Posted in Anheuser-Busch, Headlines

AB InBev South African hops vs. Craft breweries (A new drama)

AB InBev South African Hops

Today some American craft breweries took to social media to voice their concerns about another Anheuser-Busch maneuver. This time it has to do with hops.

We have verified the facts amidst the social media outrage. The news emerged in a memo from ZA Hops, an independent hop distributer. ZA Hops previously had access to and sold surplus South African hops, grown by farms under the SAB umbrella. Confirmed by Paul Gatza of the Brewers Association, ZA Hops was informed that surplus hops from SAB Hop Farms in South Africa would no longer be sold outside of the AB InBev network. The memo they sent out included the statement:

I was informed by SAB Hop Farms (part of ABI’s purchase of SAB-Miller) that ABI are commandeering all the hops that were to be allocated for distribution to North American craft brewers. The goal is to sell the hops internally to their acquired (former) craft breweries, even though they have not been able to sell all the hops as of yet. Regardless, they refuse to let US craft brewers buy any CY 2017 hops believing this will afford them a competitive advantage in an increasingly competitive marketplace. – ZA Hops (Full memo below)

This isn’t entirely surprising since the acquisition of SABMiller, including SAB Hop Farms, occurred in the fall of 2015 thereby giving ownership to AB InBev. However, many breweries have lashed out today at the news that they will not have access to purchase SAB grown South African hops this harvest.

This move by AB InBev opens an interesting discussion however. While they are completely within their rights to use their own assets (hops in this case), within their own breweries, and restrict competitors (North American craft breweries), it has incited the industry into some interesting reactions.

The biggest chord struck seems to be a general fear at the shear size and power of AB. Following the shocking news this week about Wicked Weed, the craft beer industry has to feel like no one is safe. To follow that purchase with the loss of previously accessible hop varieties, once again to AB, can’t feel good.

It seems a scary pattern of vertical integration becoming clearer and clearer each year. Distributers, craft breweries, even home brew supply shops to name a few. Now they have cut off an entire hop region from anyone outside of AB InBev.

We find ourselves asking, how far will this go? Will AB InBev try to vertically integrate even further and expand their North American hop sector as well? This week has made it pretty obvious that even those we thought would never sell, do.

America’s craft sector has made amazing leaps and bounds with hundreds of new craft breweries founded every year. In fact this year, the U.S. hit over 5000 craft breweries during a generation that is encouraged to “drink local” and “drink craft.” It’s become pretty clear that AB has noticed and is waging war. They started quietly at first, but this week has been pretty loud to the ears of craft beer lovers.

At the end of the day, the news has been rough on craft beer this week. It has raised a lot of anger, fears, and questions. But frankly, what did we expect from AB? For them to lay back and watch their percentage of the beer market shrink year after year and say, “well its only fair, at least the people have choices?”

No, this move is exactly what should be expected from Anheuser-Busch. It falls right in line with historically how they do business. How they grew so large and became such a powerhouse in the first place. It’s smart business. As a publicly traded company, their responsibility is to their shareholders, not their competitors.

But does it suck for the breweries we know and love? Absolutely. Does it suck for all who support independent craft brewers and loved those yummy South African hopped beers? Absolutely.

UPDATE: AB InBev makes a statement on South African hop allocation. 

 

FULL: ZA Hops Memo:

“Along with the news late last week of ABI buying Wicked Weed, I was informed by SAB Hop Farms (part of ABI’s purchase of SAB-Miller) that ABI are commandeering all the hops that were to be allocated for distribution to North American craft brewers. The goal is to sell the hops internally to their acquired (former) craft breweries, even though they have not been able to sell all the hops as of yet. Regardless, they refuse to let US craft brewers buy any CY 2017 hops believing this will afford them a competitive advantage in an increasingly competitive marketplace. So unfortunately, there will be no CY 2017 hops available from ZA Hops. Whether they decide to sell to the craft beer market independently is unclear at this point should they not be able to allocate all the hops internally. This is a shocking turn of events, though commensurate with ABI’s business practices, and devastating to my company – yet another blow to craft beer.”

Image: Beer Street Journal/ Elk Mountain Hop Farm