Grainswest - Fall 2023

Fall 2023 Grains West 48 BY PETER WATTS • PHOTO COURTESY OF CMBTC Hard hit brewing sector in surprisingly good shape THE GLOBAL BEER INDUSTRY HAS faced significant headwinds the past few years. The pandemic, followed by the es- calation of input costs, supply chain diffi- culties and shifts in consumer preference hit hard, but not all is doom and gloom. China’s brewing industry is quite profita- ble and markets such as Brazil, Colombia and Mexico continue to thrive and grow. In 2022, global beer production rose in 2022 to 1.89 million hectolitres (mln hL) from 1.87 in 2021, an increase of 1.33 per cent, or a little more than the beer output of Canada. While China’s economy struggles, its beer sector has been relatively healthy in recent years. The largest producer and consumer of beer in the world, it is by far Canada’s largest raw barley export mar- ket. China’s meteoric rise in production saw it surpass the U.S. as top brewer in 2002. Production peaked in 2013 at more than 500 mln hL, a quarter of world production. China produced an estimat- ed 360 mln hL in 2022 and imported an additional 10 mln hL. With disposable incomes on the rise, Chinese beer drinkers increasingly focus on premium brands and quality over quantity. Between 2013 and 2020 China’s total output fell an astounding 25 per cent as demand for cheap, mass-produced beer waned. Sales of premium beer such as Tsingtao and Yanjing have grown, as has demand for imported brands such as Budweiser and Heineken. The continued premiumization of the market is a positive for barley demand as high-quality beer uses more barley malt and less adjunct. U.S. beer consumption per capita has steadily decreased for a decade. While volume is now below 80 per cent of peak 1980s consumption, the value of sales has risen annually for several years. In 2019, U.S. beer sales hit $116 billion USD but fell to $94 billion USD in 2020 because of the pandemic then rebounded to just over $115 billion USD in 2022. Cheers toglobal beermarkets THE MALT HOUSE Nonetheless, U.S. craft brewers faced a particularly hard economic hit during the pandemic. For small brewers, crucial taproom sales dried up under lockdown. Their larger, regional cousins faced steep competition, high costs, supply chain problems and overproduction. Though certain big brewers sold off brands pur- chased pre-pandemic and endured share price tumbles, their value has tended to recover. The world’s third and fourth larg- est beer markets respectively, Brazil and Mexico, are significant raw barley and malt importers. Brazilian beer production fell during the pandemic, but rebounded in 2021, while Mexico continues to have the world’s fastest mar- ket growth. Mexico is Canada’s second largest malt customer after the U.S. With beer markets dominated by mul- tinational companies such as AB InBev and Heineken, consumer preference in these countries remains lighter, lager style beers. Nascent craft sectors are growing but represent just two to three per cent of production. Canadian beer consumption has trend- ed downward for 15 years. Per capita consumption of about 68 litres in 2022 represents nearly a 25 per cent drop since 2008, but as in the U.S., market value continues to grow. Notably, the popularity of craft beer in Canada has risen steadily. More than 1,200 breweries now operate across the country compared with less than 400 a decade ago. Craft and premium beer require signif- icantly greater use of malt as compared with light, macro-beer products. Demand for barley and malt to supply the nation’s beer industry thus remains strong despite lower total beer production volume. Peter Watts is the CMBTC managing director. Representatives from Brazil, Colombia, Mexico and the U.S. attended the CMBTC Latin American Malt Academy in March.