but it also offers an opportunity for businesses to tap into the consciousness of a community. “Local” builds relationships.

As Maureen Ogle recently wrote, the idea of local has been that “the narrative helped build and bind the industry” with help from the Brewers Association. But what happens when that knot starts being pulled apart?

Perhaps it’s becoming a case where a successful beer doesn’t necessarily need to be local in geography, but simply in philosophy.

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Beer Money: Anheuser-Busch and AB InBev

anheuser busch-logo

What’s going on here? Read this post to find out.

Note: Figures below include money attributed to both Anheuser-Busch and Anheuser-Busch InBev. Sources of information recognize AB as a political action committee and AB InBev as an organization. All charts are clickable to enlarge.

Anheuser-Busch

Campaign finance, from 1989 through Q2 2014: $15,619,200

Lobbying:

  • All time: $58,700,812
  • 2013-14: $6,150,000
  • 2013-14 spending represented 10.5 percent of all-time amount
    Source

2013-2014 Cycle

Individual contributions:

AB donations politicians 2013-14

Political Action Committee contributions:

AB donations PAC 2013-14

All Time

Individual contributions:

AB donations politicians all time

Political Action Committee contributions:

AB donations PAC all time

AB InBev

Campaign finance, from 1989 through Q2 2014: $24,314,793

Lobbying:

  • All time: $102,350,812
  • 2013-2014: $18,450,000
  • 2013-14 spending was 18 percent of all time amount
    Source

2013-2014 Cycle

Individual contributions:

AB InBev politician donations 2013-14

Political Action Committee contributions:

AB InBev PAC donations 2013-14

All Time

Individual contributions:

AB InBev politician donations all time

Political Action Committee contributions:

AB InBev PAC donations all time

Anheuser-Busch

Over last 24 years, top-five party committees have been:

  • Florida Republican Party: $1,100,317
  • Missouri Republican Party: $955,000
  • California Democratic Party: $672,733
  • Missouri Democratic Party: $656,778
  • California Republican Party: $617,442
    Source

Anheuser-Busch

2014 Election Cycle

  • Total Raised: $840,526
  • Total Spent: $915,913
  • Contributions to federal candidates: $575,898 (43% to Democrats, 57% to Republicans)
    Source

Anheuser-Busch InBev

2014 Election Cycle

Contributions: $1,243,919

Lobbying:

  • $4,610,000 in 2014
  • $50,020,406 since 1998
    Source

Legislation of Interest

Lots of attention where you’d expect:

Of all organizations, Anheuser-Busch had greatest interest in matters related to distribution, given their vast network throughout the country. Just a few areas of note included:

  • Safe and Efficient Transportation Act and issues related to truck weights
  • Highway Trust Fund Reauthorization
  • Montana/North Dakota railroad issues

Others areas included monitoring of issues related to the malt industry and beverage packaging legislations such as proposals regarding alcohol excise taxes, included but not limited to Health Care Reform.

Beer Money series:

Bryan Roth
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac

How One (Big) Beer Company Bucks Craft’s Rise

dos quis meme

When we talk about beer industry growth, it’s pretty much an exclusive discussion of craft’s never-ending climb and how that ascension is changing the industry.

Or it’s about Big Beer’s fall from grace and how their throne is threatened, leaving them scurrying about the land, snapping up businesses into a mutated form of fiefdom.

But perhaps one conversation we need to have is about beer’s other story – the rise of one Big Beer giant, going against the grain of its behemoth brethren all thanks to the success of one segment of beer.

And it’s not even craft.

Instead of growing depletion numbers and rising profits from a brewery down the street, this tale instead comes from south of the border.

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Stretching Your Dollar: Is Elasticity Craft Beer’s Biggest Threat?

Beer_Bottle-stretch

Every story started deserves an ending.

Remember my last post and the inner struggle between a local beer and national one? The difference of a couple bucks was enough. In lieu of a beer brewed within a short driving distance, I bought the new Sierra Nevada Harvest Ale, made with Neomexicanus hops. The price certainly helped, but the promised experience of enjoying a beer created with what is essentially “experimental” (read: new) hops pushed me over the edge.

Also, I’m still not buying the $11 bottle of “imperial amber ale” brewed several miles from where I type this.

At the core of my decision was the reason I’ve become so adamant for craft beer in the first place – quality and variety. As Greg Engert recently pointed out, we shouldn’t let the sole idea of “drinking local” cloud that search:

We began by decrying the lack of variety, the lack of quality, and the lack of full-flavored drinking experiences offered by the industrial lager. Now, the desire to drink local brews has reached a fever pitch, often blinding publicans and craft beer drinkers alike from what should ultimately guide our choices: Is the beer of the highest quality? Is it bereft of off-flavors? Is it delicious? In short, is it superlative and memorable?

This is especially important when considering today’s beer consumer is focused on aspects of variety and new experiences. So what does this have to do with how we spend our money, anyway?

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Stretching Your Dollar: Local Brews and the Beer Economy

Beer_Bottle-stretch

I’ve lost track how often I do it – standing alone, head bobbing back and forth from one beer to another.

It seems absurd, but in reality, it’s also a growing “problem.”

Do I want to spend $8 on a 22-ounce bottle of locally-produced pale ale or stout or $6 on a seasonal specialty beer from a national brand?

For me, like many beer enthusiasts, “drinking local” is more than a mantra thrown around. It’s a key part of my passion toward appreciating beer. I like knowing exactly where a beer came from, but also that I’m supporting a small, local business.

But the fact of the matter is a penny saved is a penny earned and this is an expensive hobby.

More important, this kind of cost-benefit analysis is pivotal for the vast majority of shoppers: those unlike me, who don’t overthink the malt and hops in a beer. Often, the choice is simple – find a good beer for a good price. Or, rather, find a good price and plan for the best.

So why is this something to worry about, anyway?

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