The proposed merger of two global beer titans isn’t likely to harm hop and barley producers, who are increasingly selling to craft brewers, experts say.
Anheuser-Busch InBev, a Belgium-based brewer with $21.5 billion in annual sales, recently confirmed that it has proposed a union with SABMiller, a brewer based in the United Kingdom that generates $26.3 billion in annual revenues.
The combined entity would control roughly 70 percent of the U.S. beer market, which is bound to spark antitrust concerns with federal regulators, said Bart Watson, economist for the Brewers Association, which represents craft brewers.
Worries about the influence this behemoth would have over beer ingredients are tempered by the competition from craft brewers, Watson said.
While craft brewers only produce about 11 percent of the beer consumed in the U.S., they use a disproportionately large amount of hops and barley — particularly specialty varieties that are largely ignored by industrial brewers, he said.
“It’s hard for a large brewer to use market power when they’re not participating in that market,” Watson said.
As the number of major companies in an industry shrinks, the remaining buyers have every incentive to wield their power and try to reduce prices for ingredients, said Peter Carstensen, a law professor specializing in agricultural antitrust at the University of Wisconsin.
However, this phenomenon is less of a concern when producers have alternative sales channels, he said.
“If there are a lot of other outlets, then it won’t have as much effect on them,” Carstensen said.
Large brewers traditionally used a quarter pound or less of hops per barrel, but craft brewers use an average of nearly 1.4 pounds — roughly sixfold more, said Ann George, administrator of the Hop Growers of America trade group.
Historically, about two-thirds of U.S. hop production consisted of “alpha” hops, which are used to impart bitterness and are favored by large brewers, said George.
Now, roughly two-thirds of the hops grown are “aroma” varieties that are popular among craft brewers, she said.
These specialty cultivars are responsible for the upswing in hop production, which has grown more than 50 percent since 2012 to 45,500 acres, George said.
“That buildup in acreage has been attributable to the demand from the craft sector,” she said. “It makes a huge impact on our hop industry.”
Craft brewers also have an outsize footprint in the market for malt, which is produced from barley, said Watson. About 1.4 billion pounds of malt are used in craft brewing, which is 35 percent of the total amount.
Large brewers aren’t as reliant on barley malt because they also use brewer’s rice and corn syrup, he said.
“These beers are not the ones that are going to be heavy demanders of hops and premium ingredients,” Carstensen said of the most popular brands produced by AB InBev and SABMiller.
Nonetheless, the combination of the two companies is problematic from the perspective of consumer choice, he said.
A telling sign is that the stock price for all major breweries rose after the merger proposal was announced, Carstensen said.
This increase may indicate that these companies are expected to collude more effectively after the merger, he said. “The market is expecting to see less competition in the beer industry.”
Given these concerns, it’s likely U.S. antitrust regulators will block the merger unless the combined company divests its stake in MillerCoors, a joint venture between SABMiller and Coors Molson, said Watson.
“Everyone’s assumption is they’d be forced to sell their stake here,” he said.