U.S. Craft Brewers Cut Out of South African Hop Supply

Hundreds of U.S. craft brewers that had been experimenting with a selection of South African-grown hops will no longer have access to the proprietary supply after Anheuser-Busch InBev, which owns the farm, said it would reserve nearly 100 percent of the latest yield for its own brands.

In a statement released yesterday, A-B said the decision to restrict access to those hops — which were grown at the SAB Hop Farms subsidiary previously owned by SABMiller and acquired by A-B InBev last October when the MegaBrew merger was finalized — was the result of a “poor yield” in 2017.

“South Africa is not a traditional hop growing region,” ABI global hops procurement director Willy Buholzer said via a statement. “SAB’s R&D efforts made it possible to grow hops in South Africa but it is still less than 1% of the world hop acreage and production. This year, South Africa suffered from low yields. Previously, SAB has sold a small surplus of locally-grown hops to the market. Unfortunately this year we do not have enough to do so given the poor yield.”

But a U.S. supplier of those very same hop varieties believes the move is “anticompetitive” and aimed at putting thousands of independent brewers at a competitive disadvantage.

Greg Crum, the founder of Colorado-based hops brokerage ZA Hops, sent his customers an email saying A-B would no longer allow SAB Hop Farms to supply the South African-grown hops.

“Along with the news late last week of ABI buying Wicked Weed, I was informed by SAB Hop Farms (part of ABI’s purchase of SAB-Miller) that ABI are commandeering all the hops that were to be allocated for distribution to North American craft brewers,” Crum wrote. “The goal is to sell the hops internally to their acquired (former) craft breweries, even though they have not been able to sell all the hops as of yet. Regardless, they refuse to let US craft brewers buy any CY 2017 hops believing this will afford them a competitive advantage in an increasingly competitive marketplace.”

According to Marketwatch, South Africa produced more than 1.81 million pounds of hops last year, an amount that will now be allocated to ABI, which reportedly wants to increase production to more than 2.2 million pounds grown on 1,235 acres. Beer writer Bryan Roth noted on his blog that the amount of hops in question was small — just 44,100 pounds — in comparison to the number of hops grown in the U.S. — 89 million pounds — last year.

According to Buholzer, more than 90 percent of the hops in question will be devoted to A-B’s South African brands, Castle Lager and Castle Lite, and the excess will be sold to various South African craft breweries.

“This means that less than five percent can be allocated to other Anheuser-Busch InBev breweries outside of South Africa,” Buholzer wrote. “Knowing the high demand for South African hops locally and abroad, we are working to expand local hop acreage. Depending on the 2018 crop outcome, we may once again be able to sell more hops to breweries outside of South Africa.”

Many of ZA Hops’ customers turned to social media sites such as Twitter and Facebook to express outrage over the decision.

“Don’t think macro brew acquisitions matters? Today we learned AB InBev is cutting-off all indie breweries from buying South African hops,” San Diego-based Modern Times wrote via Twitter. “So we hope you enjoyed the beers you had w/ Southern Passion, J-17, etc…Some of the best hoppy breweries in the country were using these. Next time you consider buying beer from AB InBev & their zombie breweries, we hope you’ll take this extreme dickishness into consideration.”

Modern Times founder and CEO Jacob McKean told Brewbound that his brewery used the South African hops in several special release IPAs, including Floating World and Effective Dreams.

“There’s nothing ‘high end’ about it,” San Francisco-based Cellarmaker Brewing Company also wrote on Twitter. “Please consider where you spend your hard earned dollars. Ownership matters. On to the next cool hop… We’ve got a full pallet of South African hops left. Should still be in beers for about a year or so. Enjoy em’ while they last I suppose.”

Cellarmaker owner Connor Casey told Brewbound that his brewery used the hops in 10 or 15 different beers, including a Southern Passion single-hop beer release.

“These hops don’t make or break our brewery specifically,” Casey told Brewbound. “Cutting off access to ingredients is pretty low. It’s not the absolute end of the world, but it’s certainly a step in the wrong direction. They didn’t take simcoe, citra or mosaic.”

Rhode Island-based Proclamation Ale Company, which bought “a few hundred pounds” of the hops from ZA Hops, called the move “a sad turn of events” and an “example of the things that many craft brewers are scared of” on the company’s Facebook page.

“It sucks for the brewers, but has an even more tremendously shitty impact of the great guys that built a company around selling these hops to craft brewers,” Proclamation wrote.

Paul Gatza

Brewers Association director Paul Gatza told Brewbound that since such a small amount of South African hops were being used by U.S. craft brewers that he doesn’t foresee a major impact on the U.S. market.

“The large brewers are the biggest hop buyers — in this case, they’re hop producers as well — and they can do what they choose to with those hops, assuming that they didn’t have contracts out with those hops to other brewers through brokers,” Gatza said.

Crum told Brewbound that he began importing and distributing the hops under the name Furthur Brewing in 2012. He later founded ZA Hops, which specialized in reselling proprietary South African hop varieties such as African Queen, Southern Passion, Southern Aroma, Southern Star and several other experimental varieties imported from the SAB Hop Farm in South Africa.

Crum added that he worked with SAB Hop Farms for two years to grow its export business, and that he sold the hops to more than 100 breweries during the 2016 crop year. ZA Hops’ clients included Modern Times and Firestone Walker, which used a pair of experimental South African hops in its Luponic Distortion 004.

“Demand has gone from a couple hundred kilograms to 20,000 kilograms this year,” Crum said.

When the MegaBrew merger was finalized last October, Crum said he was told that A-B would “take a hands-off approach” to the hop farm and everything would be “business as usual.”

Then, in March, the global beer giant invited brewers from its High End portfolio of craft and import companies to visit the SAB Hop Farms, Crum said.

“Three weeks after that, they issued a directive to SAB that they were to halt all exports of their hops,” Crum told Brewbound.

Since then, Crum said he and SAB Hops Farms director, Lauren Steytler, had attempted to convince A-B that the growth potential would be higher selling to outside clients.

“We thought we’d won the battle from a financial standpoint,” Crum said. “It was straight numbers. You’re going to make more money from the hop farm entity than selling to your guys.”

However, on the same day that A-B announced its purchase of Wicked Weed, Crum said he received an email from the director of SAB Hop Farms informing him that A-B would only sell hops to South African microbrewers, and that any leftover supply would be shipped to the U.S to sit idly in cold storage facility.

“They don’t want craft brewers to have them,” Crum claims.

A-B is taking advantage of its position as a vertically integrated beer manufacturer. But is the decision to cut indie craft brewers off from the South African hops supply really “anticompetitive?”

Andre Barlow, an antitrust lawyer with Doyle Barlow & Mazard, and a former attorney of the Department of Justice’s Antitrust Division, told Brewbound that moves like this are “one of the repercussions from allowing the two largest global beer manufacturers to merge.”

“They made a business decision not to supply them to these craft brewers in the United States, and clearly they have the incentive and the ability in this case to impact these craft brewers from maintaining their product,” he said. “That’s a huge concern from a consumer standpoint as well.”

Meanwhile, the move has essentially shuttered ZA Hops. Crum said he operated his business on “handshake agreements” with brewers, and he didn’t take deposits or sign legally binding contracts with his clients.

“It’s very loose,” he said.

Crum told Brewbound that after informing existing customers of the news, he sold eight boxes of Southern Star hops. Only four boxes remain, he added.

“And then, outside of that, that’s it for craft brewers in the United States,” he said.

However, Anheuser-Busch InBev-owned Northern Brewer, a Minnesota-based homebrew supply store, is offering packages of several South African varieties.

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