Craft beer industry anxiously awaits AB InBev decision on malt supply

Craft beer lovers could be facing a leaner future with much fewer options , as the covid-19 lockdown hits brewers.

The South African craft beer industry is holding its breath as it waits for the world’s largest brewer, Ab InBev, to make a decision on whether they will continue supplying malt to local craft breweries.

This comes after Food For Mzansi reported last week that South Africa’s only malting company (Walts Malting) to locally produce a variety of specialty malts for beer brewers would be closing its doors for good.

The chairperson of the Craft Beer Association of South Africa (CBASA), Wendy Pienaar says: “We are currently in talks with SAB (a subsidiary of AB InBev) to find out what will happen to our access to their malts, hops and crowns.”

Since the merger of SABMiller and AB InBev in 2016 the Competition Commission has ruled that AB InBev is obligated to supply malt to the local craft beer market. This obligation, however, comes to an end in November this year. This is causing major uncertainty amongst local brewers.

Walts Malting announced that its closure was due to government-imposed lockdown regulations which prohibits the sale of alcohol. With the company closing, the multinational drink and brewing company Ab InBev becomes the only specialty malt producer in the country.

Malt is grain barley used in the brewing of beer. The grain undergoes various processes before it is sold to beer makers as malt. Most beers have two types of malt: base malts and speciality malts that give beers their flavour and colour.

There are several speciality malts, of which Walts Malting was the only local producer in Mzansi. Ab Inbev produces one variety – pale malt – and is still obliged to supply these to other brewers until November this year.

AB InBev subsidiary South African Breweries (SAB) declined to comment, saying it is a legal matter and they were awaiting a response from the legal team.

Although the long term future of the arrangement remains unclear, the company said it would resume selling malt, hops and crowns to the local craft beer industry. “As soon as lockdown comes to level three (expected first of June) it will be business as usual and we will start again to sell malt to other customers,” the company said in a short statement.

Should the international brewing giant decide not to supply the craft industry after November, the breweries will be forced to import all their malt.

“While larger craft breweries might have the cash flow and infrastructure to do this, smaller breweries do not have the luxury,” says senior manager at Walts Malting, Patrick Nelissen.

Managing director of Africa Hops and owner of Riot Beer in Cape Town, Marc Fourie, says he is extremely frustrated by the ban on alcohol sales.

Fourie has been in business for the past five years and says he is an exemplary businessman who pays his taxes. “For government to simply say ‘we’re closing the alcohol sector, see you guys on the other side’ is treason,” the brewer exclaims.

“They have abandoned me as a tax-paying citizen. You try and be part of the new South African landscape but at the first sign of a crisis they abandon us.”

If the industry does not resume operation in full capacity soon, Fourie fears that the malt suppliers that local breweries import from will eventually run out of cash flow and close business. “When the supply companies close, we won’t get any stock. What this means is that craft beer in South Africa will die,” he says.

Currently the hurt is felt throughout the industry. “Everything that we have built through the last year is absolutely gone. If business does not resume, we will be completely cashless by the end of this thing,” says Fourie.

In 2018 and 2019 there was an explosion of new craft brews being launched, but it seems that South African consumers are going to have a lot less choice going forward.

“The appeal we want to make to beer consumers going forward is be pickier about what they drink. Supporting local small craft breweries will make a huge difference,” Fourie says.