Barley is a resilient crop, but as climate change a dry year could dent brewer profits by nearly 9%, Barclays has warned, as water scarcity and shifting climate patterns raise risks for a crop central to beer production.
In a scenario analysis led by analyst Scott Gordon, the bank estimates that a 15% global supply drop from a bad hydrological year in one or more key growing regions, potentially pushing barley prices up by around 50%.
Given that barley accounts for 10-15% of brewers’ cost of goods sold, this could translate into an 8-9% hit to profits in a bad year.
"Barley is a resilient crop, but as the climate changes, we see potential for a hydrological shock," Gordon said.
Guinness maker Diageo PLC in its 2025 annual report admitted that "the greatest risk to our agricultural raw material sourcing arises from water scarcity".
The note highlights that most of the world’s barley – nearly 90% – is rainfed and increasingly grown in areas facing water stress. Only 11% is irrigated, and of that, 70% is already in regions under high or extreme water pressure.
While brewers are starting to adapt – with Diageo for example developing drought-resilient barley strains designed to endure water scarcity and Heineken forming efficiency partnerships – Barclays says there is limited transparency around the scale of these efforts.
The bank cautioned that adaptation will take time and that companies remain vulnerable to sudden weather-related supply shocks.