Foreign Firms Changing Face of Idaho's Brewing Industry
Tuesday, 24 November 2009 12:01
International mergers and acquisitions are impacting eastern Idaho barley growers who supply millions of bushels of the cereal grain each year to regional commercial malting plants, helping ensure breweries can whet the thirst of beer drinkers throughout the world.
Irrigated malt barley grown in eastern Idaho is used in virtually every domestic U.S. beer and increasingly foreign brands because of its high quality and reliability.
In recent years, Great Western Malting, Anheuser-Busch and Grupo Modelo have constructed immense concrete malt structures that have altered the skylines of Pocatello and Idaho Falls. Combined, they produce about 28 million bushels of malt annually - Great Western, six million; Anheuser, 16 million (doubling capacity in 2004); Grupo, six million.
Great Western's plant juts high near Highway 30 on Pocatello's west side. The Anheuser-Busch and Grupo Modelo plants are virtually adjacent and dominate Idaho Falls' south end near Highway 91. Together, the three plants are part of the largest malting barley contracting program in the nation.
Idaho ranks behind North Dakota and ahead of Montana as the nation's top three barley-producing states. As of Sept. 30, approximately 5,000 Idaho producers harvested 510,000 acres of barley in 2009, down 13 percent from the previous year. Their 48.45 million bushels were down 3 percent from 2008. Seventy-eight percent of Idaho's acres this year were planted for malting.
In 2004, Idaho farmers produced about 60 million bushels of barley, harvesting 647,500 acres, but 2006 and 2007 were among the two smallest crops in 30 years. In 2007, the growers gleaned almost $143 million in revenues.
Since Grupo Modelo opened its $75 million Idaho Falls complex and Anheuser expanded about five years ago, malt processing in Idaho more than doubled. State officials say Idaho barley production is the most diverse and versatile in North America, generating two-row and six-row malting types, feed and new food barleys.
At a recent breakfast meeting at the Homestead Restaurant in Blackfoot, Idaho Barley Commission Administrator Kelly Olson outlined how significant moves by Australian, Belgian, Brazilian and Mexican companies are changing the U.S. malting and brewing industry.
In the past year, most of Idaho's major barley malt companies have either changed ownership or formed joint ventures with industry competitors as a global consolidation trend that began in 2002 continues, Olson noted.
"These mergers start upstairs with the brewing companies," she said.
Great Western Malting, a subsidiary of United Malt Holdings, the world's fourth largest malt manufacturer, and three sister companies have been sold to GrainCorp Ltd. of Sydney, Australia, the second largest agribusiness listed on the Australian Stock Exchange. That deal totaled $757 million.
GrainCorp operates more than 280 grain receiving and storage sites in Queensland, New South Wales and Victoria. UMH has had 14 malt plants in the U.S., Canada, the United Kingdom and Australia, producing about 1.2 million metric tons of malt each year.
Great Western has been a leading buyer of Idaho malting barley for more than 40 years. Its original malt plant, which still operates, was established at Vancouver, Wash., in 1934 by Northwest brewers. It is the second largest buyer of malting barley in Idaho. Nearly half of its total malting barley purchases come from Idaho, worth more than $25 million annually to Idaho producers.
Two major developments in July 2008 have brought about a profound change in the industry that affects Idaho growers:
* Anheuser-Busch and Belgian/ Brazilian InBev, the world's second and third largest brewers, merged in a $52 billion deal to create the world's largest brewing conglomerate with about $39 billion in annual revenues. Anheuser-Busch remains the largest buyer of Idaho barley.
* Miller Brewing and Coors, the second and third largest brewers in the U.S. market, finalized a joint venture to share 30 percent of that market. MillerCoors operates six barley storage sites, including one in Burley with a nine million-bushel capacity. It is one of the top four buyers of Idaho malting barley, offering direct contracts to Magic Valley growers. Coors has been contracting in Idaho for at least 35 years, exceeding $16 million annually. It also has a 120,000-bushel storage site in Buhl.
Two Mexican brewing companies now contract for Idaho malting barley, including Grupo Modelo, Mexico's largest brewer, which created GModelo Agriculture Inc. as an Idaho subsidiary in 2004 to contract up to six million bushels for processing in Idaho Falls before shipping malt south of the border.
This year, Cerveceria Cuauhtemoc Moctezuma (CCM), Grupo's main Mexican competitor, started contracting directly with eastern Idaho growers for barley shipped to Monterrey, buying 92,000 bushels. Based on its first year, CCM's contract program is expected to grow substantially the next two to three years, Olson said.
Grupo Modelo brews Corona, the top imported beer sold in the U.S.; CCM's Tecate is the fourth largest imported beer brand sold here. The Wall Street Journal and Bloomberg reported that Anheuser-Busch InBev, which owns a non-controlling 50 percent stake in Grupo Modelo, may attempt to acquire the remaining 50 percent.
If that were to occur, Anheuser-Busch InBev would control Idaho Falls' two large barley malting operations with Australia-based GrainCorp running Great Western's Pocatello plant.
"It's not a done deal, but if it happens there could be great pressure on Modelo. We might wake up in a year or two, and Idaho Falls could be a consolidation with one barley procurement program," Olson said.
(C) 2009 The Idaho Business Review. via ProQuest Information and Learning Company; All Rights Reserved
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