Raise your glasses to the craft brewers; Thousands of young breweries – as well as established family concerns – are fighting back

October 15, 2013 5:05 pm

Raise your glasses to the craft brewers

By Luke Johnson

Thousands of young breweries – as well as established family concerns – are fighting back

Ifrequently meet worried participants in the media industry, and thank my lucky stars I mostly make my living from food and drink. The stability of the sector – compared with the turmoil in newspapers, thanks to digital upheaval – is a great comfort. Indeed certain industries, such as the brewing trade, appear to be coming full circle and reverting to a structure that prevailed at the start of industrial capitalism. For this, entrepreneurs must be grateful: it enables us to compete against the multinationals, and resist the relentless trend towards consolidation and oligopolies.Beer was first made on a serious scale in the 16th century. Production became increasingly mechanised and among the first purpose-built industrial structures were London’s breweries. Major businesses grew up during the early industrial revolution and became among the largest commercial undertakings in the world; these included 18th-century giants such as Whitbread and Truman’s. The number of players grew to peak at 3,556 in 1915 in Britain. A similar trend was apparent in the US – a huge variety of operators in a fragmented sector.

During the 20th century, beer markets matured amid relentless merger activity, culminating in the creation of dominant global groups such as Anheuser-Busch InBev and SABMiller. These behemoths sell familiar brands of mostly processed beers across many countries, backed by vast marketing budgets. They control huge market shares. Their economic model is colossal scale and production efficiencies, combined with unrivalled distribution power.

But consumers in Britain and the US have become more concerned with authenticityand choice in their chosen beverages. Better educated citizens want a higher quality, more flavoursome beer. So smaller, independent and often local breweries have made a comeback. In Britain, Camra, the real ale campaigning group, says there are now about 1,150 – up 187 in the past 12 months alone.

In the US, the Brewers Association says there are 2,347, with more than 350 launched in 2012 alone. This matches the number of breweries that existed in the 1880s. Craft brewers command 10 per cent of the total beer market, and sales expanded by 17 per cent last year in a generally stagnant beer sector.

This brewing revolution is almost entirely driven by passionate entrepreneurs serving something distinctive to a public tired of mass-produced beer. Many consumers will pay more for cask ales, and individual varieties with character and more flavour. I see this first-hand within our Draft House pubs, which offer more than 30 beers from craft brewers. Typical of the new breed of brewing entrepreneurs is my friend Petra Wetzel, who makes delicious Bavarian-style lager in her Glasgow West brewery.

To me this renaissance of artisan breweries reflects the truth that entrepreneurs identify changes in consumer tastes better than large corporations. Start-ups tend to be the innovators and experimenters; large businesses do not want to risk failed product launches, and need huge volumes of any new concept for it to have an impact on their bottom line.

The capital required to launch a microbrewery is not huge – the challenge is often obtaining shelf space in supermarkets or persuading bars to serve it. But interesting and novel pubs are springing up everywhere, and this 21st-century breed of publicans is often keen to stock different brews – which helps provide the craft vendors with exposure to regular drinkers.

While I am a strong advocate of free markets, I also applaud this consumer shift away from generic products supplied by a tiny handful of multinationals. Thousands of ambitious young breweries – as well as some long-established family concerns – are fighting back. They are providing a broader selection of stouts, lagers, ales, milds, porters, bitters and every other kind of beer. Minority and diverse preferences are better catered for by this proliferation of thousands of breweries, selling pints of everything from Camden Ink to the Flying Dog Gonzo Imperial Porter.

So the cycle turns. Consumers and society are winners. Water, malt, hops and yeast are being converted via fermentation by a new generation of risk-taking independent brewers, demonstrating the ever-resilient and inventive nature of entrepreneurship.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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