Crystal balls and craft beer

Opinion

2 Oct

It’s been a rollercoaster few months for craft beer – Michael Donaldson explains how breweries can learn from all that’s happened and shift the dial...

Following the liquidation and sale of the iconic Epic Beer brand, and with Brothers Beer going into voluntary administration, there’s been a lot of talk about the future of craft beer in New Zealand.

The background is well-detailed: huge cost increases across the board — excise tax going up almost 7% for each of the past two years is a massive blow, along with hikes in CO2 costs, ingredients, freight, and packaging. In addition, consumers have less discretionary income thanks to cost-of-living hikes and rising mortgage rates.

The net result is a drop in beer sales coupled with pressure on breweries to keep price increases to a minimum in a price-sensitive market. At the same time, there’s an added squeeze coming on the supermarket shelves as that space moves increasingly to higher volume six-packs with an expectation that they will retail in the mid-$20 range. That’s too tight for many craft breweries.

“It’s imperative that breweries diversify and think about new audiences.”

The on-premise scene is also tight: there are more than 200 breweries in New Zealand and all of them are trying to sell kegs to someone, but the legacy of COVID has hit pubs and restaurants too.

For bigger breweries, large volumes give them the ability to weather the storm, and there are often contracts in place with pubs that provide guaranteed sales. For craft breweries, it’s more a case of hang on for dear life. For small or family-run businesses such as Epic there’s little room to move when the squeeze comes on.

It sounds like a doomsday scenario, especially when you read the mainstream media headlines, but the reality is more palatable. Craft beer has gone through a decade of rapid expansion and the market is now reaching a plateau. While it feels that there should be a retrenchment, ironically there are still new brands coming into the market.

And let’s face it, once the economy picks up and summer arrives people will start buying beer again.

But there are a few lessons that breweries can learn from the past year.

• The days of someone brewing what they like to drink and knowing they will find like-minded customers are over: craft is a mass-market product now and that means accepting the fact that people like certain types of beer. Hazy, fruity, light, and lifestyle are the keywords.

• On that note, it’s imperative that breweries diversify and think about new audiences. Not every brewery will want to make ginger beer, hard lemonade, an RTD, or a non-alcoholic beer, but that stuff sells. See Good George’s crafted cocktails, Urbanaut’s Kihi range, or Sawmill’s just-released Ginger Beer. Craft has moved from being a sub-culture to part of a wider beverage market.

• Taprooms or brewpubs can bring huge upsides for a small brewery, but it’s no longer a case of “build it and they will come” — there needs to be more than beer to get them there. Wānaka’s Rhyme X Reason won the Tourism Trophy at the recent NZ Beer Awards. As the judges noted: “They are supportive of local community efforts and the local community supports them in return. Visitors are clearly enjoying the experience that Rhyme X Reason offer and seek them out as part of their Wānaka visit, adding to their overall regional experience.”

• Direct-to-customer (aka online shopping) is the future. But breweries need to get traffic to their webstores and then convert those visitors. That means advertising, understanding SEO, creating a great user-experience, and having the ability to offer everything from cases to pick-and-mix. And it must be delivered fresh and on-time. It also means building a database of customers, writing engaging emails and offering incentives to loyal customers.

Craft beer has enjoyed a great ride, and while the brakes have been applied, the journey is not over — there’s a long way to go, especially when you realise that craft’s 20% market share means there are millions of Kiwis who have yet to enjoy truly flavoursome beer. It’s just a matter of finding them, converting them, and then watching them jump on board and never look in the rear-vision mirror.