Independent brewers reap benefits of beer duty cut
SIBA Beer Report 2014 portrays thriving local brewing sector
Independent brewers are reaping the benefits of the scrapping of the beer duty escalator in last year’s Budget with increased sales.
According to Beer Report 2014, published today by the Society of Independent Brewers (SIBA), its members grew volume sales by an estimated 7.9 per cent in 2013 to 1.55 million barrels – meaning the nation’s beer lovers drank nearly 33 million more pints of local beer than in 2012.
Beer Report, based on survey responses from around 250 SIBA brewers, paints a picture of an industry in rude health. As well as growing volumes, SIBA’s brewing members swelled last year by 11%, taking the total to 723. Between them, they brewed close to 10,000 different beers – including permanent and seasonal brews. They also created 900 new jobs and 60% of them made a significant capital investment in their business.
Julian Grocock, SIBA chief executive said, “Beer Report 2014 should provide the Chancellor with much to cheer, demonstrating as it does the wisdom of his decision this time last year to end the beer duty escalator.
“That decision sent a clear signal that the government recognises the vital contribution that independent brewers, economically and socially, make to the hundreds of localities where they are based. In response, our members, feeling more confident in the long-term prospects for our industry, have invested in their businesses by buying new equipment, opening pubs and recruiting new staff.”
With the 2014 Budget a month away, SIBA has joined industry calls for a freeze on beer duty, and details of the investment by local brewers following last year’s duty cut have been presented as part of the association’s Budget submission to the Treasury.
The themes of Beer Report will be continued at BeerX, SIBA’s annual celebration of British beer and brewing, taking place in Sheffield from 11th to 15th March. BeerX will stage the SIBA National Beer Competition and Business Awards, a Festival of Beer, a series of seminars delivered by industry experts and speeches from key figures from brewing, pub retailing and politics from the UK and abroad.
Diversity, innovation and lasting influence
The sheer number of beers and beer styles available for drinkers in the UK to enjoy is highlighted in Beer Report. SIBA brewers produced some 4,000 permanent cask ales last year – a 25% increase on the 2012 figure – as well as 5,800 seasonals and specials.
Golden ale is the most widely brewed beer, with 97% of SIBA members listing one in their portfolio, while 89% brew a traditional bitter and 60% a strong bitter or IPA. Stouts and porters are brewed by 53%, while further down the table, some newer beer styles are making inroads: 14% now brew a varietal or green hop beer and 5% an unfined cask beer.
Draught beer – the vast majority of it in cask – accounts for 85% of SIBA members’ total output. 75% of them now bottle a proportion of their beer – on average, five beers per brewer – and 19% of members are producing some craft beer in keg.
The choice of beers available to today’s drinker stands in contrast to the shrunken brewing industry that existed in 1975, when the Good Beer Guide listed 87 brewers producing a total of 1,500 beers. Beer Report credits this rejuvenation of British brewing both to the pioneering microbrewers of the 1970s, including the late Peter Austin, who was SIBA’s founding chairman in 1980, and to CAMRA, founded in 1971.
The influence of those microbrewers spreads beyond the local brewing sector in this country, as Grocock points out, “Long-lived regional and national brewers have installed small-batch ‘craft’ plants so they can experiment themselves, while foreign microbrewers – primarily in the USA – have embraced traditional British styles at the same time as pushing the boundaries of innovation, which is especially true of modern IPAs.”
The majority of SIBA brewers wholeheartedly embrace their responsibilities to the locality where they operate, and it would be hard to find a better example of positive ‘localism’ than that demonstrated by these small businesses.
Small brewers’ greatest contribution is to provide local employment. A total of 5,500 people are now directly employed in local brewing. And, because brewing at the smaller end of the market is labour-intensive, local brewers need a proportionally higher workforce. Brewers producing 1,000HL or fewer employ one person for every 500HL of output, compared to one per 3,000HL in larger breweries.
In addition, brewers provide indirect employment in the growing number of pubs championing local beer, and up the brewing supply chain, at barley and hop farmers, brewing machinery manufacturers, bottlers and others. European research into the contribution of brewing has concluded that one job in brewing supports 21 others: one each in agriculture, supply and off-trade retail and 18 in pubs.1
Other local community engagement highlighted in the report includes charity support – cited by 80% of survey respondents – as well as events and sponsorship (73%) and brewery open days (77%). Results are frequently impressive from even the smallest brewers: Tyne & Wear based Cullercoats Brewery, just two years old, has already donated £10,000 to its local RNLI.
Investing in a sustainable future
Similarly, few industries are more committed to sustainability than local brewing. Perhaps because running a brewery is a ‘lifestyle choice’ for many in the sector, they are determined that the pursuit of profit should not compromise their principles or stray across ethical boundaries. Most independent brewers seek to build a lasting business with, at the least, minimum negative environmental impact and wherever possible a positive one.
Beer Report outlines local brewers’ commitment to a raft of environmentally-aware measures, from constructing ‘green’ premises (26%) to reducing energy consumption (73%), reducing water use (64%) and cutting ‘food miles’ (41%). Wolf Brewery in Norfolk is applauded for its new waste water treatment, which has eliminated the need for tankers, reducing C02 emissions and delivering considerable cost savings.
SIBA members’ desire to act responsibly is well-illustrated by their use of Small Brewers’ Relief (SBR). This report, as those of previous years, shows that the majority are using their SBR wisely, to build robust breweries that will not only survive without the relief but thrive. New brewing equipment, recruitment and staff training, marketing and design top their SBR investment list, with only 2% of survey respondents using it to discount their beer.”
Representation ‘from the smallest brewer’ upwards
There is no doubt that local brewing owes its current good health to Small Breweries’ Relief (SBR). Introduced in 2002, SBR remains SIBA’s biggest political ‘win’ and, understandably, members rate its defence as SIBA’s top priority among the many activities it undertakes on their behalf.
Second on the list was the more general, but related, area of political representation. While SBR may be SIBA’s most significant victory, it is far from being the only one, and the report lists the organisation’s other successes, frequently achieved in partnership with other industry bodies, including: introduction of guest beer regulations; defence of the use of isinglass; ensuring ‘end point duty’ and fending off the threat of duty stamps on bottled beer.
Other SIBA activities that members see as delivering real value include: regional and national beer competitions and festivals; the SIBA website; connections with suppliers through the associate membership and BeerX.
Grocock said, “For 34 years, SIBA has sought to represent its members’ interests across a wide range of issues, at a regional, national and Europe-wide level. In all that time, we have remained true to our founding principle of ‘working for the smallest brewer’, even as many of those smaller brewers have thrived and expanded, and it remains today the cornerstone of SIBA’s support for its members.”
Commercial arm delivers benefits
Ensuring its members had the best possible opportunity to bring their goods to market has underpinned SIBA’s activities from the outset. As a result, SIBA has developed into a trade association that, uniquely, has a commercial arm that is all about securing access to market.
SIBA’s DDS scheme, launched in 2002, is the most commercially successful output of the association’s Access to Market initiative. Last year, DDS enabled 526 SIBA brewers to deliver local beer to around 2,400 pubs and shops belonging to 20 pubcos or off-trade retail groups.
The success of DDS has undoubtedly been one of SIBA’s strongest recruitment tools, but few brewers depend on it for sales. Only 6% of SIBA total sales last year went through DDS, with direct sales into free trade pubs by far the biggest route to market (50%). Off-trade outlets – major and independent combined, but excluding the few supplied through DDS – accounted for 10% of total SIBA sales.
As tie relaxations and alternative free-of-tie buying take hold in a growing number of pub estates, DDS sales have begun to level out. SIBA continues to explore opportunities with pub operators and off-trade retailers that will make it easier for its members to put their beers in front of a larger audience of prospective buyers.
SIBA’s commercial arm delivers far more than just DDS. SIBA Cellar Services provides members with the full range of technical cellar support, while NCRNet, co-ordinated by the SIBA commercial team, is making headway in repatriation of casks and kegs. At the same time, SIBA’s commercial team is trialling the provision of a new ‘cloud technology’ service for members.
One new area of possible SIBA commercial involvement is export: 21% of members currently export, while 58% think a SIBA-led export project could help them grow their business abroad. As a step in this direction, next month’s BeerX will stage a number of export-related events including a ‘meet the buyer’ session giving brewers the chance to discuss opportunities with buyers from a number of countries.
Grocock said, “Beer Report 2014 is the 12th annual overview of the brewing industry produced by SIBA. We are delighted that, once again, we are able to portray a successful, vibrant and innovative independent brewing sector.
“The report also presents a holistic view of SIBA as a unifying force in British brewing: our commercial arm helps independent brewers to grow their businesses; our community roots and infrastructure mean our success generates investment, employment and wealth locally; our commitment to responsible and ethical business underpins long-term sustainability and social cohesion; and our representation work for our members ensures the ongoing health of local brewing.
“Occupying this pivotal role, at the heart of communities and economies up and down the land, places local brewers, and SIBA as their representative body, in a unique position to build the future of British brewing. It is a role we will fulfil with commitment and passion, as we have for the last 34 years.”
1. Ernst & Young: The Contribution made by Beer to the European Economy, available at http://www.brewersofeurope.org/asp/publications/