Reports of the death of Craft Beer have been Greatly Exaggerated

BeerThere has been more talk in the media recently discussing the future of craft breweries, and how they are under threat from the big multi-nationals who are looking to exploit the changes in how and what consumers drink. Essentially, the opinion is that the craft beer sector has become a victim of its own success.

In December, our Caledonian comrades at BrewDog published a typically forthright blog post lamenting that several good craft beer companies had been sold to or bought out by the big players in the preceding year.

“2015 has been a bad year for craft beer,” they wrote. “Global beer mega corporations, the ones who destroyed, bastardised and commoditized beer over the last 50 years have been acquiring craft breweries left right and centre.”

The blog post was published in response to the sale of Camden Town Brewery to AB InBev, the world’s largest brewer. Sadly, Camden Town is unlikely to be the last example of this trend, particularly in the US where there has been an intensifying movement of big brewers acquiring craft operations, brought about by brewing giant AB InBev being more aggressive in its acquisition strategy of craft brewers and consequently the other major brewers following their lead.

The increasing attraction of the small craft brewer to the big multinationals is principally down to the changing tastes of the consumer. In the U.K., lager sales have dropped by 8 percent over the past 5 years according to Mintel. But between 2014 and 2015 alone, sales of bitters and ales have grown from 895 million litres in 2014 to 913 million litres in 2015.

So, Craft beer is rapidly gaining market share on the major brands, whose sales have been in long-term decline since the 1990s. In 2014, craft beer accounted for 11 percent of volume and 19 percent of value of the total U.S. beer market, according to the figures from the U.S.-based Brewers Association.

Of course, the trend of craft beer companies being bought out may also pose a threat to competition in the sector as the combination of market saturating distributor incentives and small brewery purchases limit the opportunities for smaller players.

In their blog post, BrewDog said they expected the quality of Camden Town Brewery’s products to decline as a result of the acquisition, a statement refuted vigorously of course by AB Inbev who claim to be buying the brewery as a partnership to enable them to invest in the craft category and grow the Camden Town Brewery brands and business and as part of a portfolio building exercise to develop a portfolio of premium brands that can meet the diverse and changing needs of consumers.

Renegade Brewery has a philosophy of independence, so we do tend to agree more with the BrewDog view – when brewing becomes purely about finances, numbers and returns, as well as some of the romance of the industry getting stripped away, so does a drive for quality and a desire for experimentation in favour of cost savings, profit maximisation and mainstream success. Therefore, we are naturally inclined to treat the statements of the likes of AB InBev with some trepidation – their track record is hardly good. As BrewDog highlighted in their blog post, a simple consideration that, for example, “just by being owned by AB-InBev the beer duty Camden will pay on a 50L keg of their big seller, Hells, will instantly increase by around £20. On their current production numbers (quoted at 65,000 HL this year) the difference between full duty and half beer duty is approximately an extra £2.7m of beer duty annually. To put this into perspective, in their last financial year Camden made £319k of profit. So all of a sudden Camden have much, much higher beer duty costs and they also need to generate significantly more profit to give AB-InBev a return. Something will have to give. No prizes for guessing what it will be.”

However, the Craft Beer market is lucky to be blessed with consumers who are fans, first and foremost, enthusiasts who understand their favourite drink, and the benefits of the environment they have been created in. They themselves are often purposefully avoiding the international brands and consciously supporting the smaller operations with a mind-set more akin to their own. Add this attitude among drinkers to that of the thousands of staunchly independent breweries still around, and you feel that this is a David versus Goliath fight that could end up once again favouring the underdog.