Craft beer gains just 0.1% market share
Prepared on behalf of Bord Bia and the Independent Craft Brewers of Ireland, the Craft Beer and Independent Microbreweries in Ireland 2018 report was published recently. Drinks Industry Ireland takes a look.
29 January 2019 | 0
This new report from Bord Bia and the Independent Craft Brewers of Ireland is not the first such report on Ireland’s craft beer industry.
The findings of the first study contributed to the government’s decision in Budget 2015 to raise the production ceiling (below which microbreweries can avail of excise duty relief) from 20,000 to 30,000 hectolitres.
However this report cautions that “the data presented in this report are not comparable to data from previous reports”.
It’s estimated that by mid-2018 there were over 125 microbrewing companies operating in the Republic of Ireland of which 75 were independent production microbreweries and the remainder were brand owners that source all their product from production microbreweries.
The number of production microbreweries has increased five-fold from 15 in 2012 to 75 in 2018. Of the 75 production microbreweries in existence, 57 have entered the market in the last five years.
The report defines an independent microbrewery as “one which is not under the legal or economic control of any other brewery and has a total output of beer not exceeding 40,000 hectolitres”.
The research was carried out during the period July to September 2018 and some 57 independent microbreweries or 79% of the total surveyed responded.
Only five additional microbreweries operated in 2018, however, as compared with 2017 – the lowest increase since 2012. But the report points out that, “New entrants were partly offset by failures: it is estimated that over the last two years, seven production microbreweries have gone out of business, with five failures in the year to mid-2018 alone. The emergence of a significant failure rate is a new departure and reflects changed market circumstances for independent production microbreweries”.
Nevertheless there has been an increase in production on the 2016 figure.
The output of craft beer by independent production microbreweries amounted to some 157,000 hectolitres in 2017. This represents a 10.7% increase on the 2016 figure of 142,000hl.
But this also represents a significant reduction in the rate of growth of output of recent years.
“In 2016 and 2015, output grew by 31% and 56% respectively,” states the report, “Almost 20% of microbreweries experienced a decline in output in 2017, an increase on last year’s figures of one in six.”
Total beer production in Ireland amounted to 8,019,000hl last year so the Irish independent microbrewery production output of 157,000hl in 2017 represents just 1.9% of total production.
Size, Structure and Output
According to the report, “Of the 70 breweries in mid-2018 that were also in production in 2017, 31 or 44.3% produced 500hl of beer or less in that year. A further 14 or 20.0% of breweries produced between 500hl and 1000hl of beer so that two-thirds of microbreweries produced 1,000hl or less. Only eight (or 11% of microbreweries) produced more than 5,000hl in 2017”. These accounted for 84,000hl in total or 56.3% of the output of the sector.
On the other side of the counter, the total consumption of beer in Ireland was 4,479,000hl for 2017. The report observes, “Of the 157,000hl produced by independent microbreweries in 2017 some 126,500 hl were sold in the domestic Irish market, indicating an Irish independent microbrewery share of domestic beer consumption of 2.6%”.
The total turnover of craft beer producers last year was €44.3 million, up from €39.4 million in 2016, an increase of 10.9%.
Over one in six of the responding microbreweries enjoyed a turnover less than €50,000 last year and over one-third (25) had a turnover of under €100,000. Nearly one in five (13) had a turnover of over €1 million.
Exports accounted for 30,500hl or 19.4% of total craft beer production in 2017 but just four microbreweries accounted for 75% of all export volumes while sales to the domestic market grew by 12.7%.
With an eye to exports, the report finds microbreweries mentioning 13 international markets with France receiving the most mentions followed by the UK and Italy. The US, Russia and the Netherlands also feature strongly, notes the report, adding that, “Other countries mentioned were Netherlands, Belgium, Denmark, Austria, Spain, and Canada”.
France again emerges as the market with most perceived potential, followed by the US, Italy and Spain.
Some 58% of microbrewers do not currently export, but 57% of these intend to develop export markets in the next few years, states the report.
Capacity & jobs
Irish independent microbreweries have a current capacity utilisation rate of 49.5% and in mid-2018 employed an estimated 522 people. Of this total, 364 represent full-time jobs.
The microbrewing industry sources over half of its brewing ingredients by value domestically. For example, almost 95% of microbreweries source supplies of malted barley from within the Republic of Ireland.
Tax Revenue Benefits
While microbreweries benefit from a tax rebate, they still pay substantial excise duties to the Revenue Commissioners, points out the report.
“Based on estimates of domestic sales for 2017, it is estimated that microbreweries will pay the Revenue Commissioners some €6.7 million in excise duties in respect of 2017 production,” it states.
Beer Style offerings
Pale Ales and India Pale Ales are the most common craft beer styles offered, accounting for 35.6% of all beer products. Stouts and Porters (17.7%) and Red Ales (12.8%) are next in importance according to the report. Lagers and Pilsners are relatively less common at 10.9% of all year–round beer products.
At the other end of the scale, only six offer a ‘Saison’-style beer. Taking Pale Ales and India Pale Ales together, 57 or 82.6% of microbreweries offer one or the other.
Only 30 or 43.5% of microbreweries offer either a Lager or a Pilsner.
Almost three-quarters of sales (72.1%) are directly distributed by the microbrewers themselves principally through pubs, hotels and restaurants and by far the most common issue raised among the independent microbreweries surveyed is the extent to which the sector is being held back in the on-trade.
Some of these factors are likely to include:
- the increased competition from macrobreweries, arising from an expansion of their product range and high levels of advertising spend
- increased competition from foreign craft and speciality beers as the market for craft beer in Ireland has developed
- the considerable influence of macrobreweries in domestic beer distribution
- the product mix offered by microbrewers, with a majority not offering a Lager and 50% not offering a Stout or Porter as standard when these two beer styles account for the vast bulk of the conventional beer market in Ireland and
- lack of resources available within the sector to successfully market product.
Overall beer production in Ireland rose by 4.6% in 2017 as independent craft beer production increased by 10.7% leading to an increase in independent microbreweries’ market share from 1.8% in 2016 to 1.9%.
Consumption of beer declined by 2.1% in Ireland in 2017 while that of Irish craft beer rose by 12.7% so that there was an increase in market share of independent microbreweries from 2.5% in 2016 to 2.8% in 2017.
Exports from small independent microbreweries accounted for 19.4% of total production. This level of exports is only a marginal increase on export volumes of 29,600hl in 2016.
The author of the report, Economic Consultant Bernard Feeney, believes that research into consumer preferences and perceptions of craft beer would be useful as well as an in-depth and fact-based study of beer distribution in Ireland.