What's in store for brewer's yeast procurement with rising craft beers demand?

There has been a shift in beer consumption trend arising from increasing popularity of craft beers over traditional beer among consumers. Large breweries, in order to reduce the high complexity and cost involved in maintaining various yeast cultures and propagating them in house for small batches of beer, have started procuring 'ready to pitch' dry yeast from outside suppliers. Top industry players such as AB InBev, SAB Miller, Heineken and Carlsberg are expected to increase their sourcing of yeast from external suppliers in the near future Having said that, procuring yeast from outside suppliers also needs to be skillfully strategized, given the fact that yeast suppliers'  power, with respect to a beer industry client, is very high. Yeast manufacturers profitable businesses are yeast extracts and baker's yeast and they earn minimal revenues from brewer's yeast business segment. Further there are only four big global yeast manufacturers holding ~90% share in the yeast market, making it a highly consolidated market for a brewer's yeast buyer and bringing down their bargaining power. Nevertheless, some strategies such as consolidating the procurement of various yeast types and thereby leveraging on volumes of scale can provide a substantial edge to breweries while negotiating with outside yeast suppliers!

Introduction While 80% of the beer consuming population still enjoys the traditional beer, craft beers are speedily gaining popularity among avid drinkers and attracting new comers especially in developed countries. It is certainly going to be a vital business in the coming future which is evident from the fact that the beer industry leader, Anheuser-Busch InBev spent an estimated USD 162 million dollars on buying three' craft breweries in the last one and a half years. Following the drift, world's second largest brewer, SAB Miller has also opened its wallet to buy UK based craft brewery "Meantime" to get into the Europe's booming craft beer movement.   Author: Sachina Garg