Barley Takes A Tipsy Turn

Bangalore: Indian beer makers may not be too inclined to raise a toast to this, but domestic traders are getting high on exporting barley at a huge premium because of a global shortfall in its production.

What more, this is likely to force most domestic manufacturers to import barley, a key raw material for brewing beer, at a premium. During this fiscal year, domestic barley output is expected to be around 1.24 million tonnes while the demand is around 1.34 million tonnes. With about 50,000 tonnes being exported, beer makers will be forced to pay a huge premium to meet their needs in a country where the beer market is growing between 15 per cent and 20 per cent annually.

What has triggered such a situation is the failure of barley harvests in Australia, Canada and some European countries forcing them to source barley from India even though the country produces low grade barley.

“With the peak season (from April onwards) drawing nearer, there is hardly any barley left for the beer manufacturers in the country,” the All India Brewers Association Director, Sandeep Kumar, told Business Line.

Between 15 per cent and 20 per cent of India’s barley production is fit for making malted barley (or germinated barley) which is a raw material for beer. The rest of the crop is used as animal feed.

Sandeep Kumar said most of the producers face the prospect of resorting to import of malted barley instead of barley even if it costs more because it saves them time. Companies like SAB Miller which is the second largest beer maker in the country, start preparations a few months earlier to meet the demand during the peak season and hence time factor plays a major role for them.

Malted barley constitutes 30 per cent of the cost of production of beer and any increase in its price translates into a bigger hit for the manufacturers. If they need to pass on the increase to the consumers, they cannot do so without seeking permission from various state governments which control the end price. A spokesperson for United Breweries, which is the largest beer maker in the country, however, said that they had foreseen such a situation and hence are well equipped to deal with it but for others it may certainly not be a happy position to be in.