Some of the world’s finest hops are grown in a single micro climate in South Africa.
InBev, owner of Anheuser Busch, Miller and other giant breweries around the world recently purchased the lion’s share of the world’s best hops. And that means no South African hops for many of your favorite micro brews. Expect the taste profile for some of your favorite micro brews to change as smaller brewers scramble to source new hops.
Anheuser-Busch InBev shuts out craft beer brewers by hoarding hops
The beer giant also is scooping up craft brewers and dominating the homebrew market
In a global beer marketplace, it doesn't pay to focus strictly on the U.S. beer industry.
On May 10, I received a message via Twitter TWTR, -0.81% from a longtime reader in Colorado:
Rick Ellis @R1506 @Notteham Any truth to the rumor regarding ABI buying every pound of South African hops?
That's not a far-fetched question. As The Wall Street Journal's Tripp Mickle wrote last year, Anheuser-Busch InBev's BUD, -0.08% $108 billion takeover of SABMiller included the latter's considerable hop holdings in South Africa, SAB Hop Farms. South Africa produced 1.81 million pounds of hops last year, more than the U.S. when excluding Oregon, Washington and Idaho.
And it's all gone to Anheuser-Busch InBev (ABI). Shortly after that reader's message arrived on Twitter, I received an e-mail from Paul Reiter, co-owner of Great Notion Brewing in Portland, Ore., containing a discouraging message from one of his suppliers. Greg Crum, a U.S.-based brewer, consultant and hop vendor through Fort Collins, Colo.-based ZA Hops, informed Reiter that he wouldn't be able to give him any hops from this year's harvest.
ABI "refuse[s] to let U.S. craft brewers buy any [calendar year] 2017 hops, believing this will afford them a competitive advantage in an increasingly competitive marketplace," Crum wrote.
Crum didn't respond to a request for further information, and Anheuser-Busch InBev has offered some insight into why it's making this move. At a workshop in George, South Africa, earlier this month - as reported by African business publication BizCommunity - ABI noted that it wants to increase South African hop production to more than 2.2 million pounds grown on 1,235 acres.
By bringing SAB Hop Farms hops into the fold, Anheuser-Busch InBev has enclosed its ecosystem and gained more ground on competitors. Do you like the South African hops you're tasting in Wicked Weed, Goose Island or Elysian beers? You can get them exclusively at Norther Brewer for $9.99 a pound. Like those obscure-hop IPAs, but don't want to walk to a store you don't know for them? Let an Anheuser-Busch InBev distributor take them to a national grocery store chain right near your suburban home. Live in the city? Then try those proprietary hops at a Goose Island or 10 Barrel taproom near you.
Willy Buholzer, ABI's global hops procurement director, said this year's recent harvest season in South Africa produced a low yield. More than 90% of this year's South African hops will go into local brands Castle Lager and Castle Lite. He also says that much of the rest will go to South African craft breweries, leaving just 5% for ABI brewers throughout the world.
Out of reach
Reiter, of Great Notion Brewing, was aiming to be one of the first breweries in the Pacific Northwest to offer beer with South African hops - "to be on the forefront of what's new, cool, experimental," he said.
The greater issue, which beer writer and historian Stan Hieronymus touches on in his 2012 book, "For the Love of Hops," is that Anheuser-Busch InBev has never been shy about controlling the means of production. Before Anheuser-Busch's merger with InBev in 2008, it had no problem buying up the majority of a hop farm's acreage in Oregon. In fact, Anheuser-Busch alone once accounted for more than 75% of all of Oregon's hop acreage.
Anheuser-Busch InBev has given craft beer brewers and fans quite a bit to be nervous about. Just last week, Wicked Weed Brewing in Asheville, N.C., announced that it was selling to ABI and joining its craft and import group, The High End. It was the 10th U.S. brewery to do so since 2011 and just Anheuser-Busch InBev's latest foray into previously unexplored portions of the industry.
Last year, ABI launched its venture-capital firm ZX Ventures and almost immediately scooped up Roseville, Minn.-based Northern Brewer, the biggest homebrew-supply chain in the country. The American Homebrewers Association in Boulder, Colo, notes that homebrewing included 1.2 million participants, created more than 11,000 jobs and drew more than $1 billion in spending and $700 million in revenue in 2015. It's hugely influential in determining who the nation's new brewing talent will be and what styles they'll help popularize.
The critic's view is that this is an incredibly anti-competitive stance aimed directly at regional and craft brewers. The realist view is that hauling in those South African hops strengthens Anheuser-Busch InBev in a way that scores of new Lagunitas taprooms will never bolster parent company Heineken HEINY, +0.72% or that new Ballast Point breweries will never prop up Constellation Brands STZ, +0.41% The more competitors that enter Anheuser-Busch InBev's space, the more the big brewer will remind them that the world is its space. And that world is full of willing sellers.
U.S. Craft Brewers Cut Out of South African Hop Supply
May 11, 2017
Hundreds of U.S. craft brewers that had been experimenting with a selection of South African-grown hops will no longer have access to the proprietary supply after Anheuser-Busch InBev, which owns the farm, said it would reserve nearly 100 percent of the latest yield for its own brands.
In a statement released yesterday, A-B said the decision to restrict access to those hops - which were grown at the SAB Hop Farms subsidiary previously owned by SABMiller and acquired by A-B InBev last October when the MegaBrew merger was finalized - was the result of a "poor yield" in 2017.
"South Africa is not a traditional hop growing region," ABI global hops procurement director Willy Buholzer said via a statement. "SAB's R&D efforts made it possible to grow hops in South Africa but it is still less than 1% of the world hop acreage and production. This year, South Africa suffered from low yields. Previously, SAB has sold a small surplus of locally-grown hops to the market. Unfortunately this year we do not have enough to do so given the poor yield."
But a U.S. supplier of those very same hop varieties believes the move is "anticompetitive" and aimed at putting thousands of independent brewers at a competitive disadvantage.
Greg Crum, the founder of Colorado-based hops brokerage ZA Hops, sent his customers an email saying A-B would no longer allow SAB Hop Farms to supply the South African-grown hops.
"Along with the news late last week of ABI buying Wicked Weed, I was informed by SAB Hop Farms (part of ABI's purchase of SAB-Miller) that ABI are commandeering all the hops that were to be allocated for distribution to North American craft brewers," Crum wrote. "The goal is 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. Regardless, they refuse to let US craft brewers buy any CY 2017 hops believing this will afford them a competitive advantage in an increasingly competitive marketplace."
According to Marketwatch, South Africa produced more than 1.81 million pounds of hops last year, an amount that will now be allocated to ABI, which reportedly wants to increase production to more than 2.2 million pounds grown on 1,235 acres. Beer writer Bryan Roth noted on his blog that the amount of hops in question was small - just 44,100 pounds - in comparison to the number of hops grown in the U.S. - 89 million pounds - last year.
According to Buholzer, more than 90 percent of the hops in question will be devoted to A-B's South African brands, Castle Lager and Castle Lite, and the excess will be sold to various South African craft breweries.
"This means that less than five percent can be allocated to other Anheuser-Busch InBev breweries outside of South Africa," Buholzer wrote. "Knowing the high demand for South African hops locally and abroad, we are working to expand local hop acreage. Depending on the 2018 crop outcome, we may once again be able to sell more hops to breweries outside of South Africa."
Many of ZA Hops' customers turned to social media sites such as Twitter and Facebook to express outrage over the decision.
"Don't think macro brew acquisitions matters? Today we learned AB InBev is cutting-off all indie breweries from buying South African hops," San Diego-based Modern Times wrote via Twitter. "So we hope you enjoyed the beers you had w/ Southern Passion, J-17, etc.Some of the best hoppy breweries in the country were using these. Next time you consider buying beer from AB InBev & their zombie breweries, we hope you'll take this extreme dickishness into consideration."
Modern Times founder and CEO Jacob McKean told Brewbound that his brewery used the South African hops in several special release IPAs, including Floating World and Effective Dreams.
"There's nothing 'high end' about it," San Francisco-based Cellarmaker Brewing Company also wrote on Twitter. "Please consider where you spend your hard earned dollars. Ownership matters. On to the next cool hop. We've got a full pallet of South African hops left. Should still be in beers for about a year or so. Enjoy em' while they last I suppose."
Cellarmaker owner Connor Casey told Brewbound that his brewery used the hops in 10 or 15 different beers, including a Southern Passion single-hop beer release.
"These hops don't make or break our brewery specifically," Casey told Brewbound. "Cutting off access to ingredients is pretty low. It's not the absolute end of the world, but it's certainly a step in the wrong direction. They didn't take simcoe, citra or mosaic."
Rhode Island-based Proclamation Ale Company, which bought "a few hundred pounds" of the hops from ZA Hops, called the move "a sad turn of events" and an "example of the things that many craft brewers are scared of" on the company's Facebook page.
"It sucks for the brewers, but has an even more tremendously shitty impact of the great guys that built a company around selling these hops to craft brewers," Proclamation wrote.
Brewers Association director Paul Gatza told Brewbound that since such a small amount of South African hops were being used by U.S. craft brewers that he doesn't foresee a major impact on the U.S. market.
"The large brewers are the biggest hop buyers - in this case, they're hop producers as well - and they can do what they choose to with those hops, assuming that they didn't have contracts out with those hops to other brewers through brokers," Gatza said.
Crum told Brewbound that he began importing and distributing the hops under the name Furthur Brewing in 2012. He later founded ZA Hops, which specialized in reselling proprietary South African hop varieties such as African Queen, Southern Passion, Southern Aroma, Southern Star and several other experimental varieties imported from the SAB Hop Farm in South Africa.
Crum added that he worked with SAB Hop Farms for two years to grow its export business, and that he sold the hops to more than 100 breweries during the 2016 crop year. ZA Hops' clients included Modern Times and Firestone Walker, which used a pair of experimental South African hops in its Luponic Distortion 004.
"Demand has gone from a couple hundred kilograms to 20,000 kilograms this year," Crum said.
When the MegaBrew merger was finalized last October, Crum said he was told that A-B would "take a hands-off approach" to the hop farm and everything would be "business as usual."
Then, in March, the global beer giant invited brewers from its High End portfolio of craft and import companies to visit the SAB Hop Farms, Crum said.
"Three weeks after that, they issued a directive to SAB that they were to halt all exports of their hops," Crum told Brewbound.
Since then, Crum said he and SAB Hops Farms director, Lauren Steytler, had attempted to convince A-B that the growth potential would be higher selling to outside clients.
"We thought we'd won the battle from a financial standpoint," Crum said. "It was straight numbers. You're going to make more money from the hop farm entity than selling to your guys."
However, on the same day that A-B announced its purchase of Wicked Weed, Crum said he received an email from the director of SAB Hop Farms informing him that A-B would only sell hops to South African microbrewers, and that any leftover supply would be shipped to the U.S to sit idly in cold storage facility.
"They don't want craft brewers to have them," Crum claims.
A-B is taking advantage of its position as a vertically integrated beer manufacturer. But is the decision to cut indie craft brewers off from the South African hops supply really "anticompetitive?"
Andre Barlow, an antitrust lawyer with Doyle Barlow & Mazard, and a former attorney of the Department of Justice's Antitrust Division, told Brewbound that moves like this are "one of the repercussions from allowing the two largest global beer manufacturers to merge."
"They made a business decision not to supply them to these craft brewers in the United States, and clearly they have the incentive and the ability in this case to impact these craft brewers from maintaining their product," he said. "That's a huge concern from a consumer standpoint as well."
Meanwhile, the move has essentially shuttered ZA Hops. Crum said he operated his business on "handshake agreements" with brewers, and he didn't take deposits or sign legally binding contracts with his clients.
"It's very loose," he said.
Crum told Brewbound that after informing existing customers of the news, he sold eight boxes of Southern Star hops. Only four boxes remain, he added.
"And then, outside of that, that's it for craft brewers in the United States," he said.
However, Anheuser-Busch InBev-owned Northern Brewer, a Minnesota-based homebrew supply store, is offering packages of several South African varieties.
Rapid growth of hop acreage causes concern
Source: The Shout
By Deborah Jackson, Editor Beer & Brewer
Thanks to continued and increased demand for hop-forward beers, hop acreage continues to climb in the US and across the world, with US acreage almost doubling in five years.
Despite a decrease in overall beer production, demand for hops continues, as signalled by hop contracts thanks to a greater thirst for more heavily hopped beers.
While the continued demand for growth is good news overall for hop growers and brewers, it is not without some concern: US acreage has grown 75.5 per cent in just four years.
In 2012, USDA-NASS reported the total US acreage was 29,683. For 2016, acreage amplified to 52,963. And, as reported in the International Hop Growers' Convention (IHGC) April meeting, an additional 5,185 acres are anticipated to total 58,148 acres of hops in the US for 2017.
If anticipated acreage is actualised, then in five years' time, hop acreage in the US will have practically doubled. Thanks to increased contracts with breweries and the rapid efficiency of US growers who can respond so quickly to customer demand, hop acreage has risen 95.8 per cent in five years.
Ann George, the Executive Director of Hop Growers of America, said: "To put it into perspective, the US acres added in the last five years is larger than the total acreage of any other hop-growing country in the world, outside of our own and Germany, the two largest hop-producing countries.
"Further, our estimated 2017 acreage increase (5,185 acres - a 9.8 per cent growth) by itself is larger than other individual countries' total acreage outside of the US, Germany, and the Czech Republic."
While the continued and rapid growth of acreage has some concerned about an imbalance in variety as tastes change and growth in the craft segment begins to slow, growers will be looking to rebalance that over the coming years.
Overall, thanks to many more craft customers, and a seemingly unquenchable thirst for IPAs and other highly hopped beers, the result for US growers is a far more stable market than in past years: high demand and a diversified customer base. As brewers are looking to plan for their hop requirements, responsible, realistic contracting is encouraged to keep supply and demand in proper balance for the 50-plus varieties being grown in the US.
"When a brewery has a hop variety they depend on and is crucial to their operation, it is dangerous to rely solely on the spot market. Growers rely on forward contracts to plan their acreage for many years out into the future. However, contracting an excessive amount above their needs is not wise either as brewers can be left with expensive hops that they may not be able to sell to other brewers," said Patrick Smith, Vice President, B.T. Loftus Ranches, Inc.
"Over-contracting can also lead to a surplus in the market which tends to discourage future investments in productive capacity and leads to increasing market instability. A surplus can be just as disruptive to the market as a shortage."
In addition to acreage increasing in the US, the stocks (amount left in storage with brewers, growers and merchants) are increasing as well. While the volume of hop stocks have been increasing every year - the USDA NASS March 2017 report showed a nine per cent increase, and a 7.5 per cent increase the year before that - the overall production has grown in relation to the acreage increases. So, the percentage relative to the overall US crop has gone down.
In addition to volumes of stocks increasing, there are also developing trends with the stock reports showing a rise in the amount of stocks being held with merchants, and less with brewers. As a perennial plant in which one harvest needs to last a full year of brewing demands, it is typical to have stocks larger than 100 per cent of any given year's production at this time of year.
"Overall, we are excited with the rejuvenation of our industry over the last few years," notes Smith. "Looking to the future, long-term stability in the supply-demand balance and pricing is in the best interest of brewers and growers alike. This is best achieved through frequent communication and responsible contracting between brewers and their hop suppliers."