Bloomberg News

Brewers Helping Farmers Cut Water Use as Shortages Loom

October 16, 2012

Brewers Plagued by Water Shortage Give Farming Lessons

Sorghum grows in a field. Photographer: Sue Ogrocki/AP Photo

SABMiller Plc (SAB) doesn’t buy any grain from farmer Ram Singh Yadav. Yet the world’s second-largest brewer says it’s important to teach the 62-year-old Indian to grow his millet and sorghum with less water.

By showing Yadav how to drip-irrigate and suggesting alternative plants that thrive in arid areas, SABMiller has helped the farmer boost yields on his farm in the Indian state of Rajasthan, where the water table has sunk as low as 300 feet (91 meters) below ground, versus 40 feet in 1980, he said.

“Water is life,” said the Indian army veteran, who supports his wife, sons, daughters-in-law and grandchildren with the 12-acre farm, two water buffalo and a cow. “It’s not something you can import, you have to save what you have and use it well.”

Helping Yadav helps SABMiller as it grapples with increased water scarcity in India and other developing markets. The company owns a brewery near Yadav’s village that relies on the same water sources as his farm, and it says the support of farmers like Yadav are key to its sustainability efforts. SABMiller last year sold 22.9 billion liters of beer and estimates that producing each liter requires 50 to 180 liters (13 to 47 gallons) of water, for everything from growing grain to washing bottles.

With two-thirds of the world expected to be “water- stressed” by 2015, according to the United Nations, SABMiller and rivals such as Anheuser-Busch InBev NV (ABI), Heineken NV (HEIA) and Carlsberg A/S (CARLA) understand that they must find ways to cut water use beyond the walls of their breweries.

“We’re still trying everywhere to get our water consumption down,” Carlsberg Chief Executive Officer Joergen Buhl Rasmussen said in an Oct. 12 interview in London.

Critical Limitation

The brewers’ efforts are especially important in developing countries such as India and China, which are their fastest- growing markets and also suffer from greater water scarcity than Europe and North America. Water withdrawals there are predicted to rise 50 percent by 2025, versus an 18 percent increase in developed countries, according to the United Nations.

Water “is a critical limitation in certain parts of the world,” said Conor Linstead, senior water policy adviser at the World Wildlife Foundation, which has collaborated with SABMiller since 2009. Reducing consumption “is no longer about corporate responsibility.”

Banned Breweries

In a “sustainable development” section of SAB’s website, the company acknowledges that water shortages or restrictions on usage use present a “potentially significant risk to parts of our business.” Founded in South Africa, the company sells more beer in arid emerging markets than its peers, research house Sanford C. Bernstein estimates.

Some Indian regions are facing severe water shortages, and nationwide the monsoon is 8 percent below normal, government statistics show. The districts of Jaipur and Alwar in arid Rajasthan have banned new breweries, distilleries and bottling plants due to depleted groundwater.

In China, 45 percent of gross domestic product comes from water-scarce provinces, HSBC says, and the country’s expanding need for power is further fueling demand for water. The government has set new water consumption caps to be met by 2015, which could constrain companies across the country.

Beermakers have greater control over usage in their breweries. SABMiller says it has reduced consumption to 4 liters of water per liter of beer produced from 4.7 liters in 2008, via measures such as cleaning floors with waste water from bottle washing.

AB InBev has nominated “water sheriffs” in Russia and Ukraine to find and fix water leaks and promote methods learned from other facilities. Carlsberg has created a waste water recovery plant in the Indian city of Hyderabad that aims to recycle all of the water used in one of its breweries.

Recharge Structures

Yadav says his yields have more than doubled since he started using techniques learned from SABMiller and its partners at the Confederation of Indian Industry and Humana, a non-profit organization whose representatives conduct seminars for farmers.

The brewer is creating “recharge structures” in the region that help put water back into the aquifer. These involve digging holes above areas with fissures that allow seepage deep into the earth. The holes are filled with rocky soil so rainfall can accumulate and find its way into the ground rather than evaporating or running off into streams and rivers.

Heineken says it’s building wastewater treatment plants to clean up what comes out of its breweries, and it says it’s assessing actions like gathering rainwater to help achieve “water neutrality” in stressed areas by 2020. SABMiller has created a sorghum-based beer in Africa, using local crops and cutting costs as it doesn’t have to import and transport malting barley across the continent.

‘Wastage Gap’

SABMiller was one of the first brewers to analyze how much water it uses across its entire supply chain, from field to pub. In 2008, the company published a report showing it takes 50 liters to produce a liter of beer in the Czech Republic and 180 liters in Tanzania, where hotter weather leads to more evaporation, so crops require more water.

Water calculations are far from precise, SABMiller acknowledges. The Water Footprint Network, a not-for-profit group focused on more accurately measuring consumption, estimates that producing a liter of beer requires 298 liters of water.

While cutting water consumption could involve upfront costs, over the long term it can help companies become more profitable, consulting firm McKinsey concluded in a 2008-2009 report called “Charting Our Water Futures.”

“Almost everywhere you look, you can close this water wastage gap, typically at very reasonable costs, if not savings,” said Giulio Boccaletti, a partner at McKinsey. “If you’re water-efficient, you become more business-efficient.”

To contact the reporter on this story: Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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