BMC rice source

Discussion in 'Beer Talk' started by kylelenk, Jan 21, 2014.

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  1. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania
    In Memoriam

  2. otispdriftwood

    otispdriftwood Initiate (0) Dec 9, 2011 Colorado

    Adjucts 2%... Heck, I'll bet the super bowl ads alone are more than what they spend on rice. Keep in mind they have the ability to contract rock-bottom prices for their raw materials years in advance, even less incentive to change to something cheaper. More costly items like "Production" are very dependent on consistent quality raw materials to keep that massive brewing machine running efficiently. A company like InBev has so many better places to pinch a penny than risking an entire brand on a raw material.[/quote]



    And this is why statistics are unreliable. Your original post declares that "Raw materials are not an expensive enough item to skimp and risk a multi-billion dollar brewing operation on" but you choose to ignore the total raw material costs in your listing and pie chart and only include adjuncts since it serves your purpose in an attempt to prove your point. It took another post to add the TOTAL raw material cost and find out it's equivalent to production costs and sales and marketing costs.
     
  3. Ranbot

    Ranbot Pooh-Bah (2,463) Nov 27, 2006 Pennsylvania
    Pooh-Bah

    Not when everything else you do depends on that raw material and you're already getting your raw materials at the cheapest rate possible locked in years in advance. Besides, all of this ignores that a higher quality raw material probably produces a product more efficiently. Finding efficiencies in factory-style production can be much more involved than simply using a cheaper raw material. You have to consider how that raw material effects everything downstream and brewing is arguably even more sensitive than a typical factory because they have to keep a consistent flavor of the end product. There's too much at stake.
     
  4. otispdriftwood

    otispdriftwood Initiate (0) Dec 9, 2011 Colorado


    I have no answer. But if you thought the topic was odd, you still read it and replied. Why?
     
  5. StoutSnob40

    StoutSnob40 Grand Pooh-Bah (4,611) Jan 4, 2013 California
    Society Pooh-Bah Trader

    I read it just to see if it was as obscure as the title implied. It was.
    I commented just to make my curiosity known to everyone.
     
  6. otispdriftwood

    otispdriftwood Initiate (0) Dec 9, 2011 Colorado

    Thanx.
     
  7. colforbin73

    colforbin73 Initiate (0) Mar 30, 2010 California

    drove by the fairfield plant today.... the whole valley smelled like a mash. smelled ok.... like 20% as good as your mash smells when you are homebrewing.

    maybe i will go take the tour and report back in this thread?
     
    russpowell likes this.
  8. PapaGoose03

    PapaGoose03 Grand High Pooh-Bah (6,057) May 30, 2005 Michigan
    BA4LYFE Society Pooh-Bah

    The title on this thread implies that all 'BMC' companies use rice in their beer, but I don't think I've ever heard or read about Miller or Coors using it. Do either of these two brewery groups have some of their products that are brewed with rice?
     
  9. jesskidden

    jesskidden Grand Pooh-Bah (3,145) Aug 10, 2005 New Jersey
    Society Pooh-Bah Trader

    Pre-Molson and -Miller mergers, Coors advertised [below] that Banquet used rice (IIRC, they even noted that it came from contracted farmers in California). In the '30s, their ads even boasted of not using any corn for their "Export Lager", but by the late-'70s for Banquet they used both rice and "starch" - the latter of which was probably corn-based. Most of their current promotional material for Banquet only says they use "grain" - which is typically macro-speak for corn or both corn and rice as an adjunct, depending on market conditions, etc.

     
    #49 jesskidden, Jan 22, 2014
    Last edited: Jan 22, 2014
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  10. kylelenk

    kylelenk Initiate (0) Apr 17, 2012 Michigan


    In 2012, InBev has sales of ~$40B. COGS were ~$16.5B. Which means if adjuncts made up 2% of that, their total cost to InBev would have been $330MM. I couldn't find individual sales per brand but if we imagine that brands with adjuncts account of only 30% of COGS, a paltry estimation, then you're looking at adjunct costs north of $100MM. It would be facetious to think that rice/commodity prices aren't important. I can assume with little doubt that there is a whole department at InBev with the sole responsibility of monitoring prices in the rice market.

    Read further:

    "Anheuser-Busch InBev, the world’s largest brewer, on Thursday said it had hedged its barley purchases through 2011, avoiding a big cost problem. The price of barley has more than doubled in the past month-and-a-half due to the drought in Russia and Ukraine."
    http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=BUD

    And in InBevs annual stockholders letter:

    "Changes in the availability or price of raw materials, commodities and energy could have an adverse effect on AB InBev’s results of operations to the extent that AB InBev fails to adequately manage the risks inherent in such volatility, including if AB InBev’s hedging and derivative arrangements do not effectively or completely hedge changes in commodity prices."

    Further:

    "The commodity markets have experienced and are expected to continue to experience price fluctuations. AB InBev therefore uses both fixed price purchasing contracts and commodity derivatives to minimize exposure to commodity price volatility. The company has important exposures to the following commodities: aluminum, barley, corn grits, corn syrup, corrugated board, fuel oil, glass, hops, labels, malt, natural gas, rice, steel and wheat."

    AND FINALLY:

    "rice swaps for 79m US dollar (last year 31m US dollar)"

    So, rice is important enough that InBev is spending $79M on future contracts per year.

    All can be found here:
    http://www.sec.gov/Archives/edgar/data/1140467/000119312512102548/d310992dex992.htm
     
    HRamz3 likes this.
  11. Ranbot

    Ranbot Pooh-Bah (2,463) Nov 27, 2006 Pennsylvania
    Pooh-Bah

    Absolutely. That's why they spend lots of money to insure their sources of rice [and other raw materials] and always study the markets to purchase their future supplies as you clearly demonstrated. But, no where in all of that did it say that InBev was actively pursuing lower quality materials, which people in this discussion have equated it to as being "cheaper" or inferior materials. If you or others always always meant "cheaper" in a purely cost context, not quality, then I apologize. I am probably guilty of using "cheap" and "poor quality" interchangeably as well, which I also apologize for if that caused confusion. My point was that they won't sacrifice the quality of raw materials needed to keep their massive brewing machine running smoothly.
     
  12. Peter_Wolfe

    Peter_Wolfe Initiate (0) Jul 5, 2013 Oregon

    I'm replying to the original post although I'll be addressing a couple of others. For those of you that don't know, I am an Anheuser-Busch employee. I'm not a public relations guy, I'm actually a hop chemist/brewing process engineer, but I like to chime in here when I see egregiously incorrect information (and my boss said I could, as long as I don't curse at anyone).

    Here's the real information. I double checked with our director of brewing in St Louis (he handles US and Canada) as well as our director of global brewing (handles China, Europe, etc.) to make sure this was all correct.

    1) All of our rice used in the US is grown in the US. 100% of it. It is delivered in whole grain form (with the paddy husks and bran removed) and milled on-site at the breweries alongside the malt mills (separate mills). For Budweiser brewed internationally, rice grown outside the US is used (e.g. Chinese rice in Chinese Budweiser).

    2) We don't use rice syrup.

    3) We don't use "sushi grade" rice. The name is kind of a misnomer, since it's not so much a grade as a physical shape: sushi rice is a short grain variety. We mainly use a medium grain rice (similar to what you might see in Uncle Ben's instant rice boxes or something like that). This is also not a "grade". You can see the grades here: http://www.calrice.org/pdf/USDA Grades For Milled Rice.pdf

    We use FGIS (Federal grain inspection service, a branch of the USDA) to inspect our rice. We have our own internal specifications that don't exactly correspond to the grade specs above; however in the areas where they do overlap we are better than grade one in some areas and in others we don't go below grade 2. There are also specs that are very important to use (such as low total oil content) that are not even listed in the USDA grades.

    4) Broken versus whole rice: this is a complicated and controversial topic. I will attempt to talk intelligently about it, but I've not had my usual amount of coffee today so no promises.

    - There is a classification of rice called "second heads". We define this differently than some mills/growers. We do not use second heads as defined by the industry at large (in other words, what is typically defined as second heads we consider too low quality to use). There is another classification know as "brewer's screenings". These are the smallest non-milled broken pieces you can typically buy. They were used a lot in the late 1800's/early 1900's by brewers all over the nation (in their defense, this wasn't considered a poor practice and some brewers were making some excellent beer with broken rice in those times). Anheuser-Busch has never used rice of this classification, even in the era when it was typical. According to some of the historical documentation I've read, this was considered a point of pride by Mr. Busch; whether or not it was actually necessary could be a point of debate.

    - In the last 20 years we've learned a lot about what makes rice high quality for brewing; these were things that were never considered in detail before. We do allow a low amount of broken rice into our supply stream, but it must meet pretty stringent quality requirements. Broken doesn't always equal poor quality for brewing, but it could.

    We test and taste our rice/malt/corn/everything extensively. Here's a picture from yesterday, when I was tasting corn grits, rice, and 2-row malt from three malthouses (yes that's my popeye forearm): [​IMG]


    This all gets tasted constantly. This is all very high quality; in most cases it is the highest quality available in the world, period.

    If you have questions, I'm happy to answer them.
     
    #52 Peter_Wolfe, Feb 6, 2014
    Last edited: Feb 6, 2014
  13. jmw

    jmw Initiate (0) Feb 4, 2009 North Carolina

    Very informative. Well done.
     
  14. hopfenunmaltz

    hopfenunmaltz Pooh-Bah (2,635) Jun 8, 2005 Michigan
    Pooh-Bah

    Peter, thanks for the factual reply. There will still be some that will say - China! Or so it seems they will.
     
    drtth likes this.
  15. ASak10

    ASak10 Initiate (0) Jan 2, 2014 Colorado

    Some people don't let facts get in the way of an agenda.
     
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  16. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania
    In Memoriam

    I want to thank you for the richly detailed, informative, and useful answer. Especially since it helps me to correct a few misimpressions I had picked up from other sources I had assumed to be knowledgeable. Clearly some of what appears in some of my earlier posts was either wrong or misleading. Its good to get these thing sorted out correctly.
     
  17. dennis3951

    dennis3951 Initiate (0) Mar 6, 2008 New Jersey

    AB has stated the the packaging
    thank you I just learned something .
     
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  18. LAD

    LAD Initiate (0) Apr 16, 2008 Texas

    It appears that the vast majority of respondors have absolutely no clue as to where AB gets its rice. Wouldn't it be ironic if it came from Arkansas? Have a rice day.
     
  19. kylelenk

    kylelenk Initiate (0) Apr 17, 2012 Michigan

    Thanks Pete! Very thorough and detailed. As I mentioned previously, I don't really have an issue with where a brewer sources their raw materials. I just thought it was ironic with the people claiming boycott on Jim Beam and Makers Mark after the Suntory purchase. IMO, trade makes the world go round.

    Thumbs up!
     
    LuskusDelph likes this.
  20. Flashy

    Flashy Pooh-Bah (1,767) Oct 22, 2003 Vermont
    Pooh-Bah

    I think it's been farily established so far that it does not come from China or Indonesia. I also don't expect that BMC "Americana" loving beer drinkers are high-fiving each other in the mistaken belief the rice in the beer they are drinking is from the Good Ol' USA.
     
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