Domestic sales opportunities | Craft brew masters seek varieties of hops and barley with less protein and beta glucan
Canada has worked hard to find international buyers for its malting barley, but the best customers might be right here at home.
Craft beer is one percent of the world’s production of 200 billion litres, but its growth since 2004 has been measured in double digits.
Annual sales of craft beer in North America from 2004-13 increased from 800 million to two billion litres.
“About 30 percent of Canada’s malting barley goes to the craft industry. It is a pretty big component of what we do in Canada,” said Darren Smith, head of North American operations in Calgary for RMI Analytics, a Swiss based advisory company specializing in brewing raw materials and providing education for the industry.
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“It is a very specialized business, and it lends a lot of opportunities to the barley industry in Canada.”
Craft brew masters are looking for specific varieties of hops and barley to differentiate their specialty products. They use a higher rate of malt and prefer barley with lower ratios of protein and beta glucan.
“That is a huge opportunity for Canada’s barley program to get coupled in with this industry and come up with varieties that are really going to work,” he told the Western Barley Growers Association annual meeting held in Calgary Feb. 13-14.
“Those varieties may already be there.”
New varieties such as Cerveza and AC Major were developed for the craft industry, and breeders could develop more if they were well funded, said Rob McCaig of the Canadian Malting Barley Technical Centre.
The craft niche has attracted the attention of major malting companies, which are scaling back export programs to supply the market.
“I can see our malt exports dropping a little bit,” McCaig said.
Big players such as Anheuser-Busch still dominate the beer trade but they are watching the growth of these little breweries, said Smith. Some have bought or are looking at buying craft brewers or are offering their own specialty labels.
North America has 3,000 craft brewers, and many supply a local pub or restaurant or sell it in specific regions.
More than 1,200 new private breweries opened in 2012, and the latest statistics from last year indicate that 1,700 breweries are in the planning stages in the United States. One-third are expected to make it to the production phase.
The number of Canadian breweries has increased by 40 percent in the last five years, according to the Beer Canada website. Most of these small companies have opened in Quebec, Ontario and British Columbia.
U.S. craft brewers had a 7.5 percent market share last year, which is expected to grow to 10 percent within a couple years. Canada is expected to experience similar growth.
While specialty brews gain in popularity, traditional beer production growth is flat in North America, said McCaig.
Molsons reported that the Canadian beer industry grew by .5 percent in 2013, while the U.S. industry is down 1.5 percent.
The real growth has been in Asia, Africa and South America.
The U.S. was the largest beer producer in the world in 2008 at 23 billion litres, followed by China at 20 billion litres. Canada was the 11th largest producer at 2.2 billion litres.
However, Canada was not even in the top 20 in 2012. China made 48.9 billion litres while the U.S. fell to 22.5 billion. Brazil produced 13.3 billion and Russia made 9.8 billion litres.
China will produce 50 billion litres this year for its growing population and improved incomes. In fact, the world’s leading brand is the Chinese beer Snow. Bud Light is number two and Budweiser is third.
“The good news is they all take Canadian malt barley,” said McCaig.
He said Canadian malting barley is a desirable product because of its high quality and the added advantages of traceability and fewer inputs.
Western Canada’s malting barley growers use the least amount of pesticides and herbicides in the world.
“This is very important to brewers to have that risk removed.”
The challenge is finding enough malting barley as acreage continues to fall worldwide. Some offshore companies have substituted other inputs such as corn, rice or sorghum and are not returning to barley.
In Canada, the competition for acres with canola and wheat has seen barley production fall 10 to 12 percent in the last couple years.
However, yields are increasing, with new varieties such as Meredith 117 percent better than Metcalfe, which offsets the acreage loss.
Barley from Canada and Europe is shipped to China, where it is malted and sold throughout Asia.
“That is kind of a threat to maltsters here in Canada,” McCaig said.
Still, companies turn to Canada when they are looking for quality, he added.
“One thing we have done well over the last 50 years, which the (Canadian) wheat board did for us, is really hammer away on quality,” he said.
“We are still known for quality in terms of malting barley.”
Two row barley is king around the world because it provides more extract, which means more beer. It provides the proper enzymes for conversion to change the starch in the barley to sugar. As well, there is enough protein for yeast health and growth.
Canadian malt also provides the specific protein needed to enhance the foam, which is considered an indicator of good beer quality.
Canadian malting barley is 11 to 13 percent protein, which customers may blend with Australian or Argentine barley to reach the 9.5 protein level needed for their programs.
However, new varieties are needed to give maltsters and brewers what they want.
Metcalfe, Copeland, Meredith and PolarStar now represent most of the malt trade, while new varieties such as Newdale, Major, Bentley, Merit 57 and CDC Kindersley are showing good potential.
“Without new and improved varieties moving into our system, we are going to see less interest in our malt barley,” McCaig said.
