The rise of craft beer is putting hops into the spotlight. Claire Connell investigates the crop’s new popularity and finds that it’s bringing investment opportunities.
Craft beer is taking a growing chunk of the beer market, and that’s creating an unexpected agricultural bonus.
The hop plant that’s used as a major ingredient to create beer is in demand, both in New Zealand, where there are 200 brewers – and worldwide.
On the world stage
Brent McGlashen, a fifth-generation hop farmer in Motueka, co-runs Mac Hops, the biggest hop farm in the country.
He says New Zealand hops, despite making up less than 1 per cent of the world’s hop production, are in high demand.
“We seem to be the flavour of the month,” he says.
On 30 July, MyFarm opened an investment into a new hop garden being built by Tapawera Hop Garden Limited Partnership. The offer was oversubscribed when it closed on 31 August.
The project aimed to start planting a 116-hectare hop garden this spring, and is predicted to generate an average annual cash return of 15 per cent a year by 2023, MyFarm’s head of sales Grant Payton says.
New hop exporter Hop Revolution Ltd will manage the garden and sell the hops.
Payton says MyFarm raised NZ$18.5 million from 52 investors for the venture. The minimum buy-in was NZ$100,000.
There was high interest in the offering as investors recognised the growth of the craft beer market, Payton says. The hop industry is also extremely expensive to get into, because it’s so capital intensive, Payton says.
It was the first time there’s been an offering for hops in the investment market, but Payton says MyFarm plans to do more hop offerings.
Back in Motueka, McGlashen says over the years, the demand for hops has been up and down.
About a decade ago, he says 40,000 hectares of crops were pulled out around the world due to a lack of demand. Craft beer didn’t exist, and hop farmers could barely even afford a new tractor, he says.
The last three or four years have been more consistent, McGlashen says, and NZ Hops went from having about 20 customers to several hundred.
But the hop market is currently at a tipping point, McGlashen says.
The US and emerging markets
American hop producers have spent the last four or five years planting more than 2,000 hectares a year of hops, McGlashen says, more than three times the total New Zealand amount. This is currently being harvested, so it’s a waiting game to see how this will affect the market.
Payton says he’s focusing on the growth within the craft beer sector, rather than what’s happening in the US.
“Yes, the growth is slowing in the likes of the US. But I focus on the fact that it’s still growing. The other emerging markets [Europe, Asia] are growing, as their beer drinking habits shift towards craft beer.”
Risks and research
NZ Hops’ update of the 2017-18 summer season showed production was 721,959 kilograms, down 38,570 kilograms from the previous year.
Chief executive Doug Donelan says it was a challenging growing season. Demanding conditions had a “significant impact on yields”.
A very wet winter and spring brought planting delays. Summer brought a heat wave, which wasn’t much help, followed by February cyclones bringing record rainfall and flooding.
Risks for the industry include weather events like those, pests and diseases, fluctuating demand for craft beer, and possible oversupply.
Storms that devastated entire crops were an “extreme” event, but all part of the risks of farming, Payton says.
“That’s why we encourage people to diversify and have their funds across a number of investments, not have all their eggs in one basket.
“I think the craft beer sector is here to stay and will continue growing,” he says.
Research and development are needed to understand changes and trends in the craft beer market, so the industry can meet demand for hop production.
“New Zealand is small and unique, and we have hops that are not grown anywhere else in the world,” he says. “Brewers will seek this out, so they stand out from other beers in the world.”
The Hop Industry at a Glance
· NZ Hops, a cooperative of 26 growers, is the biggest player
· There are other companies too: Hop Revolution and Freestyle Farms
· Most hop gardens are based around Nelson, where the climate is favourable
· Export is 80 per cent international, 20 per cent local
· Crop research and development happens at the Plant & Food Research centre near Nelson
· We have 600 canopy hectares of hops
· There are 20 commercial varieties grown in New Zealand.
First published 28 February 2019
This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.
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