Malt production to move into new markets?

Global beer producers are faced with a conundrum – on one hand, global beer production has shifted, with more beer being produced closer to new consumers in emerging markets where demand is growing at twice the rate of developed markets. On the other hand, agro-climatic circumstances limit where barley can be grown, with the bulk of production remaining in Europe. In a new report, Rabobank anticipates malt production will increasingly move to these new markets in emerging regions, with India a likely candidate as a regional hub.

Rabobank analyst Sudip Sinha comments, “Global beer consumption is shifting, which is creating an interesting dilemma for both brewers and maltsters alike. While the centre of gravity in the global beer market has clearly moved to emerging markets in Asia, Africa and Latin America, the bulk of world barley production remains in Europe; and to a lesser extent North America.”

This pattern is further replicated in the malting sector, with Europe and North America accounting for over 60% of the world’s malt production capacity of 24.5 million tonnes. Asia Pacific, the largest and the fastest growing beer consumer, has just 21% of malt production, of which 80% is concentrated in China.

This highlights an intriguing scenario developing in the global beer raw material supply chain, with long-term implications for both malt buyers and maltsters. The situation is creating challenges for raw material procurement as well as an opportunity for strategising a global malting footprint to secure and manage the evolving demand pattern.

In an attempt to balance the demand and supply situation, brewers and maltsters may look to India as both a buyer and supplier of strategic importance in the evolving global malt supply chain. In India, malt demand from Indian breweries has shown robust growth, driven by the rising penetration of beer amongst Indian consumers. Rising demand from both brewers and other malt users is likely to require additional malting capacity by 2016/17.

“India offers several tactical advantages to global maltsters and brewers evaluating investment in malt capacity in emerging Asia,” explains Sinha. “First, the availability of domestic crops provides access to competitive malting barley. Second, India has an established but growing local product demand base. Furthermore, due to its strategic location between Middle East and Africa and South East Asia, capacity enhancement along the ports will facilitate targeting of malt demand across the South-South trade corridor.”

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