Once dismissed as a niche market for beer enthusiasts, craft beer has revolutionised the beer industry, offering an abundance of choice for consumers and an alternative to mass-production. But amidst rising inflation and a cost-of-living crisis, many breweries are feeling the tidelines closing in around them, throwing into doubt the future of this frothy phenomenon.
Craft beer isn't just about the brew; it's about passion, community, and pushing boundaries. To be considered “craft”, small, independently owned breweries, armed with traditional and experimental techniques, brew relatively small batches of beer, each a unique expression of their artisanal spirit. While beer's history stretches back millennia to early neolithic times, the modern craft movement as we know it here emerged in the late 1970s with the UK's real ale revival and brewpub boom, spawning a new generation of passionate brewers.
From a mere 500 at the turn of the century,1 the number of UK breweries has ballooned to over 1,800 today,2 helped along in part by policies like Small Brewers Relief, offering tax breaks to smaller producers. This helped to lower entry barriers and create a subsector where anyone with a garden shed and a need for a new hobby could take part and get their product to market.
But the scene isn't all David and Goliath. Craft heavyweights like BrewDog, with its rebellious branding and "punk" attitude, have attracted major investments in recent years. BrewDog achieved “unicorn” status following a £213m investment from TSG Consumer Partners in 2017, valuing the company at £1 billion. These successes, though seemingly at odds with the indie ethos, have undoubtedly served to inspire – London punters will be well-acquainted with Camden Town and Beavertown breweries who helped pave the way for others through increased awareness and distribution channels. These brewers of the ubiquitous Hells lager and Neck Oil IPA are now under the ownership of beverage giants AB InBev and Heineken, respectively.
However, these big-money acquisitions raise questions about "craft" credentials when expansion and growth clashes with independent roots.
Companies like BrewDog, facing controversies such as allegations of questionable business practices, highlight the complexities of navigating growth while staying true to craft's core values.
So what is the attraction of craft beer? A quick look through the supermarket offering has prices of craft beer starting at around £5 per litre, compared to £2.50 per litre for their macro-brewed cousins. The secret to success for craft breweries is not price, but has instead been in marketing and adaptability to consumer trends. Consumers, increasingly adventurous and quality-conscious, seek the soul poured into each pint. The vibrant styles, bold flavours, and local connections resonate with those seeking stories and experiences, not just a drink.
Furthermore, craft breweries have been quick to embrace ethical practices, often sourcing ingredients locally and prioritising sustainability with less carbon-intensive brewing and distribution methods. Demand in niche but increasingly popular areas of the market such as vegan and gluten-free beer has been quickly addressed. This resonates with a generation increasingly valuing conscious consumption and supporting small businesses.
So, why the recent hiccups? Small breweries are no different to other small businesses in that they tend to face higher production costs and are more vulnerable to economic conditions. Inflation and rising interest rates bite even deeper, while the cost-of-living crisis pushes consumers towards cheaper alternatives. Brexit also threw a spanner in the export gears, clogging up the lines as far as European exports are concerned, and further hindering growth. Some will look to Whitehall and say that more needs to be done to support the sector. The Chancellor froze beer duty in his Autumn statement, however beer duty makes up a fraction of an independent brewery’s costs and has a greater marginal benefit on the big players who pay more in beer duty and operate on tighter margins.
Yet, amidst the hazy economic outlook, there are reasons to raise a glass.
The industry's core strengths – passion, community, and quality – remain its lifeblood, and these are desirable business qualities in today’s world. It is an adaptable industry by its very nature; and consumers play their part by paying a premium for authentic, soulful beer made by local breweries. Some bloating of the industry was probably inevitable as we have seen across all sectors and a natural contraction could be more about sizing appropriately for demand. If independent breweries can navigate the macroeconomic headwinds in the short term, then structural tailwinds are there to be enjoyed in the long term.
Private equity firm, Breal Group has been busy making acquisitions offering struggling breweries a lifeline. Private equity certainly has barrels big enough to pump capital into the industry to see it through these hard times, but it does raise concerns about potential homogenisation of what is meant to be a diverse, indie scene.
The craft beer industry may be facing a bumpy ride, but its spirit of innovation and community remains intact. It punches well above its weight in terms of its influence on the market relative to its share of the market and continues to lead the way on new product lines such as low-alcohol beers, whilst daring to go where no macrobrewery would. The craft beer bev-olution is far from over.
 The Society of Independent Brewers in 2023 https://www.siba.co.uk/brewerytracker/
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