March 2017

Collision Course

The seemingly unstoppable rise in brewery numbers can’t go on for ever

EVERY MONTH, “Opening Times” seems to report new breweries being set up, at the same time as established pubs are closing down. If you extrapolate this into the future, within a decade or two we’re going to end up with more breweries than pubs. Clearly this is unsustainable, and eventually the two trends are bound to collide.

It certainly seems to be true at present that there are too many small brewers chasing not enough business. Plenty of keen people have gone into the business without giving too much thought to where they’re going to find customers. The result is a lot of cut-throat competition, with some brewers complaining that others are selling beer for less than it costs them to make it, and several reports of beer being sold “off the books” without duty being charged. This can’t be healthy in the long term, and inevitably at some point a shake-out will happen.

One obvious factor is that, for most micro-brewers, it is to some extent a labour of love. They have taken up commercial brewing because they’re interested in beer and brewing, not just as a money-making venture. Most have either previously been enthusiastic home-brewers, or have worked for another brewery before venturing out on their own. This doesn’t mean that they don’t take the business side seriously, but inevitably, across the whole population of brewers, there is a slightly less hard-headed attitude. If your prime objective in starting a small business is to maximise your profits, you probably won’t take up brewing, and it can’t be said that people run carpet-cleaning franchises because they’re fascinated by carpets.

Added to this, a significant proportion of micro-brewers don’t rely on their business to provide a proper full-time income, either because they are retired, have another job, a rich parent, or a working partner. This isn’t a bad thing in itself, and may mean they can be more experimental and take more risks, but it does mean they can afford to take a more relaxed attitude to pricing, which may irk those who do entirely depend on brewing for their income.

The prevailing culture of ever-rotating guest beers also makes it more difficult for brewers to establish any kind of brand premium. The varying beers are just seen as a homogenous, dispensable product. Even if your beer isn’t up to much, the pub probably won’t be having it on again, so it will be quickly forgotten. All cask beer certainly isn’t of broadly uniform quality, but when customers are confronted with an array of beers, and possibly breweries, that they have never heard of before, it’s well-nigh impossible for them to make an informed judgment.

Given that the underlying market conditions are unlikely to change significantly, the objective for brewers must be to develop their reputation, so that pubs are going to make repeat orders, and that customers perceive their beers – whether individual brands or the overall output of the brewery – as something they actively want to drink. There’s no magic bullet for achieving this, but has to be the aim. Consistency, and having a product that stands out, not necessarily by being extremely distinctive, but by being of obvious quality, are vital factors.

There are plenty of examples of successful breweries who have done this, a good example being Hawkshead, where many drinkers, on seeing a Hawkshead beer on the bar, will immediately go for it in preference to others. And brewers of a more mainstream bent such as Otter have prospered through providing a consistent, well-branded product that is instantly recognisable, and rarely disappoints the drinker.

1 comment:

  1. A very good summary here I feel and exactly the position. I do feel sadly that some enthusiastic entrants to the market do so without full business research or learning from others experiences,but then is that not business generally and I suppose not unique to the brewing industry. I do feel for them when they have tried but misjudged the market or finances and then fail,but that's the risk/reward of running your own business of course.

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