Barley farmers hopping mad at AB InBev

FARMERS have filed a complaint with the South African competition watchdog about Anheuser-Busch InBev’s decision to change its pricing formula for buying malt barley, a key ingredient in making beer.

The farmers lobby group Grain South Africa believes AB InBev, the world’s biggest brewer, has contravened one of the conditions set when the country’s competition tribunal approved its $106-billion (R1.3-trillion) acquisition of rival beer-maker SABMiller.

“We are aware of the complaint lodged by Grain SA and have formally responded to the Competition Commission,” AB InBev Africa spokeswoman Robyn Chalmers said.

“We have, at all times, conducted our operations in compliance with the conditions imposed by the Competition Tribunal.”

In a letter to farmers in the barleygrowing region of the Western Cape, AB InBev said it was changing what it would pay for this year’s crop to 97% of the price for top grade wheat (B1) from 102% of second tier wheat (B2).

“We are of the opinion that they are not sticking to what was agreed at the Tribunal,” Jannie de Villiers, chief executive of Grain SA, said.

“AB InBev has refused to engage any further, so the Competition Commission is the only avenue we can use.”

In the final approval for AB InBev’s acquisition, the competition tribunal said the merged entity had to comply with the terms and conditions of SABMiller’s existing supply agreements with suppliers.

Farmers also worry the new formula will leave them worse off.

Yesterday, B1 wheat cost R3 910 a metric ton and B2 cost R3 814, taking into account a fixed discount of R96 per metric ton this season. That would mean the price of barley would be about R100 a metric ton lower under the new formula.

AB InBev said in a letter dated November 8 that the new formula ensured the average gross margin for malting barley was competitive versus wheat in all South African growing regions. It said would review the crop pricing formula and the amount of barley it would buy in South Africa on an annual basis.

AB InBev buys 85 to 90% of the malted barley grown in the country.