The Society of Independent Brewers and Associates (SIBA) reported yesterday (9 May) that beer production volumes among its UK-based members have risen to pre-pandemic levels for the first time in four years.
However, “survival” was listed as the main priority for 43% of SIBA members following further brewery closures in the opening three months of 2024, the association revealed at the launch of its 2024 Independent Beer Report in London.
Andy Slee, chief executive of SIBA, sat down with Just Drinks to discuss some reasons for optimism in the UK beer scene as demand continues to prove resilient, as well as some challenges facing the industry like attracting the younger consumer back to beer and chasing profitability in harsh market conditions.
Just Drinks: Beer production among UK independent brewers has returned to pre-pandemic levels – did this happen sooner than you expected?
Andy Slee (AS): I’m pleasantly surprised. We’ve been going round and speaking to members and there were people saying that there was strong demand. What we know is there’s strong demand for independent beer. It’s just a matter of whether it’s been realised or not. So we were pleasantly surprised.
I think there’s been quite a lot of headlines about it. And I’ve been at pains to point out that because people are taking more money in the till doesn’t mean they’re making more money. The challenge remains making money out of the increased turnover. But yes, I mean, it’s good to be back to the pre-pandemic levels, even if we’re in a different world now.
JD: Have production improvements led to increased profitability or is that still a key issue?
AS: The narrative is very similar to the rest of the hospitality: there is demand. If lockdown taught us anything it’s that people want to go out and socialise with their mates. And they also want to support local businesses. So, the great news for local independent brewers is that people can kill two birds with one stone. You know, they can do that. So there’s this demand there. But like the rest of the hospitality, the costs are crippling.
How well do you really know your competitors?
Access the most comprehensive Company Profiles
on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Company Profile – free
sample
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the
unique
quality of our Company Profiles. However, we want you to make the most
beneficial
decision for your business, so we offer a free sample that you can download by
submitting the below form
By GlobalData
UK independent brewing is a rare British manufacturing success story in that it’s grown in the last 20 years where a lot of British manufacturing has declined. And it’s unique in that most manufacturing sectors are focused on one town or one region but whereas brewing is ubiquitous, it runs from Land’s End to John O’Groats.
We pay about a third of our turnover in tax. And we look at people like online gambling companies who only pay 7% of their turnover in tax. And some of the big online giants pay about that rate as well. That’s those increased costs. Also, in raw material costs, at one point last year the input cost inflation was about 20%. That’s come down, but input prices are still going up. And so making money from these is a real challenge.
JD: What are the main reasons behind the net UK-brewery closure rate being in the negative for the start of 2024?
AS: So, the thing we need to do is put that into context. There are still 1,800 brewers, so losing 38 out of 1,800 is still a small proportion of the total universe. I haven’t got the same figures for chemist shops or newsagents, but I suspect they might be similar. So we need to put things into context.
SIBA has a really eclectic membership base, as you can imagine. We literally go from a seventh-generation family brewer through to two guys that set up a couple of years ago brewing in East London. They all talk about the same things.
Slee speaking at the Independent Beer Report 2024 in London. Credit: SIBA
Number one is the problem of access to market. Secondly is high levels of taxation. Three is accessibility to capital. Fourth is problems in the labour market and recruitment and fifth is red tape, and the final one is looking for help in becoming sustainable.
Honestly, it doesn’t matter what brewery you talk to, from Land’s End to John O’Groats, cask or keg, old or young – they all talk about the same sort of the same challenges. So although I’ve highlighted costs, there’s a range of them that that make sustaining profits challenging.
JD: Are brewers looking to the government for help?
AS: We launched our manifesto last month, and our manifesto basically talks about how fairness is all we want, and I refer back to that stance, the relevant comparative taxation rates between brewers and online gambling companies. We don’t want special favours. All we want is fairness. And it’s a broader point about the UK economy is the one that says, you know, if Amazon is coming in here and doing very well, all we want them to do as a society is to pay their fair share, no more than.
Our manifesto talks about three things: firstly, fairness in access the market and have a level playing field in the market. Second, is fairness in taxation. And then thirdly is help us become sustainable.
So, in terms of access to market, what we’ve called for is a free line in tied pubs for local brewers to stock their beers and that will be worth a £28m ($35m) cash investment into the independent brewing sector, that is our estimate of just independent breweries being able to sell a single line into tied pubs.
Second, in terms of taxation, SIBA members were very much behind the introduction of the lower duty on draught beer. It was a movement from SIBA members that got that through.
And finally, we’re looking for the government’s help both in terms of grants and funding to become sustainable. We want to be part of the of the green revolution. And if I’m honest with you, I’m not sure whether the government is still on that page or not, they seem to be changing their mind a bit.
JD: What can indie brewers do to help themselves?
AS: We’re not saying to the government: “Right, you come and do these things and all of our issues will be solved.” So there are a number of opportunities. For example, being focused on low- and no-alcohol beer. Also, brewers that are successful are increasingly running their own retail space, whether it’s just the tap room in the brewery or a couple of pubs in which their beer is being sold and development of their online ordering and things like that. So they’ve got to be resourceful.
JD: Are mergers and consolidation a valid option for struggling brewers?
AS: Yeah, so first thing to say on that is SIBA lobbied for a change in the regulations to make mergers and acquisitions more user friendly.
In the old regime, if a big brewer bought a small brewer, the big brewer would pay a much higher rate of duty on the small brewer’s volumes from day one. This really disincentivised mergers and acquisitions and SIBA lobbied for a period of three years to allow businesses to merge. So having done that, we can’t then say mergers and acquisitions are a bad thing.
I think, in some areas, it provided an opportunity. If the owner or operator wants to retire then merger and acquisition is a good thing and we can make sure that that the business that they’ve nurtured over many years goes to a loving home that is going to nurture it and continue that tradition. So that’s one level where people are in control of it. There will always be the opportunity if businesses are struggling and there’s an opportunity for a bigger brewer coming in to save small breweries in trouble.
SIBA member Moor Beer’s Nano Cask Session Bitter. Credit: Moor Beer Company / LinkedIn.
JD: How are SIBA members viewing the on-premise? Is there still growing opportunity there?
AS: Well, 80% of SIBA members’ sales are in the on-premise so it’s always going to be important. SIBA has a scheme with the big tied pub companies where we operate as a central house, rather than companies having to operate with lots of brewers, we’d operate as a central house which gives our members access that they couldn’t get on their own.
So we’re in constant dialogue with those people like Greene King about how we can broaden out the availability of SIBA members’ products in that area. That’s something that we do locally. Members are more resourceful in the free trade. There’s no silver bullet to the on-premise in the UK. It’s shoe leather and it’s getting out there and having good relationships with the customers and brewing fantastic beer of the highest quality.
JD: Is there consumer confusion behind independent brewers and craft brewers?
AS: We asked 3,000 consumers by YouGov which beer brands they believed to be independent. So we had in there Camden Hells, Beavertown Neck Oil, alongside some Doom Bar which is owned by Molson Coors and some well-recognised independent brands like Timothy Taylor’s Landlord. The two brands that the consumer most believed were independent were Neck Oil and Camden Hells, which are owned by Heineken and AB InBev respectively.
So that’s my initial point, if lockdown taught us anything it is that people want to support local businesses. So you know, we then said to people, if I told you that the brands that you thought were independent actually aren’t, what are you now thinking? Around two thirds of the respondents were surprised and wanted to find out more or actually were quite annoyed. The emotions were quite varied. A third of people didn’t give a damn. So the main thing is all about making sure that people have an informed choice. And if people want to support independent businesses, making sure that’s actually what they’re doing.
JD: How are UK brewers looking to appeal to the younger consumer?
AS: First of all, I think this is a challenge for the whole beer sector and it needs big brewers and small brewers to work on this together. It’s not something that small brewers can tackle on their own and this is where the big brewers can provide genuine category leadership on doing things that engage with Gen Z.
As we said, in terms of smaller growth, what I see is, again, it’s diversifying away from corporate brands. A lot of our beers are flavoured beers, which are more appealing, like low- and no-alcohol beers. Some of our members’ retail units are more appealing. So for example, some of our members operate what you would call café bars with good coffee and good beer at the same time.
The solution is not to make more cider!
Andy Slee, chief executive of SIBA
Brewers are always resourceful but I think the issue is the young population; we need to get around the table as an industry to work out what the challenges are. And as I said yesterday, the solution is not to make more cider!
JD: Is the low- and no-alcohol trend something to consider to attract the younger drinker?
AS: I think if there was one solution, people would have come up with it. There’s a number of things to make it relevant. It’s quite an odd situation where more young people than ever aren’t drinking at all. Yet, on the other side, more young people are drinking spirits, not beer, which is the most alcoholic part of the alcohol category. So, what’s going on there? In the drinks industry, we’re often very restricted with our outlook. So we need to have a look at other categories completely away from there, to see how they’re attracting Gen Z and see what solutions they come up with.
JD: Looking at exports, how has Brexit affected UK brewers’ sales overseas?
AS: Exports have never been the be all and end all to brewing. We are predominantly a domestic market. Around 96% or 97% of the whole category is sold in the UK. So our exposure to Brexit is through the increased costs and the inflation that extra red tape brought from importing from Europe in particular.
The challenge is, for me, that the brand of UK has been tainted by what’s gone on in the last few years, whether you supported leaving Europe or didn’t. The world has a lesser view of Britain than it used to so our exports therefore become less appealing.
On operations, I know from speaking to brewers, the amount of red tape that’s required not just on our end, but also on the other end to import British beer is such that it becomes more and more of a challenge. So brewers will concentrate on the domestic market and as we said already, the domestic market isn’t without its challenges.
We haven’t got ‘helping brewers to export’ specifically in the plan currently. But I’m sure demand will increase now everything’s settling down post-Brexit and -Covid to people wanting to try and find out more markets.
I think it’s fully in the future that SIBA could use this sort of collective power to speak to governments and trade envoys and things like that about doing something on behalf of the category.
Sign up for our daily news round-up!
Give your business an edge with our leading industry insights.
