American Beer Ain’t What It Used to Be Thanks to European Barley
Craft beer sales volume jumped 13 percent in the U.S. in 2015.
When Ron Barchet set up his Pennsylvania craft brewery after quitting his job as a financial analyst, he turned to Europe for the malted barley needed to make a distinctive-tasting beer.
Two decades on, and Barchet’s Victory Brewing Co. has been joined by a brigade of small American brewers, now multiplying at a rate of about 20 percent a year, in a $22 billion industry that’s helping drive record exports of European malt to the U.S.
“We’ve been using European malt from day one in our brewery, and that was one of the things that we did think would differentiate us,” Barchet said in an interview. “The barley that they grow in Germany and in Europe in general is more suitable for all-malt beers, which most craft beers are.”
Craft brewers tend to use more than three times as much malt as their industrial-scale peers, which typically brew with a mixture of malt and cheaper grains such as corn and rice, known as adjuncts. Barley is used to make malt.
While craft volumes made up 7.8 percent of the U.S. beer market in 2014, they accounted for a quarter of malt consumed, data compiled by the beer makers’ lobby show. Meanwhile, numbers of producers from brewpubs to microbreweries grew more than 18 percent last year to 4,225 operations.
Victory, set up with school buddy Bill Covaleski in the former paper-mill borough of Downingtown, was among the pioneers in an industry that’s been trending faster in recent years than woodsman attire and extravagant facial hair. Sales of U.S. craft beer jumped 13 percent last year.
That bucks the outlook in a broader beer industry that looks pretty flat, with total sales down 0.2 percent in 2015, according to the Brewers Association lobby. It also spurs demand for materials from Europe, the largest producer of barley. In the past five years, malt exports to the U.S. from European Union nations more than tripled, according to Eurostat data.
Industrial-scale American brewers’ use of adjuncts gives brews from Anheuser-Busch InBev NV and SABMiller Plc a lighter, drier taste and clearer look.
It also cuts the cost for maltsters, who make malt by adding moisture and allowing grain to germinate before drying it. European brews usually contain more malt and are heavier and cloudier with a stronger taste of grain or hops.
“Adjuncts basically bring sugar without bringing any flavor, so it means they can make a very, very light beer,” said Scott Casey, an analyst in Hamburg at RMI Analytics GmbH. “The American industry is really focused around large-scale beer, for a long time there hadn’t been investment in specialty malting.”
As long as U.S. drinkers keep turning to European-style beverages, demand for malt will grow. If craft sales rise to a 10th of total beer volumes, the smaller breweries will consume more than 30 percent of malt used in the industry. An increase to a fifth of beer sales, and they’ll be taking up more than half.
That’s a glimmer of light for barley traders in Europe, where a glut is set to help drive global stockpiles of feed and malting varieties to a seven-year high by the season’s end next June, International Grains Council estimates show.
It also helps the region’s maltsters, said Andries de Groen, a managing director at trader Evergrain Germany, which boosted sales of barley to the specialty malt industry by about 20 percent annually in recent years.
The taste for specialty beers is spreading.
China has about 350 craft breweries from just a couple in Shanghai and Beijing three to four years ago, said de Groen, whose company is a unit of Germany’s BayWa AG. It’s a trend across the globe, allowing maltsters to sell to craft brewers at much better margins than to large international brewers, he said.
While U.S. demand for malt exports from Europe isn’t enough to erode the global barley glut, expansion to other countries could help change the picture.
“It’s positive for the whole supply chain,” de Groen said. “It’s positive for the farmer because he sees that quality is recognized, it’s positive for the maltster, and it’s positive for the brewer because he has a story to tell.”