GrainCorp to boost U.S. malt output, target craft beer boom

Sydney | Reuters –– Australian agribusiness GrainCorp plans to nearly double output capacity at one its U.S. malt plants, to capitalize on soaring North American demand for craft beer.

Typically produced by small, local brewers, the popularity of craft beers has grown rapidly in recent years in the U.S. as drinkers seek new tastes, with sales estimated to have climbed more than a fifth in 2014.

GrainCorp on Tuesday said it would spend US$75 million to increase production capacity at its Great Western Malting facility in Pocatello, Idaho by 120,000 tonnes, to 220,000 tonnes.

The move comes a few days after Australia’s largest listed agribusiness said it was looking to diversify internationally, curbing the potential impact of the recently emerged El Nino weather event that could reduce wheat production in the company’s stronghold across Australia’s east coast.

“The craft sector in the United States has been growing consistently at 10-15 percent per annum over recent years,” said Mark Palmquist, GrainCorp’s managing director and CEO.

U.S. sales of craft beer in 2014 were worth nearly US$20 billion, according to U.S. industry body the Brewers Association, up more than 22 per cent from the previous year and accounting for nearly a fifth of all beer sold in the country.

That contrasts sharply with U.S. sales of traditional beer products, which have seen little growth in the last 12 months.

Producing craft beer usually consumes larger amounts of malting barley than traditional beers.

The Idaho expansion is expected to begin in the third quarter of 2015 and to finish by June 2017.

GrainCorp said it would fund the project via cash flow and debt facilities spread evenly over its 2016 and 2017 financial results.

Great Western Malting and its Canadian sister firm, Canada Malting, both became part of GrainCorp through the Australian company’s 2009 takeover of United Malt Holdings, now named GrainCorp Malt.

On top of its U.S. market share, Great Western Malting also supplies brewers, distillers and food processors in Canada, Asia and South America with malts. Its malt and brewing supplies warehouse and distribution system, the Country Malt Group, includes warehouse operations at Delta, B.C. and Didsbury, Alta.

“Building our capacity at Pocatello makes sense on a number of levels,” Graincorp Malt president Greg Friberg said in a company release.

“Idaho is one of the most reliable sources of quality malting barley in North America and Great Western Malting has developed very close relationships with Idaho malting barley growers over 30 years. Freight and utility costs are competitive and the plant is well located to key target markets.”

Colin Packham is a commodities correspondent for Reuters in Sydney, Australia. Includes files from Network staff.

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