Anheuser-Busch InBev (AB-InBev): Trouble’s brewing as climate changes impact the beer industry

With water being a critical part of the beer making process, ABInBev takes charge of reducing its Water footprint in a changing world where water demand may soon overtake supply.

Water shortage is real.

As Green House Gas (GHG) concentrations keep rising, their impact on the earth becomes more and more pronounced. The first effect is seen in the form of the rising temperature of the planet as the atmosphere is capturing more heat than it is releasing leading to an accumulation of the heat on the earth’s surface. These higher temperatures have led to shrinking glaciers, altered precipitation patterns and have worsened the extremes of floods and droughts alike. [1] Erratic rainfall leads to fear of water shortages in areas and industries depended on agriculture. Higher temperatures make water bodies favorable breeding environments for insects and other disease carriers leading to lack of access to clean water. [2]

Why should AB-InBev care?

Water is an integral part of beer – right from being used while growing barley (a key ingredient in beer) to brewing the beer. Water itself is a key ingredient of beer: ‘Without water there is no beer.’[3] With this key ingredient becoming an increasingly scarce and unreliable resource, measures need to be taken to reduce water usage and lead water sanitization efforts.

What is AB-InBev doing?

AB-InBev’s water usage reduction strategy is well captured in the sentence ‘Conserving water from seed to sip’.[4] Once AB-InBev (ABI) looked beyond their operational walls to understand their water usage, they discovered that 90% of the company’s water usage is concentrated at the barley grower’s part of the supply chain. [5] Along with implementing efficient irrigation techniques, ABI has also partnered with agriculture based weather stations to lead usage of innovative technology which helps reduce the unpredictability in water availability. This is done by optimizing amount of irrigation with respect to predicted rainfall and local soil conditions. They are also collaborating with global seed research hubs to identify drought resistant barley seed varieties that can get them the same yield with 40% less water. [6]

Through efforts such as onsite water efficiency projects, watershed protection for brewing materials and overall operations, employee engagement and water access programs, ABI has also reduced the water used at their breweries to 3.14 hectoliters of water per hectoliter of beer by 2016 (11% reduction since 2012).[7]

Recognizing the need to champion water access along with conservation, ABI has partnered with water.org to come up with ‘The Stella Artois Buy a Lady a Drink campaign’. As part of this campaign, every time someone buys the limited-edition Stella Artois Chalice, ABI donates $6.25 to water.org. This $6.25 provides clean drinking water to 1 person for 5 years. [8]

Another indirect water conservation initiative has been undertaken by ABI’s disruptive arm (ZxVentures). Undertaking a ‘Save the Barley’ campaign to create ‘Saved grain’ from ‘Spent grain’. Spent grain is the barley that remains post the beer making process and is usually used as animal feed. ZxVentures backed CANVAS instead found a way to convert it to a high fiber – protein – nutrition drink named CANVAS. This increases the overall ‘productivity’ of the water used to grow barley since it provides more products per kg of barley grown and harvested. [9]

What else can ABI do?

Staying where you are in today’s fast moving, fast changing world (even from a climate impact perspective) is as bad as walking backwards. ABI needs to continue accelerating their water reduction efforts and set aggressive targets for the same.

Along with direct water reduction efforts, a large piece of the puzzle is to reduce energy used during brewing process so as to reduce GHG release which will reduce impact on the climate and hence increase water availability. Though ABI has dedicated some efforts around efficient energy utilization, there are various low, medium and major cost opportunities to further optimize this. These opportunities range from having a strict ‘turn off equipment when not in use’ policy to collecting steam condensate and purchasing and installing efficient equipment. The brewing, packaging and utility support are the three main buckets that have a high potential for energy reduction. [10] Enhancing their ability to replace present energy sources with onsite renewable energy sources, is another direction that ABI can move in since this is the most sustainable method of reducing GHG release.

Unanswered questions!

The success of the agriculture industry is being questioned due to its dependence on the ever-changing climate. Given the reality of resources being limited, how should ABInBev think about their short and long-term investments for water-conservation – invest in core R&D of seeds that can withstand adverse climates and need less water to survive OR in existing technologies for water/energy usage reduction?

The process of growing barley, brewing and packaging beer will continue to be a water intensive industry, albeit less than before. Given the present and future context and the preciousness of water as a resource, should/will consumers fundamentally reject the beer industry over time?

Word count: [800]

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References:

[1] Time for change article (Crystal Davis: EarthTrends Update: November 2007 “The Multiple dimensions of water scarcity”): http://timeforchange.org/water-scarcity-and-global-warming

[2] HBS document: Climate Change in 2017- Implications for Business

[3] AB-InBev website link 1: http://www.ab-inbev.com/better-world/a-cleaner-world/water.html

[4] GreenBiz 2010 article by Angie Slaughter: https://www.greenbiz.com/blog/2014/06/10/how-anheuser-busch-conserves-water-seed-sip

[5] GreenBiz 2015 article by Kelli Barrett: https://www.greenbiz.com/article/when-beer-and-water-mix-abinbev-teams-conservation

[6] Sustainable Brands 2015 article by Kim Soko Schaefer: http://www.sustainablebrands.com/news_and_views/leadership/kim_soko_schaefer/-b_inbev_how_global_brewer_setting_bar_innovation_local_

[7] AB-InBev website link 2: http://www.ab-inbev.com/better-world/a-cleaner-world/water/watershed-protection.html

[8] Stella Artois website: http://www.stellaartois.com/en_us/buy-a-lady-a-drink.html

[9] Kickstarter article on CANVAS: https://www.kickstarter.com/projects/savethebarley/canvas-a-new-type-of-beverage-made-from-saved-grai

[10] Brewers Association – https://www.brewersassociation.org/attachments/0001/1530/Sustainability_Energy_Manual.pdf

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10 thoughts on “Anheuser-Busch InBev (AB-InBev): Trouble’s brewing as climate changes impact the beer industry

  1. I think a company like ABinBev has the resources to invest in a solution for the long term. Something like working on the seed can be a solution, that can impact water consumption for barley production not just in ABinBev but potentially across the industry. The flip side to this though is that with so much consumer focus on things like non-GMO and “natural”, will such a move potentially go against the brand? I am not sure if ABinBev will do something for water conservation (the greater good) even though it might go against their brand.
    I personally don’t foresee beer consumption going down because it uses water. A lot of agricultural products, including rice, use a lot of water. Does that mean that people will start migrating to other food grains as well? Might be possible as the shortage of potable water becomes acuter. However, I do believe that techniques to re-use and/or purify the water used in the process would be the key to sustainability.

  2. Interesting write-up. I think the question is less about investing in seeds “or” other water reduction technologies and more about “and”. Your post made it clear how water-intensive the beer-making process is and I think it’s important for ABI to do everything they can to better manage their water usage.

    I think the trends in beer consumption are interesting. Globally, it’s a market grower, but in the U.S. it’s been flat to slightly down as drinkers become more health-conscious. I don’t think water usage will make a huge impact on consumer purchasing behavior but will be interesting to see how consumption trends continue.

  3. Great text – the concern about water is definitely becoming increasingly relevant to our society! Yet, I feel on the short term few companies, including ABI, will radically change their business model due to water scarcity. ABI is widely known for its lean organizations and major cost-cutting initiatives to drive better profitability (https://www.ft.com/content/268f73e6-31a3-11e7-9555-23ef563ecf9a), and these water saving programs seem to be part of those. Earth is the land of water, and water will always be widely available, but with increased climate change, it might become more expensive for companies to acquire, filter, and use them – hence ABI’s worries regarding this subject.

    Despite being, in my opinion, just one more cost-cutting initiative done by ABI, there is still merit on their effort and their potential impact to the environment by adopting more friendly processes and technologies. Their R&D teams will keep working on innovations, but much more focused on driving costs down than on solely reducing their environmental impact.

  4. Interesting read. The situation ABI is in reminds me a lot of the IKEA case we discussed in class. Just as wood is a core part of the IKEA supply chain, water is a irreplaceable part of ABI’s business. It is smart business practice to protect the source of this supply, look for ways to reduce its usage and attempt to make the supply more sustainable for the long run. While I question the motives of ABI’s sustainability efforts, I hope they succeed in their endeavors and can influence the rest of the industry to move in the same direction.

    In my opinion, consumers are willing to shift to more environmental friendly behavior, but only if the price and quality of the product makes sense. A couple of examples that come to mind is a shift towards clean energy and towards more fuel efficient vehicles. I think there could be a shift towards more environmental friendly beer or even other alcohol products, but only if price and quality are not sacrificed.

  5. Thanks for writing about this. As the world’s largest brewer, ABI has a responsibility to guide their business towards more sustainable methods and serve as an example for other brewers in the industry. In response to your first question, they should be investing in multiple areas – not just in seeds and reduction of water usage, but also look into re-using water. They have already looked into re-using materials used to make beer (http://grist.org/food/anheuser-busch-turns-beer-leftovers-into-usable-products/), which is absolutely on the right track. There won’t be one single solution that will solve everything, but rather, a myriad of changes over time in their processes.

    To answer your second question – I don’t think consumers will reduce their beer consumption because of its water usage. They will willingly give up things like almonds (1 gallon for each nut!) long before even considering beer.

  6. This is a great article – I’m really impressed by the defensive investments that ABI has made to date in sustainability initiatives for the producers in its supply chain. Developing drought resistant barely seems to be an incredibly important development that will not just allow them to stabilize supply in coming years, but could also represent a significant growth area for the business should it license these species / sell crops for other purposes.

    With all of this investment in R&D, ABInbev is taking the right step to identify the technological solution to some of these big issues. However, implementing these technologies at scale this will represent a significant capital outlay for growers that they may not be able to finance themselves. Will ABInbev have to play a role in investing in these growers facilities to ensure supply? There might be a need for ABInbev to vertically integrate its supply chain, completely transforming the business in coming decades.

  7. Very relevant subject that brings up again the question we’ve been trying to get our heads around in several of the cases in class, of whether it is acceptable, or on the flip side questionable, to have cost savings while reducing environmental impact. In this particular subject I am on the side of it being not only acceptable, but also it being a behavior that society should encourage from the big corporate citizens, given their unique position to have sizable impacts; ABInbev could very well focus on plant automation to reduce costs, on marketing campaigns to increase margins, or many other areas; not that they don’t, but still they choose to have a very comprehensive environmental impact reduction program at the core of its business that also happens to support their profits. I am truly amazed by seeing such a comprehensive program in favor of a key natural resource.

    The other aspect I wanted to touch upon after reading this essay, is the question of investing either on the seed technologies or in the efficiency technologies to reduce water consumption. In this case I would agree with previous comments that it is a definite AND, where they invest on both ends of this complex issue. Not only that but I would also add other aspects to the program, particularly a local-community oriented approach, given the challenges that arise to local communities that have big water-consuming factories in their immediacies.

  8. Very interesting piece on the sustainability responsibilities of corporations. I would say that ABInBev needs to do both, they need to invest in seed R&D and invest in technologies to reduce their energy and water usage. Essentially, they need to invest in any and all initiatives that are feasible. Additionally, I think they need to also focus on educating both the beer and agriculture industry on the importance of water sustainability and best practices. While ABInBev is the largest beer company in the world it is only one player in the broader agriculture industry which is affecting the water supply.

    I don’t think consumers will or should reject beer due to its water usage. Instead consumers should began demanding beer companies take real tangible steps towards lowering their water usage. They should only reject the companies that don’t make any effort in this initiative.

  9. Very interesting read. This one is a particular struggle for me, as I think about juggling the true motives of sustainability. I commend ABInBev on their efforts to pursue more sustainable methods of beer drinking. As a multi-national cooperation, AB is well-armed to be a leading voice in this fight. Their association with barley growers and water.org is a step in the right direction. On the other side, they’re also one of the world’s greatest polluters. Billions of cans of their beer are transported into the ecosystem, causing a host of other environmental issues. In other words, with its water campaign, ABInBev is solving only a fraction of the problem it has helped create.

    Still, something is better than nothing, especially something like AB’s water campaign that will produce economic returns for the company over the long term. I’ll be interested to monitor this one playing out.

  10. A very interesting read! While it makes perfect sense to me that the vast majority of water use in the Beer supply chain is in the growth of barley, I wonder whether this is really the best use of AB InBev’s focus. Climate change has the potential to increase costs across the entire supply chain, and I would think that water, at least at current prices, isn’t that large of a cost of the actual beer production process. Its laudible that the company is trying to manage down its water usage, I’m not sure it really makes that much of a difference in overall water usage, and isn’t the most sensitive part of the supply chain to climate change. The energy use to manage a global distribution channel, let along the energy for the production process (and the direct CO2 emissions of production itself) seems like it might be much more impactful than water conservation, and I wonder whether AB InBev might better spend its time there?

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