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No water, no beer! MillerCoors looks for a silver bullet to fight drought

On a crisp, sunny Colorado morning, Jamie Hart looks over a vast empty field that in just a few months should be flowering with this year's barley crop.

Hart has been growing barley for more than 30 years on his farm, which is about 3½ hours south of Denver, in rural Monte Vista. He uses a modest 300 acres of his 1,000-acre farm for the crop, and he knows you can't grow barley without water.

"It's our livelihood," he said. "This water is getting more and more precious every day, and we have to be able to conserve that to keep the livelihood that we know going."

That is exactly why Hart is doing everything he can to preserve every last drop as the San Luis Valley region of Colorado faces a crisis when it comes to the precious commodity.

Jamie Hart dedicates 300 acres of his farm for his barley crop.
Justin Solomon | CNBC
Jamie Hart dedicates 300 acres of his farm for his barley crop.

Hart is one of nearly 150 growers in the valley that MillerCoors calls upon to supply it with malt-barley—a crop the company holds to an extremely high standard.

In fact, MillerCoors has nearly 850 barley growers in four states from which it sources roughly 70 percent of its barley. The company also operates its own farm in the San Luis Valley, and it recognizes the problem at hand, not just in Colorado, but in Wyoming, Montana and Idaho as well.

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That's why the company has made water conservation one of its key priorities from its breweries around the country to the farms that supply it.

"Bill Coors is famous for saying that barley is to beer as grapes is to wine," said Kim Marotta, who as director of sustainability for MillerCoors is tasked with reducing its water consumption.

The water worries in Colorado are not new. The area is a high mountain desert that receives on average just 7 inches of precipitation annually. The majority of its water comes from snowmelt off the surrounding Rockies.

"We depend entirely on snowmelt runoff and we live and die by that," Steve Vandiver, general manager of the Rio Grande Water Conservation District, told CNBC.

For the last six years, the region has had below average runoff because of below average snowfall in the mountains, which accounts for roughly 85 percent of the water that comes into the basin through the Rio Grande.

"It's getting worse as we go through time here, and we are hoping to see the weather change," Vandiver said.

MillerCoors has eight agronomists who work directly with the 850 farms to provide advice and support on the ground. As this growing season quickly approaches, the desire for support was evident at its winter growers meeting. Held in in a private room of a Mexican restaurant in Del Norte, Colo., the meeting was standing-room only, with roughly 100 farmers packed wall-to-wall to hear from MillerCoors and the water experts.

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"If we are not collaboratively working with our growers and others within our agricultural supply chain to become efficient, we are not going to create scale and we are not going to create impact," Marotta said.

While water is used in the entire brewing process from crop to can, 90 percent is estimated to be used in farming alone.

"Water is extremely important. Not only is it the main ingredient in our beer, but it helps water our crop fields, it flows through our brew kettles, and it's really essential to good quality beer," said Marotta.

MillerCoors is looking for answers and has already reduced its water use in its breweries and on its test farm in Idaho known as the Showcase Barley Farm.

"On our Showcase Barley Farm, we put in a suite of best water management practices. We retrofitted nozzles, we turned off end guns, we changed our sprayer nozzles and variable rate irrigation. And through that, we were able to save over 400 million gallons of water over three years," Marrotta said.

Similar techniques, along with working with the crop itself to make the barley more drought-resistant, are underway on the Coors Farm in Colorado. "We can work hand-and-hand, we can talk about new technologies, we can learn from one another and really be great partners," said Marotta, regarding the work being done on the research farm and with the local farmers.

A new, and more expensive, pressure-gauge water nozzle was installed on Jamie Hart's farm to produce larger droplets of water to reach crops more efficiently.
Justin Solomon | CNBC
A new, and more expensive, pressure-gauge water nozzle was installed on Jamie Hart's farm to produce larger droplets of water to reach crops more efficiently.

Hart is one of the farmers who have switched the nozzles on all of their farms' pivots, the systems used to water crops, to make the water last longer. The newer models have pressure gauges and make larger water droplets, which lets more of the water reach its intended target without evaporating.

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These changes don't come without a price though. Hart told CNBC it cost him about $4,000 per pivot to replace the nozzles—an amount he said he expects to be worthwhile in the long run.

"It comes with a cost, but this water is very precious and it comes with a cost also," Hart said.

But according to MillerCoors, the costs haven't yet been passed along to the consumer. It's something Wall Street may soon be keeping an eye on as water woes grow.

—By CNBC's Justin Solomon. Follow him on Twitter @JsolomonCNBC.