Interbrew's Latrobe Brewing Co is spending more for the rice it uses to make Rolling Rock beer because increasing competition from pet food makers has cut US supplies of the grain in half.
Latrobe, Anheuser-Busch Cos, Adolph Coors Co and other brewers rely on rice to produce a lighter taste and color in beer.
The price of brewer's rice has risen as much as 45 percent in the past year, boosting ingredient costs for companies that make US$60 billion of beer a year.
"We've got to have it," said Mark Ecker, an assistant brewmaster at Latrobe.
Brewers say they must absorb the higher cost of rice because using other grains would alter the taste of their beer. While the expense is small compared with other ingredients, brewers compete with the likes of Ralston Purina Co and other pet food makers who are using more rice because it is easier for cats and dogs to digest than corn or wheat.
The rice that US brewers have been using since World War II is the powdery remains of grain damaged in the milling process. Mills remove the hull and bran to produce the rice known to most consumers. About 12 percent of the US rice crop ends up in beer.
US pet food makers, who had US$11 billion in sales last year, have been buying increasing amounts of brewer's rice to replace corn, wheat and other grains. Demand for rice-based food has grown among owners of purebreds more prone to be allergic to corn and wheat, analysts said.
"Rice has been used in the pet food industry for about 20 years now, though the use has been increasing dramatically over the last five to 10 years," said Dale Hill, manager of nutrition at Brentwood, Tennessee-based Doane Pet Care Co, which makes private-label pet foods for Wal-Mart Stores Inc and other retailers.
"Rice is getting to be more expensive than corn, but the starch in it is considered to have better digestibility and less allergens than corn or wheat," Hill said.
US inventories of brewer's rice fell 49 percent this summer, a time of year when stockpiles usually swell, government figures showed.
For Jim Byers, vice president of rice purchasing at Cormier Rice Milling Co in DeWitt, Arkansas, the competition between beer and pet food makers means higher profits.
"All of our brewer's rice now goes to the pet food industry," Byers said.
While the company makes most of its money selling long and medium-grain rice to restaurants and grocery stores, the brewer's rice has a higher profit margin because it is mostly a waste product.
The price of broken rice kernels in the Mississippi River delta, the biggest US rice-growing region, reached US$0.0663 a pound last week, up 30 percent from US$0.051 a year earlier, according to the US Department of Agriculture. Prices reached a 21-month high of US$0.0738 on Aug. 3.
Unsold supplies of brewer's rice fell to 5.3 million kilograms as of Aug. 1 from 10.3 million kilograms on March 1, Agriculture Department figures showed. During the previous four years, stockpiles rose an average 20 percent from March to August.
That means rising expenses for Latrobe, Anheuser-Busch and Coors, which add rice to the malted barley, hops and water used in brewing to lighten the taste and color of the beer without diminishing alcohol content, analysts said.
US consumers developed a taste for lighter beers in the 1940s, mostly to appeal to women who became a bigger share of the market when millions of American men went off to war, said Charlie Papazian, president of the Association of Brewers, a Boulder, Colorado-based trade group.
"The troops came back and they didn't mind it," Papazian said. "Now light beers claim the largest segment of the market."
Anheuser-Busch makes 49 percent of the beer consumed in the US, followed by Philip Morris Cos' Miller Brewing, which controls 20 percent, according to industry figures. Golden, Colorado-based Coors accounted for 11 percent. Miller, Pabst Brewing Co and many regional brewers prefer corn to rice because of the golden color it imparts to beer, said Bill Radtke, vice president of operations for Pabst in Milwaukee.
US brewers used US$320 million in rice and corn last year, compared with US$560 million in malt and US$73 million in hops, according to the Beer Institute, a Washington-based brewing industry trade group. The group doesn't keep records of the cost of rice alone, or for water and other ingredients.
As brewer's rice has been gaining, the price of long-grain rice has fallen 24 percent to US$0.1025 a pound in the past year. Rough rice futures, which represent unmilled long-grain rice, have fallen 33 percent in the past year to US$0.0414 a pound on the Chicago Board of Trade.
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