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

Mon May 18, 2015 10:16pm EDT
 
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By Colin Packham

SYDNEY May 19 (Reuters) - Australian agribusiness GrainCorp Ltd plans to nearly double output capacity at one its U.S. malt plants to capitalise 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 United States as drinkers seek new tastes, with sales estimated to have climbed more than a fifth in 2014.

GrainCorp on Tuesday said it would spend $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 chief executive officer.

U.S. sales of craft beer in 2014 were worth nearly $20 billion, according to U.S. industry body the Brewers Association, up more than 22 percent 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. (Editing by Joseph Radford)