A total of 520 opened in the UK in the last year – the equivalent of 10 per week. UHY Hacker Young, a UK accountancy network, says it is now easier for entrepreneurs to get funding, while incentives like Small Brewers’ Relief (which gives a reduced rate of alcohol duty to brewers that produce less than 60,000 hectoliters per year) provide a ‘helping hand’ to new market entrants.
However, the popularity of craft beer has not yet reached that of the US: the American craft beer industry enjoys a 21% market share (by value) with sales of $22bn (£18bn). In the UK, craft beer accounts for 8% to 9% of total beer sold in licensed premises.
Craft beer millionaires
Multinational brewers have been concerned by slow growth from their mainstream brands, while their premium brands have failed to achieve the same price points as independent breweries.
Consequently they been willing to pay high prices for independent brands - providing these brands have proved that they can deliver high sales growth and premium pricing.
“High exit valuations have added to the number of craft beer millionaires being created by the sector’s boom,” said James Simmonds, partner, UHY Hacker Young.
The UK figures mirror US trends: with 2015 data from US craft beer body, the Brewers Association, reporting a 20% rise in the number of microbreweries (totaling 2,397) & a 26% rise in regional craft brewers (totaling 178) while the overall number of breweries grew 15% (totaling 4,269 breweries).
In the US craft brewers take a 12% market share by volume and 21% share by value.
The Brewers’ Association provides a definition for a ‘craft brewer’ (including an annual production of 6m barrels of beer or under; and less than 25% of the brewery owned by a non-craft brewer). No such definition exists in the UK.
High profile takeovers in the craft beer arena have proved to both entrepreneurs and backers that craft beer is a serious business: “a long way from the cottage industry of a decade ago,” says Simmonds. Consequently, it has become easier for entrepreneurs to get the necessary funding to start their business or expand existing operations.
In May 2015, London craft brewer Meantime was acquired by SABMiller (the craft beer brand was subsequently bought by Asahi last year) while AB InBev acquired Camden Town Brewery in December 2015. Figures for the transactions were not disclosed at the time but UHY Hacker Young puts the acquisition of Meantime at around £120m ($146m at today’s exchange rate) and Camden Town at around £85m ($103m).
The premium price point of craft beer has held firm despite ‘supermarket wars’ to cut prices across other F&B products.
“Craft beer has proved it is no flash in a pan,” said Simmonds. “Both pubs and supermarkets realize they will lose sales if they do not make way for some ‘craft’ brands.”
“The pricing discipline of cult beer brands has held steady so far – they have been largely untouched by the supermarket wars that have savaged margins elsewhere in the F&B sector.”
UHY Hacker Young adds that the Small Brewers’ Relief reduced rate of alcohol duty should be extended to higher volume start-ups as well.