USA: Craft brewery revolution transformed barley and hops demand

The craft brewery revolution has transformed barley and hops demand, say experts.

The United States is the mecca of craft beer with an estimated 4,144 breweries. The next largest market is the United Kingdom with 723. Canada ranks sixth at 483, according to Alltech, an animal health company that also owns a brewery.

Craft breweries are defined as at least 75 percent independently owned breweries producing 15,000 to six million barrels of beer per year.

They accounted for 12 to 13 percent of the total U.S. beer market last year, and the industry expects that share will grow to 20 percent by 2020.

The impact of this new beer player on the barley industry has been profound, said retired University of Saskatchewan barley breeder Brian Rossnagel.

He estimates craft brewers buy at least 20 to 25 percent of the malt produced in North America, which is about double their share of the beer market.

“Craft brewers are all malt brewers, so that’s very important to barley growers and maltsters,” Rossnagel told delegates attending Ag-West Bio’s annual meeting.

Mainstream brewers incorporate sugar adjuncts, which are unmalted grains such as corn, rice and wheat, or syrups made from cheap sugars into their recipes.

“It’s really pleasing to see the craft industry come back and say, ‘no, no, we want to use barley malt,’ ” Rossnagel said.

That is fuelling a resurgence in malt and barley demand.

“Every bottle of beer from a craft brewer actually has more barley in it,” said Rossnagel.

“It’s beginning to have a major effect.”

It is also having an impact on the type of barley grown. Farmers liked CDC Copeland when it was first released, but maltsters didn’t.

They preferred high enzyme barley such as AC Metcalfe, which is used to break down some of the unmalted grains used by the big breweries.

“You folks in the craft industry and your colleagues, particularly in the U.S., came along and said, ‘we don’t want Metcalfe. It’s too hot. It’s too quick,’ ” said Rossnagel.

They wanted barley with less enzyme activity, and Copeland fit the bill. Indications are that Copeland will overtake Metcalfe as the number one barley variety grown in Canada this year.

“It’s the first time in 40 years that a high enzyme variety wouldn’t be the number one malt variety in Western Canada,” he said.

There is no slowdown in sight for the craft brewing sector. Total U.S. beer production was flat in 2015 while craft volume increased by 15 percent to 25.5 million barrels.

“It’s still growing like mad,” said David Hysert, past-president of the American Society of Brewing Chemists.

He retired in 2007 and barely recognizes the beer industry today. Two new craft breweries open up every day in the U.S., and there are more than 2,000 pending licenses.

“It’s astounding, totally astounding,” said Hysert.

“You can think of the coffee revolution. It’s the same kind of thing, Starbucks on every corner.”

That is why the major brewers are buying up craft brewers. For in-stance, Constellation Brands bought Ballast Point Brewing and Spirits for $1 billion last year.

The craft beer explosion has also ignited the hops industry because craft brewers typically use 10 times the amount of hops as mainstream brewers.

U.S. farmers planted 51,112 acres of hops in 2016, up 14 percent from the previous year. Canadian farmers grew 257 acres in 2015. The crop is grown in 24 states and seven provinces, up from three states in 2007.

Craft brewers like a different type of hops than the major brewers, said Hysert, who is a former vice-president with John I. Haas Inc., the largest hops company in the U.S.

There are two types of hops, bitter and aroma.

The market was 70 percent bitter and 30 percent aroma in 2007, but today it has reversed.

“It’s an absolutely amazing turnaround, and it’s all because of the craft breweries,” he said. “It’s an understatement to say that craft breweries use aroma flavour hops liberally. They love their very hop-forward beer styles.”

One of those styles is India pale ale, which accounts for 25 percent of all craft beer sales and 46 percent of their growth.

That is one type of beer produced by 9 Mile Legacy Brewing Company, a nano-brewery located next to the Saskatoon Farmer’s Market.

Brewery co-founder Shawn Moen said it is about one-tenth the size of a regular craft brewery. It brews 100 litres at a time and eight batches a week. The size of the operation allows it to be nimble and experiment with varieties.

“I think we’ve done about 45 different styles of beer since we opened last year,” he said.

Moen said craft beer accounts for one to two percent of Saskatchewan’s beer sales and seven to eight percent nationally, so the market penetration is much lower than it is in the U.S.

“We’ve got big, big room to grow,” he said.

It means a lot to him to buy malt from Biggar, Sask., to use in his tiny brewery because he was raised on a farm near Cabri, Sask.

“I’m a farm kid. I grew up, as many of us have, watching our farmers grow products and ship them out of province without adding value, and that always got to me.”

08 October, 2016