Last week AB InBev bought the entire South African hop crop. That’s right, the entire country’s crop. South African hops make up about 1% of the world’s hop crop, but have become an increasingly hot commodity in the race towards breweries seeking out new, rare and innovative hops. According to AB InBev, 90% of that 1% will be used within South Africa to hop the South African beers they already own, like Castle Lager and Castle Lite. That leaves %0.009 for AB breweries including breweries under its High End brand.

The only breweries that will have access to this hot crop of hops are AB InBev breweries such as Elysian, 10 Barrel, Wicked Weed Brewing and AB InBev’s seven other craft brewery acquisitions.

To round out what AB has done in the last few years: Buy craft breweries, corner the home brew market, now investing heavily in hops and they just announced they’ll invest $2 billion into their core US brands, over the next four years. If you want South African varietals, you can still get them, but only if you have an existing contract with an SA hop farmer or, if you’re a home brewer, you can get them at Northern Brewer Supply, the largest home brewing company in the US, that is now owned by AB InBev. In the competitive and slowing beer market, AB InBev is doing what you’d expect: Re-positioning itself as the vertically integrated company it is, by investing in its competitors and the supply chain.

Buying up an entire geographical hop crop, while seemingly an amazing feat, does have a precedent, albeit that precedent is set by the company in question. Before it merged with InBev in 2008, Anheuser-Busch owned 75% of Oregon’s hop crop. Oregon farms about 5,000-6,000 acres a year (8 to 11 million pounds of hops), which is 5% of the world’s hop supply, or 5x more than the South Africa. ABI hopes to increase SA’s crop to about a 2 million pound annual yield.

Impact on Breweries and Hop Growers

Not every brewery is impacted the same by this move. Locally, Jack Lamb, CEO at Aslan Brewing, told me the move has no impact on them because there are no organic hops out of South Africa. Chad Kuehl, owner of Wander Brewing, says he’s never used South African (SA) hops and “doesn’t care” about the AB InBev buyout because

This is a standard move for AB! Maybe we have become ‘normalized’ to their shitty moves? – Chad Kuehl, Wander Brewing

The most prominent local use of SA hops has been Structures Brewing. James Alexander, owner of Structures, told me, “We have eight varieties on hand and we have used them in about five beers.” Structures used African Queen, an SA hop, in its double IPA Dopethrone, released in December 2016. They also used SA experimental hop N1/69 in its September 2016 release, FuzzWords. Unless AB InBev decides to sell any overages, what Alexander has on hand will likely be the last they get.

Max and James of Structures Brewing

Boundary Bay’s Director of Quality, Bryan Krueger, told me he has a deal with Alexander to use some of his remaining SA hops and Boundary will have a beer brewed with them later this year.

Great Notion Brewing out of Portland, OR is one of the hottest breweries in the Northwest. They were also one of the first breweries to be vocal about AB InBev’s buyout, posting to Facebook “Great… Anheuser-Busch InBev just swooped in and bought all of the exciting new South African hops we thought we had coming to us this summer.”

Co-owner Paul Reiter told me they were excited to use South African hops in some upcoming beers, but now will never have the chance. They weren’t sure what beers they would put them in, but wanted them on hand to experiment with.

It was complete assholery to buy the entire market and not leave any for other breweries…you can quote me on that. – Paul Reiter, Great Notion Brewing

Reiter had emails of intent, or what he called “verbal contracts”, but they never had signed contracts to get the hops. Their hope was to buy about 1,000 – 1,500 pounds of SA hops, or about an acre. South African hops cost about $10 per pound, so Great Notion was planning on a $10,000 to $15,000 buy. This doesn’t impact future beers because they didn’t have any planned beers for those hops.

The Hop Growers of America is a trade organization with a primary focus on grower support, statistics, trade promotion and education. Jackie Brophy, Communication Director of Hop Growers of America, said they don’t have an official position on the acquisition because the details and fallout are still in motion. She did mention that there are many hop varieties available to breweries, right here in the Northwest. They have heard merchants (breweries) that were upset about no longer having access to SA hops, but she says this is likely because they were trying to purchase them on the “spot market” and didn’t have a standing contract.

Because annual hop quantities can’t be fully known, due to unpredictable growing conditions, and breweries need a set amount to meet beer production, hop contracts are necessary between breweries and farmers. To get their hops in the ground, breweries need to pay the hop farmer upfront. But most small breweries need a bank loan to pay the hop farmer because they are paying for something that has yet to be produced. If a farmer grows more than the contracted amount, they can offer them up on the “spot market.”

If there’s a shortage in a variety of hop, that price can increase significantly. In 2016, there was a 40% decline in hop crops and European hops increased in cost by 50%. Some varietals increased by 5 times as much, or just weren’t available. A brewery’s ability to even operate is highly dependent on good planning, relationships and a big of gambling. This is why losing access to even an expected crop creates issues.

But how bad is it, really?

The industry seems less concerned with day-to-day implications for their business and more around broken expectations, with a wary eye for what AB InBev’s intentions might be.

Even though ABI purchased the entire SA market they have haven’t immediately cut off supply to the US. In fact, it’s business as usual. Brophy says,

From our understanding even though AB took over the ownership, they’re still fulfilling contracts. If you have a contract it should be fulfilled.

If you don’t have an SA contract, the sheer number of hops and hop growing programs available to breweries in the Northwest should be comforting. Reiter told me Great Notion will be using innovative hops from around the Northwest to stay ahead of the curve.  They recently used experimental hop 331 in their Grassroots IPA. 331 is developed by Oregon State University’s Aroma Breeding Program. Crux Fermentation recently released Experimental 331 IPA using the same varietal.

He says they are also looking abroad for hops, such as the UK for Jester and Slovenia for Styrian Wolf varietals. Reiter also says hot new markets in Australia and New Zealand are intriguing, but the cost is quite high at around $20 a pound. In comparison, hops in the Northwest average about $5-$6 per pound. It’s also possible that the South African market will become available again. ABI told Draft Mag that if they have overages they might sell them on the spot market.

Kuehl, agrees that our backyard is the best option, regardless of the SA buyout and the acquisition doesn’t impact any future Wander brews, or how they do business.

If I am not mistaken Washington State passed Germany for being the top hop producing region in the world. AND, there is currently a hop SURPLUS. We have all that we need. – Kuehl

In 2015 and 2016 Yakima produced more hops than anywhere in the world, surpassing Germany. With 30% of the world’s hop crop – 75% of the nation’s – and a growing and numerous experimental hops in our backyard, the argument could be made that buying local will be the fallout and this can only be a good thing. Boundary’s Krueger told me that most Bellingham breweries buy a higher proportion of local ingredients due to their availability anyway.

This isn’t all bad- NW brewers need to band together and work ceaselessly on low-tech quality improvements, as well as focusing on coaxing new and novel flavors from LOCAL ingredients. To support one another on this path is to extol the unique (and priceless) value of the Northwest and beers made here. – Krueger

The US now produces over 50 varieties of hops and that doesn’t include the growing experimental hop market. South Africa has about 7-10 main varieties and a number of experimental ones. The US has more than enough hop varieties to meet demand. For those like Great Notion in Oregon, they are lucky to have Oregon State University’s Hop Breeding program that is bringing new varietals and experimentals to the market.

AB InBev’s buyout of the South African hop market is a disturbing thought for many in the industry. Is it a harbinger of future moves to corner the craft beer supply chain and distribution? We’ll have to wait and see, but there is an endless supply of new hops to excite the imaginations of brewers and the palates of craft beer drinkers, right in our back yard.