Booming U.S. Craft Breweries Could Spark Malt-Processing Investments

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Researched by Industrial Info Resources (Sugar Land, Texas)--The U.S. craft brewery boom has yet to show signs of slowing. Industrial Info is tracking $1.53 billion of investments in the brewery segment of the Food & Beverage Industry. In 2014, the craft industry reached a record 11% market share of total U.S. domestic production of beer, according to The Brewers Association.

Macro breweries continue to lose market share and suffer from falling domestic sales. But craft beers, as advertised, are much more ingredient-rich, especially in barley malt. Currently, Industrial Info is tracking $244 million of malt-related investment spending in the U.S. and Canada.

This begs the question; does the switch to craft beers from macro spell a new trend for industrial malt processing for North America? Intuitively, the answer would seem to be a solid "yes." According to estimates by the U.S. Department of Agriculture (USDA), craft brewers tend to use about four times the concentration of malt per barrel that macro brewers use.

Macro Breweries Demand Less Malt
Demand for malt from the brewery industry is in flux. Because of declining sales, the demand for malt from macro breweries is falling at a rate of about 16.47 pounds of malt per barrel lost. But craft breweries are seeing a net gain of demand at about 68.7 pounds of malt per barrel.

The demand for malt from both sectors will be equal when craft breweries control as little as 19% of the U.S. beer market, according to data derived from the USDA and the Brewers Association. At the current rate of growth for craft breweries, that could occur as soon as 2021.

What does this mean for capital spending? According to a report by the Montana Department of Commerce on the feasibility of malt-processing facilities, a 10,000-ton-per-year malt-processing facility (which is considered medium-sized) would require an investment of about $14 million for the equipment and about $5 million for the storage and building. Using available data on demand growth, Industrial Info estimates that this will lead to about $828 million of investment spending in malt-processing facilities between now and 2021.

Craft Malting
The malting industry has been largely unchanged over the past decades. Macro brewers have used the same malting techniques to produce a consistent quality and taste of beer. However, the rise of craft brewing has led some to invest capital in new malting technologies. Skagit Valley Malting Company (Burlington, Washington) has been investing significant capital in proprietary technology for craft malting, in hopes of providing its client's craft beer with diverse flavors of malt. The company's malthouse conversion project has a total investment value of $50 million, with completion set for third-quarter 2016.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.