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The beer economy, part 1

October 11, 2017

 

Over the past week, two separate brewers, By the Horns and Hiver, have called a halt to their fund raising efforts on Crowdcube.  Hiver is now pursuing a private fund raise and By the Horns are talking about a contingency expansion plan having not reached its funding target. After a series of largely successful brewery and beer crowdfunding campaigns in the past 2 years, more than a dozen of which we invested in (for intelligence purposes), this marks an interesting point where beer businesses that may have benefited from a still fast growing craft beer market will now need to work all the harder to differentiate themselves. In addition, the prospect of higher interest rates attracting people back to fixed income and deposit products and the rumoured tightening of Enterprise Investment Scheme (EIS) tax efficient status means that businesses will have to fight even harder for investor money.

 

It could be a reflection of perceived quality of the brewer and beer or it could be the quality of the proposition and marketing required to reach a sustainable audience. It certainly means that investors will, more than ever, look at the financials, business leadership and robustness of the breweries they invest in.

 

There is a risk of overblowing this as an inflection point – both raises were seeking relatively modest sums of money (£350K each) and crowdfunding is likely best seen as a way to reward and enfranchise loyal supporters rather than being a truly cost-effective source of capital.

 

What is clear is that there are a lot of breweries out there! The overall number appears to have peaked in the past few years at 1700-1900 in the UK and predictably new entrants are well- publicised but the number of those closing is not so well reported. But in short, it is a competitive market for all of those to reach a growing (but not limitless!) number of independent beer and ale drinkers.

 

I don’t claim that we at RCB have all the answers and that we wont be challenged by these trends, alongside the many opportunities we also enjoy. But given that we are neither young in age nor in a hurry (it's already taken us 15 years to get to this point) we’ve been very deliberate and long term in our thinking on how much capital we need, what our brewhouse must be and what our beer will taste like and be charged at and, most importantly, what our drinkers and routes to markets will be and what they won't be. I suppose this long term thinking is rather appropriate given our home is Melton Mowbray Market, a business which is 1000 years old and mentioned in the Doomsday book.

 

Part of our preparations have included years of analysis of beer and brewing markets and businesses in the UK and globally and what makes them tick. Over the course of the coming months, and before we put our head down and focus solely on our customers, our market and expanding our own business, we will take some time out from fund raising and brewery and business building to share our experiences and thoughts on the market and trends in beer consumption (past, current and future), differing brewery models (say property focus of some traditional brewers v liquid focus of new independents) and what it all might mean for beer lovers and the breweries that serve them.

Would welcome thoughts from all as we go along.

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ROUND CORNER BREWING

Melton Mowbray Market, Scalford Road

Melton Mowbray LE13 1JY

 

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