Are there too many breweries?

Russ Taylor of XT Brewing offers his take on market conditions

Despite recent events, the number of UK brewers seems to keep growing, although the rate is now finally slowing and there have been quite a few casualties in the last couple of years. The question has to be: is there enough room in the market for all these brewers and is there still a growing demand for independent beer?

To put a little perspective on the matter it is interesting to look at how much of the beer market supply is from “craft” brewers. Craft is always a bit of a contentious term but for now let’s take it to mean independent brewers who are not part of a global group, whether producing keg, cask, cans or bottles. In the UK beer market, many of these craft brewers are members of SIBA and currently their share of the whole beer market is about 6.5%.

The vast majority of beer sold in the UK is made by one of six global players. As a reader of this you are most likely to be only ever interested in the products of the craft brewers and pay no attention to the other brands on the bar, so the bias may not seem so significant from that viewpoint.

Does it matter? – for you the decerning drinker, who takes time to think about what beer to have and what pub to drink it in, there has probably never been more choice. If you look at beer culture in the UK and around the world there is, and seems to be a continuing, growing desire for more interesting, premium beers with a back story. So, there is definitely a market for craft.

Russ Taylor, one of the most successful local brewers

In the last two years things have changed in the way we consume beer, as there has been a shift away from drinking in pubs. The craft brewers have adapted and changed the way they package their beers; from only 16% of production going into bottles in 2017 to 34% now in both bottles and increasingly cans. There has also been something of a move from cask beer to keg.

If there is demand for craft beer, and with only 6.5% of the market there is a huge space in which to grow, just think that doubling the craft market would still represent only a measly 13% of all beer sales. Indeed, craft sales as a percentage of the whole market have grown a little over the last two years, whereas the overall beer market is still declining year on year. There is plenty of opportunity, but the Iron Curtain wrapped around craft brewers is getting access to that market. If cask demand is falling, which in 2017 made up three quarters of the output of SIBA members, to less than half now, then will inroads into more of big-beer’s market share in pubs have to be in keg? It is in that keg market that things start to get tricky when we look at those big global producers. Mostly the likes of Heineken, Budweiser and Molson Coors are not that bothered about cask; their business focus is all on the big fizzy brands, so they will be looking to defend those keg sales. Budweiser’s Camden Town brand and Heineken’s Beavertown have both been pushed hard and are now taking a very big share of non-lager premium beer sales in pubs.

Small breweries currently benefit from duty relief, a tax break that since its inception has kick-started and sustained the craft beer revolution. The relief helps to bridge the gap in brewing and sales costs for small producers, who will by size be inherently inefficient. Changes are coming which on the face of it look OK, including reduced rates for beers under 3.5% and a draught beer discount. However, this change also gives a significant tax cut to the big producers on those lower strength pub beers. If the changes go ahead you will start to see many more beers under 3.5% as the global giants take advantage of that reduced duty rate.

As a craft brewer, getting your beer into pubs is not just a case of making a decent beer and selling it to all your local pubs. Unfortunately, many outlets are tied in some way and as much as they and their customers might want a tasty local craft beer, there may be no or very few taps and hand pulls available free of tie. Access to market is often blocked by those large producers who control many of the taps on the bar, and have the financial clout to defend and hold on to that advantage in a multitude of ways.

There are many forces at play in the changes to what and how and where people drink, as costs are going up for producers and pubs at a time of less disposable income. It is also interesting seeing the percentage of younger people not drinking beer nowadays.

But there is certainly room for more variety and more creative brewers, and the consumers are certainly there with a demand for those interesting and exciting beers. However, that needs to be matched by a growth in number of independent venues including brewery taprooms, micro-pubs, festivals, and of course pubs and bars who want to and can take those beers.

Drink independent!