Last month, there was an outbreak of debate in the blogosphere about whether small brewers were getting a reasonable return for their efforts. Now, it’s undoubtedly true that many struggle to make a decent living but, on the other hand, when the general view of drinkers is that beer in the pub is too dear anyway, it’s hard to argue that customers’ reluctance to pay a fair price is to blame.
So what are the reasons why it’s difficult to earn a reasonable return as a micro-brewer?
One obvious factor is that, for most micro-brewers, it is to some extent a labour of love. They have taken up commercial brewing because they’re interested in beer and brewing, not just as a money-making venture. Most have either previously been enthusiastic home-brewers, or have worked for another brewery before venturing out on their own. This doesn’t mean that they don’t take the business side seriously, but inevitably, across the whole population of brewers, there is a slightly less hard-headed commercial attitude.
If your prime objective in starting a small business is to maximise your profits, you probably won’t take up brewing, and it can’t be said that people run carpet-cleaning franchises because they’re fascinated by carpets. I’ve listened to quite a few “meet the brewer” presentations over the years and, while people’s motivation and level of business expertise obviously varies widely, there’s only one I can remember (which I won’t name) that really gave the impression of having all the commercial factors thoroughly nailed down.
Added to this, it has to be said that a significant proportion of micro-brewers don’t depend on their business to provide a proper full-time income, either because they are retired, have another job, a rich daddy, or a working partner. This isn’t a bad thing, and may mean they can be more experimental and take more risks, but it does mean they can afford to take a more relaxed attitude to pricing, which may irk those who do entirely depend on brewing for their income.
It certainly seems to be true at present that there are too many small brewers chasing not enough business. A lot of keen people have gone into the business without giving too much thought to where they’re going to find customers. The result is a lot of cut-throat competition, with some brewers complaining that others are selling beer for less than it costs them to make it, and several reports of beer being sold “off the books” without duty being charged. This can’t be healthy in the long term, and inevitably at some point in the future a shake-out will happen. The two trends of an ever-increasing number of breweries, and an ever-decreasing number of pubs, are bound to collide one day.
The prevailing culture of ever-rotating guest beers also makes it more difficult for brewers to establish any kind of brand premium. The varying beers are just seen as a homogenous, dispensable product. Even if your beer isn’t up to much, the pub probably won’t be having it on again, so it will be quickly forgotten. All cask beer certainly isn’t of broadly uniform quality, but when customers are confronted with an array of beers (and possibly breweries) that they have never heard of before, it’s well-nigh impossible for them to make an informed judgment.
Given that the underlying market conditions are unlikely to change significantly, the objective for brewers must be to develop their reputation, so that pubs are going to make repeat orders, and that customers perceive their beers – whether individual brands or the overall output of the brewery – as something they actively want to drink. There’s no magic bullet for achieving this, but that is what brewers need to aim for. Consistency, and having a product that stands out, not necessarily by being extremely distinctive, but by being of obvious quality, are vital factors.
There are plenty of examples of successful breweries who have achieved this. A very good example is Hawkshead, where many drinkers, on seeing a Hawkshead beer on the bar, will immediately go for it in preference to others. And brewers of a more mainstream bent such as Otter have prospered through providing a consistent, well-branded product that is instantly recognisable, and rarely disappoints the drinker.