Brewing and Malting: Where Are We and More Importantly, Where Are We Going?

Brewing

• There is a tremendous amount of change taking place in the industry.
• Most of industrialized nations declining in production, slack being taken up by Asia (China, Vietnam), India, Mexico, Columbia, Russia – growth in these areas approaching double figures.
• World beer production growing at a steady pace.

• In terms of production area, North America has declined from 24% of beer produced in 1998 to 17% today, while Asia and South America have split that new volume.
• China is now the number 1 beer producer in the world.

• 64% of the beer produced in Asia is brewed in China, growth is in double digits for past 5 years.
• The brewing world is in a major consolidation phase – bigger is better, more economical, global brands.

	2002 Global Brewers Ranking	2005 Global Brewers Ranking
1	Anheuser-Busch 122.4 million hl	Inbev 143.6 million hl
2	SABMiller 110 million hl	SABMiller 133.5 million hl,
3	Heineken 92.9 million hl	Anheuser-Busch 128.1 million hl
4	Interbrew 92 million hl	Heineken 94.5 million hl,
5	Carlsberg 68.6 million hl	Molson Coors 49 million hl
6	Companhia de Bebidas das Americas 55 million hl	Carlsberg 35.8 million hl
7	Scottish and Newcastle group 45 million hl	Scottish Courage 32.4 million hl
8	Grupo Modelo 33.4 million hl	Grupo Modelo 33.4 million hl
9	Coors 32.4 million hl	Kirin 30 million hl
10	Kirin 30.7 million hl	BBH 30 million hl

• World beer consumption continues to increase.

• Per-capita volume in China is very low (18 L per annum).

• Many factors affect consumption in the mature markets including:
  - Demographics
  - Lifestyle
  - Drinking and Driving
  - Growth of Other Beverages
  - Price (Taxes)
• Aging population trend.
• Growth of travel = growth of imports.
• Decline in per capita consumption – trend to wine, coolers.
• Tax burden on beer.
• Look at Happoshu growth in Japan:

• Current and future brewing trends:
  - Breweries are Traditional Incremental changes – no breakthroughs
  - Economic considerations High gravity, more use of adjuncts, hulless barley
  - Increased “quality”
  - Use of technology – on-line / at-line, NIR, Neural Networks, electronic nose
  - Energy use reduction - Wort Boiling
  - Environmental Issues - D.E. Replacement

• Also going through consolidation.
• Malting barley trade is increasing yearly, but fluctuates according to the harvest.

• Selectable average for malting barley in Canada around 2 million tonnes.
• Two-row is taking over, less 6-row.
• Six-row mostly goes to the US.

	1997-2001	2002-2003	2003-2004
Canada	1,070	570	981	(90% 2R)
U.S.A.	600	200	420	(58% 6R / 42% 2R)
China	470	43	460	(96% 2R)
S. Africa	20	85	71	(2R Metcalfe)
South America	12	0	124	2R Metcalfe)
Japan	42	30	22	(B1602 / 2R)
Mexico	51	4	22	(90% 2R)
Total	2,265	932	2,100

Company	Location	Capacity (MT)
Canada Malting (Conagra)	Calgary, Alberta Thunder Bay, Ontario Montreal, Quebec	260,000 130,000 80,000
Prairie Malt (Cargill)	Biggar, Saskatchewan	220,000
Rahr Malting	Alix, Alberta	140,000
IMC	Winnipeg, Manitoba	92,000
Total		922,000

Malting Future Trends

• A search for meaningful analysis.
  - Does the current analysis meet the brewers needs?
  - Brewing problems are seldom explained by malt analysis --- the heterogeneity problem.
  - Kirin and SAB have specific tests for yeast flocculation.
  - Haze prediction?
• No blending to meet specification.
• Continuing slow expansion of specialty malts.
  - Using Biotechnology.
  - Speed up breeding cycle.
  - Genome mapping – QTL, marker assisted selection.
  - New quality characteristics.
• More varieties to choose from.
• Proprietary varieties.
• How many varieties?
• Shorter variety lifespan.
• Higher extract - hulless barley, etc.
• Biotechnology solutions to present problems.
• A breakthrough GM barley – fusarium resistant?

• Single malt - Single Wort - Single Yeast.
• Engineering Solutions to Wort Separation.
• Engineering Solutions to Flavour Stability.
• Division Between Large and Small Production Units.
• Fewer “gimmicks”.
• A Functional Food?
  - You are what you eat.
  - Beneficial effects of alcohol.
  - Antioxidants – polyphenols.
  - Medicinal properties of hops.