The UK has now as many breweries as it had in the 1930s. And it’s all down to the explosion in the interest in premium and craft beers – cheers!
An industry only recently thought to be on its knees is actually in rude health, with a whopping 64% increase in the number of breweries over the past five years, according to accountancy group UHY Hacker Young.
But are inn and tavern owners taking advantage of the opportunity to increase revenue that is seemingly staring at them through the bottom of the glass?And “there’s plenty of growth yet to come” trumpets the firm’s James Simmonds.
They will need to if senior food & drink analyst at Mintel Richard Caines’ market assessment is correct.
“Continuing to grow sales will be particularly important to pub and inn operators in order just to stand still in terms of profits, given increased operating costs in 2017. Household budgets also look likely to be squeezed during 2017 and beyond by rising in- flation, impacting on discretionary spending in pubs. This will all make it difficult for pubs to increase sales and maintain profitability without raising prices in some areas,” he warns in the firm’s latest assessment of the UK drinks industry.
That makes the decision by any inn as to whether to stock premium beers and craft ales crucial to the success of the bar-side of the business. The first question is if I stock it, will it sell? The second is who will buy it? And the third is how much will it sell and is there a big enough profit to justify seeking out new stockists and suppliers, never mind the space shelf involved in bringing in yet another beer product.
Let’s take a look at who is drinking the high-end beers. Harris Interactive conducted some research into this last year and discovered that nearly one in four (24%) of drinkers in the A and B socioeconomic groups say they actively avoid mass-produced beer, while just 18% of drinkers in the C, D and E groups say they do, suggesting it’s the preferred tipple of the professional classes.
More affluent drinkers are also more likely to only drink craft beer, with 11% of ABs claiming to do
so versus 9% of CDEs. Less affluent drinkers also appear to be more skeptical of craft brands’ claims of producing better-tasting beers – 13% of CDEs say all lager tastes the same, versus 9% of ABs.
The fact that so many cask drinkers (69%) fall into the ABC1 demographic is significant. So is the fact that 90% of cask drinkers don’t have a specific amount of money in mind to spend when they go to the pub. “For premium beers, the national averages are £3.52 for cask and £4.15 for craft keg. Far from representing a threat, the higher price of craft keg demonstrates the scale of opportunity for licensees,” the report notes.
So, there is a clear monetary incentive for offering premium cask and bottle beers. New research for the Cask Report, produced by Cask Marque, shows 81% of cask customers would, in the right circumstances, pay up to 20% more for a quality glass of real ale.
Obviously craft beer can be significantly more expensive than more mainstream offerings.
But this opens a whole can of worms when trying to navigate the minefield of today’s beer/ale marketplace with many in the industry continuing to grapple with definitions of what attributes give a beer ‘craft’ credentials. The water has been further muddied by the move into a previous niche sector by the big beast brewers.
Highlighting that the craft movement is not just the domain of small, independent brands, SABMill- er-owned Meantime introduced its first small-batch beers in April 2016. The small scale of production allowed the brand to be quickly reactive to consumer demand, with the new launches based on the popularity of their predecessors.
This summer Danish raider Carlsberg bought out the London Fields Brewery, makers of Easy IPA and Shoreditch Triangle IPA, while another favourite brewer in the capital, Camden Town Brewery was swallowed by multinational giant Anheuser-Busch InBev a couple of years ago.
Carlsberg moved to extend its premium Backyard Brewery range with a new craft beer, Shed Head, which launched exclusively into the on-trade in May. And following a 13-year hiatus, the Hofmeister brand is back and transformed into a 5% abv Bavar- ia-brewed Helles premium lager.
The brand is now owned by a group of inde- pendent UK entrepreneurs working with the big Marston’s brewer. The revamped beer will soon be available in 330ml bottles and 50 litre kegs in bars and pubs nationwide.
Hofmeister CEO Spencer Chambers, says: “Now more than ever, we are experimenting and enjoying craft beer – with the craft beer scene in the UK continuing its explosive growth.”
As well as being a leading pub operator and inde- pendent brewer with an estate of around 1,550 pubs comprising managed, franchised and leased pubs, Marston’s is also a brewer of premium cask and bottled ales. Like-for-like sales in its taverns were 1.6% above last year driven by “greater consumer interest in local beers and craft drinks and the continuing development of our offers”.
Worryingly perhaps for Chambers, Mintel research shows that consumers’ thirst for lager is waning. Overall, sales of lager have dropped by 8% over the past five years alone, down from 3.44 billion litres in 2010.
But spokesman for the British Beer and Pub Association Neil Williams offers some reassurance to those pitching at the premium end of the market: “Whilst total beer sales have been falling in the on trade, there is a distinct trend in this part of the market towards premiumisation,” he says.
“In premium lager we have seen 9.3 per cent growth since 2009 while standard lager has fallen by
29.9 per cent. In premium ale we have seen 7.8 per cent growth since 2009 whilst standard ale has fallen
30.4 per cent. Customers are increasing discerning when it comes to their choice of beer.”
Yet while some Brits may be falling out of love with lager, it seems ‘hop-portunity’ knocks at ale’s door, helped along by the rise of craft beer and styles such as IPAs in particular.
The Cask Marque Cask Matters survey shows that in consumers’ minds, cask ale is strongly associated with craft, with 56% of craft drinkers saying cask is a craft beer.
And it provides further evidence that lager is the category losing the most amid the craft beer boom with 38% of craft drinkers are switching from lager into the category. This trend demonstrates that craft ale is creating an entry point to top quality ales for lager drinkers, particularly for younger consumers.
Another point worth noting is that local and regional production is far more important to craft drinkers, with half listing it as a key attribute of a craft beer.
Equally, the success of numerous brewers in selling beers well beyond their homelands is significant.
It shows that drinkers also appreciate recognised, respected top-quality beers from other localities.
Surprisingly, only a quarter of licensees responding to the survey say they have special relationships with breweries from their own area. This may seem low in such a people-driven industry – and one that is so interested in local and regional products.
Licensees associate craft with being trendy, a description that tops their list of definitions for a craft product. Licensees also align craft with real ale, reflecting the views of their customers. Interestingly, consumers are less influenced by price when it comes to buying a beer they believe is a craft product.
So there is a clear monetary incentive for offering premium cask and bottle beers with 81% of cask customers who would, in the right circumstances, pay up to 20% more for a quality glass of real ale, says the Cask report.
The fact that so many cask drinkers (69%) fall into the ABC1 demographic is very significant. So is the fact that 90% of cask drinkers don’t have a specific amount of money in mind to spend when they go to the pub. “For premium beers, the national averages are £3.52 for cask and £4.15 for craft keg. Far from representing a threat, the higher price of craft keg demonstrates the scale of opportunity for licensees,” the report notes.
Paul Nunny of Cask Marque says: “Both brewers and retailers are trading in an evolving market which creates opportunities for those fit for the challenge.”
Brewdog co-founder James Watt agrees: “Good pubs are not struggling. I think they need to look at what they are serving, their environment and staff. So many pubs are doing fantastically well at the moment and pubs that are not good will not do well, and customers will vote with their feet and their cash.”
And he should know. Over the past ten years, Brewdog, based in Scotland has grown to become UK’s best-selling craft beer exporting to 60 countries and runs 49 bars across the world. It has even launched its own Beer Geek awards in recognition of the growing demand for craft and premium beers.
Cormac McCool, bar manager of the Black Sheep in Dublin is in agreement that the drinking environment is key to increased turnover at the beer taps.
“The beers we serve are mind-blowingly good, but we make sure we have a relaxed environment in which to enjoy them. For example, we have no TV
screens only an open plan area with cozy tables, good simple food and, of course, great beer.”
His establishment is owned by the Galway Bay Brewing Company – a niche brewer that has recognised the profits to be made in selling premium beers and top quality cask ales and embarked upon a strategy of pub-buying to exploit this
The Mintel survey reveals that those pubs with a focus on cask and quality beer generally, 65% have seen cask sales grow in the last year, with just 7% experiencing a dip. Encouragingly, pubs with a spe- cialism in beer say they’re attracting more food and drink trade generally, drawing customers through their great choice of cask products.
Emma Clifford at Mintel says taverns are making a mistake if they ignore the possibilities of matching the beers they serve with food.
With the concept of pairing beer with food having gained traction among UK consumers, ‘dine in’ meal deals look to be a huge missed opportunity for beer. These would provide an ideal platform to give world beers – which are already growing in popularity – even more visibility through partnering them with the cuisine from their respective countries of origin.”
The contribution by quality beer and ale drinkers to pub tills (on drinks and food) of almost £1,030 a year is a whopping £240, or 30% more than the av- erage pub-goer spend. When it comes to ‘big nights out’, cask drinkers are the top spenders among beer drinkers, with nearly a quarter prepared to spend
£50 or more. Their expenditure has increased 6.5% in the past two years. It’s clear that cask drinkers are much less motivated by budget than any other type of beer drinker.
Phil McGurran, the general manager of Belfast’s Erri- gle Inn, took the decision to go down the premium cask and bottled ale route several years ago. Unlike many licensed premises in Northern Ireland his is a family business and therefore is not tied to a major brewery.
This gave him the freedom to “try something different”.