Between a rock and a hard place
Call it belated poetic justice or just plain market economy. After several failed harvests and a decrease in barley acreage, Germany’s brewers find themselves in a spot of bother when faced with maltsters’ bills. That is, provided maltsters have any malt to sell at all.
Aren’t you occasionally tired of all the money talk on our site? That’s why we have decided to focus on commodities, for a change. After all, this is the season to write about raw materials. As brewers are touring up and down the countries to assess this year’s barley harvest, farmers’ associations have begun issuing “mmm, ahmm, mmm” warnings that consumers might be in for yet another price hike when it comes to wheat and barley products. Sorry, readers, seems like it’s money all over again.
In Germany, farmers have begun to benefit from their switch to bio energy crops, like rape. When it comes to subsidies and selling prices, rape offers higher yields than barley. Over the past few years, what used to be barley fields have turned bright yellow during spring, the colour of rape. As a result, the amount of barley harvested has gone down and dramatically so last year when bad weather aggravated the situation. German brewers have already complained that they are lacking barley malt of certain quality specifications. But even low quality barley has become hard to get as brewers in Russia and China have sucked up whatever they could get hold of, even if it was only chicken feed – as brewers like to call low quality barley.
Last year Dr Axel Simon, the now-retired chief of Bitburger brewery, raised a storm when he told maltsters that if they were not to reduce their malt prices, Bitburger would resort to…. Whatever he said verbatim was not related to the tabloid press, but his threat made hacks assume that he was secretly planning to do away with the Reinheitsgebot.
It has not come to that, yet. Instead, and to many people’s surprise, brewers just widened their malt specifications. Specifications that seemed sacrosanct and impossible to revise were altered more or less over night without the world coming to an end. In fact, there was not a single consumer protest that the taste of beer had deteriorated.
Interestingly, the tightened barley and malt market has had a major impact on the balance of power within brewing corporations in Germany and beyond. While in the past departments like human resources and purchasing were being looked down upon by the other departments as subservient necessities, this does not hold true any more. Far-thinking companies have transformed the purchasing job from a corporate dead end to a true strategic function. Those in purchasing now yield a greater power than ever before. The new breed of purchasing managers are level-headed people, whose boots are made for walking (read job-hopping). As they tend to spend precious little time with each employer (Heineken in Russia, for example, has gone through three purchasing managers in five years only, we are told), they bring a wide range of experiences from different industries to bear on their current job. Given last year’s difficulties, many fast-track purchasing managers have challenged the brewery’s technical staff over their cherished “how-to-dos”. In fact, they did dare pose the question to brewers “if you could use six-row barley in 2007, why can’t you do in 2008 too?”
In 2007 the planted barley acreage in Germany has declined again and, given bad weather in certain areas, yields are expected to be low. Maltsters and brewers already have begun to wonder what kind of malt qualities they will have to deal with. But, more importantly, they have begun to wonder what prices they will have to contend with. High barley and malt prices coupled with high energy costs – and no chances of raising consumer prices for beer. Small wonder that brewers currently find themselves between a rock and a hard place. But someone will have to give in the end. Suppliers who hear the slogan “our strength lies in intelligent purchasing” know what lies in store for them.
