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The beer economy, part 2: The rise of craft

November 20, 2017

I’ve seen and produced some insightful (well I thought so) graphs on the significant decline in beer volumes (down 35% since 1980), rise of wine and even cider and dynamics within spirits (less whiskey, more white spirits). 

 

Nothing produces a bigger reaction for our stakeholders than that above which shows just how dynamic the beer market has always been.

 

The above is symptomatic of some of the biggest trends which have killed or made so many beer businesses in the UK:

  1. The steady decline in the ale market and of pubs who could handle these great beers and ensure quality.  Pub numbers are down 17% since 2000 alone.

  2. The inexorable rise in importance of supermarkets (and other off licenses) as the dominant way drinkers source their beer.  Off trade has gone from only 10% of the market in 1980 to over 50% and growing since 2015.

  3. The rise of super breweries capable of churning out lagers incl imports of now dominant foreign lager products badged as premium.  Imports are up c375% since 1970 (only exception to this growth is Denmark!!!!).  The number of domestic breweries sank from 3,556 in 1915 to 191 in 1980 and back up to 2250 in 2017.

On this last point, the positive turning point was Gordon Brown’s progressive beer duty introduction in 2002 which succeed in putting more solid economic foundations underneath the independent beer sector.   It is somewhat of a disappointment that too often small brewers used this duty saving to price compete with others, rather than investing it on their product quality incl funding laboratory, QA staff and more experienced brewers. 

 

In the current climate where we are buffeted by wage inflation, minimum alcohol prices, BREXIT threatening essential labour supplies and duty rises and especially business rates that are escalating at eye watering rates then, I think it is safe to say we might find ourselves wishing we were still in the New Labour days. 

 

So, with the era of lagers now stagnating, what ‘s next? 

  1. Can Craft Grow?  Craft beer is still only c2% of the market but growing by 50% a year.  Could it really keep going like this for 5 more years and so reach the double digit market share levels currently enjoyed in the US?  Or does the ongoing attraction of traditional ale limit craft’s exponential growth potential?  Premium coffee is 40% of that market – could we see premium taste-led beers reach that level?

  2. Are all craft beers built to last?  There is a clear trend around...well…trends.  IPAs, Black IPAs, DIPAs, Sours etc.  which have a nasty reality of ending.  What will be the first timeless UK independent beer that transcends its craft niche?  Is it really Brewdog’s Punk IPA?

  3. What breweries will survive a shake out?  Can all these 2250 breweries really survive or will we see many go to the wall as interest rates rise, recession kicks in and competition ‘finds out’ business and brewing acumen of some.

  4. Where and from what will people be drinking in 5 years?  330ml cans are rocketing up versus bottles and kegs will continue to take share from cask.  Its difficult to argue with the science that both these newer formats improve the breweries’ ability to deliver the beer they want to drinkers.

For all of these trends there are some issues that, regrettably, haven’t changed in the last 40 or so years:

  1. Not enough women drink beer

  2. Quality of product is too variable and this has been exacerbated by rise of start-up breweries, often with inexperienced brewers with limited technical skill or vision.

  3. Where people buy and consume beer from (basically pubs or supermarkets) is still too narrow.   Beer sales in cafes, restaurants and other casual dining or social settings must rise.

  4. Beer (in UK) is still too dependent on its session properties as opposed to an all occasion drink.

Whatever the future holds, there is one thing that has not and should not change – beer is a social lubricant.  The combination of great taste with great food and friends makes those wonderful ‘experiences’ we all want to give our customers.  Long may this constant reality endure.

 

Combie

 

 

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