Independent beer producers will need to focus on the basics and keep their options open.
In what now feels like ancient history, in August 2019 I wrote an article on some of the challenges facing the burgeoning UK craft brewery market. In it, I suggested that the experience of American brewers, where the market is more developed, potentially provided some lessons for beer brands in the UK.
Fast forward twelve months, and the landscape has changed more than anyone could have imagined. COVID-19 resulted in the closure of all on-licence premises for over three months, drastically changing consumption patterns and potentially the on-trade market for years to come.
Although the disposal of millions of pints of beer which had gone off in pub cellars during lockdown has seen the most press attention in recent months, the hangover from COVID-19 is likely to last much longer for brewers of all sizes.
Although pubs and restaurants were permitted to reopen from 4 July, many took a cautious approach whilst demand levels were uncertain. The government’s Eat Out to Help Out scheme has been successful in drawing some consumers back to restaurants and pubs during the month of August.
Where pubs have reopened, many have streamlined their offering in order to reduce the wastage on slower-selling lines. Of course, the rapid growth in craft producers in recent years has been driven in part by consumer demand for greater variety. Yet with pubs now only stocking a core selection of ‘bestsellers’, those brewers that fail to make the cut will be negatively impacted.
Brewers that have access to canning or bottling facilities have fared better than their competitors, with many having initiated or expanded into direct-to-consumer sales. This sales channel is generally higher margin for the brewers and allows them to maintain engagement and brand connection with the end consumer.
In July 2020, proposed changes to Small Brewer Relief Scheme were announced.
Under the old regime brewers producing less than 5,000 hectolitres a year (roughly 880,000 pints) were the largest beneficiaries, securing the maximum relief of 50 percent, with the relief tapering to zero for brewers producing 60,000 hectolitres or more. This has been a major contributor the growth in the number of small independent breweries and has enabled them to better compete with the global brewers.
The new regime however, will lower the threshold for receiving maximum relief to 2,100 hectolitres, with the taper being removed at a slower rate. The result is that the scheme has the potential become more beneficial to mid-sized brewers, whilst being relatively less supportive of the smaller independent market.
The market is tough and is likely to remain so for the foreseeable. Brewers of all sizes should consider the following:
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