When it comes to making beer, few things matter more than ingredients. At Anheuser-Busch, the U.S. division of the world's largest brewer AB InBev, changes in what consumers look for in their beverages and a more volatile climate, have forced the company to change how it goes about purchasing ingredients now and laying a foundation for new ones well into the future.
"Just from the brewing side of the brewmaster's standpoint, understanding where your ingredients come from is an important part of our job," Travis Moore, head of North America brewing for Anheuser-Busch, told Food Dive. "Because we can't make really great beer without having really great ingredients."
The beer giant, known for popular brews such as Bud Light, Budweiser and Michelob Ultra, routinely tests ingredients before they go into the product. It is also investing millions of dollars to find the next rice, hops or barley varieties, such as versions that can be made using less water or are more resistant to challenges such as drought or diseases.
Working closely with farmers
Anheuser-Busch works closely with more than 1,000 U.S. barley, rice, and hops farmers — some of whom the company has partnered with for several generations — to make sure the crops are grown using its exact specifications. Once the company provides farmers with crop protocols, it keeps in close contact with producers to offer insight, guidance and help them adjust to conditions like temperature or precipitation to meet these specifications.
Jess Newman, senior director of agriculture procurement and sustainability at Anheuser-Busch, has a 15-member team of agronomists stationed in regions where the commodities are grown — employees are based in Idaho, Montana, North Dakota and Minnesota for barley; a hops agronomist in Washington state and another agronomist in Missouri to support rice farmers.
"Just from the brewing side of the brewmaster's standpoint, understanding where your ingredients come from is an important part of our job. Because we can't make really great beer without having really great ingredients."
Head of North America brewing, Anheuser-Busch
Newman said Anheuser-Busch is vertically integrated into agriculture, owning malt plants, hop farms and rice mills. This gives the company a higher degree of control over ingredient quality, which is critical to beer production.
"Even though we've contracted with them to grow certain varieties with us, we don't actually accept them or say we want to use them until one of our brewmasters and one of the folks on the agronomy team gets to actually evaluate them and rub them, smell them and inspect them," Moore said. "So we do that for every single lot of hops that we use in our process so we don't by chance get a bad hop variety."
The quality check continues away from the farm, too. In St. Louis on an early December afternoon, rice and barley removed directly from railcars sitting on Anheuser-Busch's property are sampled by the brewmaster before a decision is made whether to unload and use them.
In addition to hops, barley and rice, the beer company is heavily dependent on two other ingredients to make its beers: its own proprietary yeast and locally sourced water. In St. Louis, Anheuser-Busch has a partnership with the city and a water treatment facility where it takes the liquid and filters it on its own a few more times before brewing. The water also is tasted and checked by those who oversee brewing before it’s used to make beer or clean out their equipment.
St. Louis also plays a role in yeast distribution: Anheuser-Busch ships from its headquarters more than 300 different yeast strains to brewers around the world — each beer requires a different variety depending on what kind it is, such as an IPA, stout or hefeweizen.
Newman, whose team is responsible for procuring ingredients from farmers, said having a close relationship with growers and maintaining as much oversight of the entire process as possible is crucial. Not only does the company need the right quality, but Anheuser-Busch must ensure it has the right amount.
In addition, Newman said because crops grown for beer are more niche, the company needs to make sure producers are getting a competitive price and receiving the technical support they need to keep raising them.
Betting big on research for long-term payout
A key part of Anheuser-Busch's ingredients strategy includes investing in research for new varieties that may not pay off for several years. At the company's Fort Collins, Colorado, facility, agronomists are naturally breeding barley varieties that factor things such as stress from drought, shortening the growing cycle of the plant or reducing the need for inputs like water or fertilizer. As organic becomes more coveted by the consumer, researchers are devoting more attention to that too.
"Why do we breed our own barley varieties? Because barley is niche, right? It's not exciting enough because of its market size for independent breeders to be interested," Newman said. "There is a void of others who are interested in these crops and that makes sense for us in the U.S. because barley's really only used in brewing beer."
Once Anheuser-Busch develops a barley variety that it wants to use, the company conducts crop management trials where it grows the commodity for at least three years. During that time, Anheuser-Busch is designing a protocol to help its growers know exactly how to raise the crop, such as how to apply nutrients and irrigate. Those guidelines are given to farmers when they come and pick up their seeds.
"These are not short-term business cycle decisions," Newman said. "We definitely have to think about the long-term because that's how agriculture works."
Beyond its own walls, Anheuser-Busch has turned to partnerships with land grant schools such as the University of Idaho and Montana State University. The relationship has already paid off, leading to the development of a system that delivers water to plants closer to the ground.
"It sounds really simple, but makes a massive difference," Newman said.
The technology, called Low Elevation Sprinkler Application, or LESA, can curtail water use by up to 30% as more of it gets into the ground rather than getting blown away or landing on the leaves of the plant. It also reduces the risk of a disease forming and can curtail energy use in operations where groundwater pumps are in place.
These advantages have proven attractive for farmers, with some producers initially willing to pay half of the money to install the system with Anheuser-Busch cost-sharing the rest. Increasingly, more farmers are installing the technology on their own as their old irrigation systems age out.
Navigating 'feast or famine' years
The research from CPG companies like Anheuser-Busch has become increasingly important as climate change impacts growing conditions. Newman said the biggest impact on its supply chain has been less about warming temperatures and more about greater variability in precipitation. She said the "feast or famine years" for precipitation is the biggest challenge for the company when it comes to sourcing ingredients and controlling sprout in small grains like barley.
"It stresses our procurement, because it stressed our partners (that grow the crops), many of which we've worked with for many generations, she said.
Last year, barley growers in North Dakota and Minnesota had to delay spring plantings because conditions were too wet, but then rain came around harvest time, causing germination, mold and blight to appear in some areas. With the volatility in rain, breeders at the company are developing barley varieties that are less vulnerable to sprouting or diseases that can happen during harvest. The varieties could be grown commercially within three years, Newman said.
"We're committed to the growing regions where we operate. So, then it becomes a question of, okay, what can we do to lessen this problem?"
Senior director of agriculture procurement and sustainability, Anheuser-Busch
Work is currently being done to breed barley with a shorter growing cycle to reduce the risk of sprout events from late-season rain. Anheuser-Busch also is looking into ways for the brewer to use "slightly out of spec ingredients ... without ever compromising the quality of our beer."
"We're committed to the growing regions where we operate. So, then it becomes a question of, okay, what can we do to lessen this problem?" Newman said.
Anheuser-Busch is working with Indigo Ag to pilot a program with rice suppliers in Arkansas that would require the commodity to be grown with 10% less water, carbon and nitrogen emissions compared to county averages. In exchange, the farmer receives a premium for their crops to cover the risk of trying new practices. Other commodities are being considered for similar environmental specifications in the future.
Craft beers spur ingredients innovation
The environment is not the only factor influencing how commodities are grown. Changes in what consumers look for in their beers plays a large role in how Anheuser-Busch sources its ingredients. The popularity of craft beers — there were 7,346 makers of the specialty brews in 2018 compared to 3,814 just four years earlier, according to the Brewers Association — has spurred brewers to look for new versions of ingredients to get their product to stand out.
While Anheuser-Busch is best known for its iconic brews, it is gradually expanding its craft presence in recent years through the purchase of brands such as Goose Island Beer Company, Devils Backbone, Wicked Weed Brewing, Karbach Brewing and Platform Beer.
"The more choices we give them (when it comes to ingredients), the more the craft brewery can really flourish and push boundaries," Newman said.
Today, Anheuser-Busch purchases up to 30 varieties of hops, many of them in smaller volumes, for its craft partners to use and experiment with — an increase from roughly 10 a few years back. The introduction of organic beers, which includes large brews such as Michelob Ultra Pure Gold, also has prompted the company to explore ways to expand how much of the specialty ingredient it has at its disposal.
To encourage more barley growers in Idaho to switch their conventional crops to organic — a process that can take three years — the company launched Contract for Change, a long-term contract with farmers to provide transitional and organic premiums during the change. The program also provides technical support to these farmers during this transition period.
“A big part of the innovation process is ensuring that what ingredients you plan to use are going to be able to scale with the demand growth of that product," Moore said. "You wouldn’t set out and develop a product that uses something that is not scalable ... You have to take the approach of don’t fall in love with something you can’t have.”