Just as in the states, many craft brewers in the United Kingdom are struggling and the Drinks Business surveyed two prominent industry voices to help explain why.
The Society of Independent Brewers (SIBA, kind of like the Brewers Association in the US, but with a British accent) Head of Communications, Ned Walker sees the concerning number of closures in 2022 as the end result of a perfect storm of post-pandemic factors…
“Independent breweries have seen raw material, utility and energy costs rise across the board and without the economies of scale of the global companies many businesses have found it incredibly difficult to remain profitable, for many breweries the combined financial burden has proved too much and we have seen a number of closures over the last twelve months.”
Matt Howard, head of insolvency and recovery at Price Bailey Accountants, explained to DB that in addition to the craft beer industry maturing, inflation was also a factor impacting small independent brewers…
“The growth in brewery startups has slowed in recent years and we are now starting to see a significant number of business failures as the market becomes increasingly saturated and brewers face stronger economic headwinds. Soaring inflation is leaving consumers with less money to spend on premium products. This is reflected in the shelf space retailers allocate for craft beers. As consumers trade down to cheaper global brands, supermarkets reduce space for craft beers which leaves some products with very little market exposure.”
Howard agreed with SIBA that multi-national brewers were able to survive the economic impact of the pandemic thanks to their enormous scale…
“While many multinational brewers have seen profits surge over the past year, smaller independent brewers generally operate on much tighter margins with minimal exposure to foreign markets. They produce smaller batches of beer and cannot leverage economies of scale to offset inflationary pressures”.
“Even in benign economic conditions small breweries can struggle to turn a profit for a few years but with higher borrowing and raw ingredient costs, coupled with weakening consumer demand, many startups are likely to fold before they get out of the red.”
“I’ve been monitoring and covering the changes to the beer industry for craft/micro for a few years now, and it’s not been good,” Howard added. “It’s going to be an ‘interesting’ few years.”