India: SABMiller enters into barley agreement with farmers in Haryana

Skol Breweries India Ltd, the wholly owned subsidiary of SABMiller India, the country’s second largest brewer, is the first corporation to enter into a contract farming agreement with farmers in Haryana, LiveMint reported November 27.

Confirming this, a SABMiller spokesperson said: “We have entered into a trial contract for one season with barley farmers for an initial supply of 2,000 tonnes of barley. We will extend the contract, depending on the quality of the produce.”

The company has 10 breweries in nine states across India and brews a total of 50 million cases annually. Farmers in Haryana’s Gurgaon and Mahendragarh-Rewari belt, among others, cultivate barley in close to 10,000 acres, said Baldev Singh, superintendent (marketing enforcement) and in charge of contract farming, Haryana State Agriculture Marketing Board.

While this is the first contract farming venture for Skol, it already has a two-year-old collaborative farming project in Rajasthan, where it provides farmers with seeds and other inputs.
However, there is no formal contract and the farmers in Rajasthan are free to sell their produce in the open market.

“We give them a slightly better price than the market and they are more inclined to sell to us,” the SABMiller spokesperson said. Last year, the company bought 7,000 tonnes of barley from farmers in Rajasthan. The figure will go up to 15,000 tonnes this year, the spokesperson said.

Haryana’s venture into contract farming has also evoked interest from liquor major United Breweries Ltd. Senior officials of the marketing board will hold a joint conference of farmers and their potential buyers and corporations in December and executives from United Breweries are expected to participate at the conference to explore business potential, said sources in the marketing board.

Indian traders are exporting barely to other countries at huge premiums because of a global shortage. This has disrupted expansion plans of local breweries. With Haryana being one of the large barley producing states, contract farming could well offer these companies the relief of having an assured supply of the raw material. The beer market in India is growing at more than 20% annually.

28 November, 2007