Canadian maltsters are facing slumping sales in key export markets.
“It’s the state of the beer market right now. Beer sales, especially from the larger breweries, are all kind of in the tank along with the economy,” said Bob Sutton, vice-president of sales and logistics with Rahr Malting Co. in Alix, Alta.
Financial turmoil in the United States and the European Union has people consuming fewer pints.
“People don’t have disposable income anymore,” said Sutton.
Global beer consumption is actually on the rise, although the rate of growth the last couple years is about half what it was in the early 2000s, according to Canadean, a market research firm for the beverage industry.
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Consumption increased by 2.4 percent in 2010. The numbers aren’t in for 2011 yet but Canadean expects another increase of 2.9 percent. That is well below the five to six percent annual growth rate experienced throughout most of the 2000s but an improvement on 2009 when sales increased by less than one percent in the midst of the U.S. financial crisis.
Beer sales are on the decline in North America and the European Union. China is almost single-handedly responsible for the rising global sales. Consumption jumped by six percent in that country in 2010.
China, Vietnam, Brazil and other Asian and Latin American countries are expected to be the biggest drivers of growth between now and 2016 but the annual increase in global consumption will probably remain around three percent, said Kevin Baker, beer account director for Canadean.
Unfortunately, Canadian maltsters don’t participate in many of those emerging markets, said Phil de Kemp, president of the Malting Industry Association of Canada.
In China, the barrier is the large tariff differential between malting barley and malt imports designed to protect the country’s malting industry.
“China has been on quite a tear over the last 15 years with respect to building malt plants,” said de Kemp.
Chinese maltsters are processing so much barley they are starting to become a competitor in export markets.
Canadian maltsters face stiff competition in Asian markets from Australian maltsters who have a substantial transportation advantage into those markets.
Japan has long been one of the top markets for Canadian malt but there are emerging problems in that country as well.
The Japanese government recently decided to tax full-malt beers at a much higher rate than hipposhu or low-malt beers, sparking consumer demand for the low-malt alternatives.
In Latin America, there is stiff competition from Argentina’s emerging malting industry.
And in markets like Europe and North America, there is a trend toward declining consumption exacerbated by financial woes in those regions of the world. The Czechs, the world’s leading beer drinkers, consumed 135 litres per capita in 2010, which is well below the 160 litres consumed before the economic crisis in 2008.
“There is no question that in the so-called mature markets, beer consumption has stagnated or declined somewhat,” said de Kemp.
The myriad of issues in the various markets all add up to a worrisome development for an industry that exports two-thirds of what it produces. Malt exports in 2010-11 were 572,600 tonnes, which is 10 percent below the previous five-year average.
Four malting companies in Canada operate six plants with a combined capacity of about 1.1 to 1.2 million tonnes.
“Our capacity utilization is down significantly,” said de Kemp.
But his members believe that there will be new opportunities in the post-single desk environment to make inroads into the emerging beer markets.
“Hopefully we’re going to be able to focus on some of that now that we’ll be able to deal directly with farmers,” said de Kemp.
“I don’t think anyone wants to be just completely dependent on North American domestic sales at all. Certainly that is where we don’t want to go.”
