Britain’s traditional brewers squeezed by rise of craft beer
Mid-sized brands lack tax breaks of microbreweries or efficiencies of big operations
The rise of “craft beer” and microbreweries is forcing Britain’s traditional brewers to change decades of tradition as they compete for space at the bar.
Brewers such as Shepherd Neame, Black Sheep and Camerons, many family-owned, say they are an increasingly “squeezed middle” between multinational drinks companies and trendy, but state-subsidised, microbreweries.
The number of microbreweries has risen dramatically since 2002, when Gordon Brown halved beer duty for companies that make less than 5,000 hectolitres (3,055 barrels or 880,000 imperial pints) a year. The duty rises on a sliding scale to full tax at 60,000 hectolitres.
In 1970, the UK had 140 breweries. There are now about 1,700 of them, according to accountancy group UHY Hacker Young.
Mr Brown intervened after a spate of brewery closures from Stones of Sheffield and the Brakspear brewery in Henley-on-Thames to Vaux in Sunderland.
For small brewers, the tax break can shave about a fifth off their costs and as craft beer sales have grown, the rise in competition has hit midsized brewers hard.
“We don’t have the duty benefit of the small guys or the efficiencies of the bigger ones,” said Ian Parkinson, director of Moorhouse’s Brewery in Burnley.
“Microbreweries have a 25-30 per cent price advantage. It is an unfair playing field. I am unaware of any other market where the government intervenes so directly like this.”
In response, Thwaites, founded in 1807, licensed its popular Wainwright and Lancashire bomber brands to one of the big pub and beer companies — Marston’s — in 2015. It now only brews niche ales for its pub, hotel and spa estate.
Shepherd Neame has branched out into hotels and food, while retaining brewing volume by supplying unbranded bottles to discount supermarkets.
Moorhouse’s, founded in 1865, once had a niche making Black Cat, a mild beer. In recent years it has invested £4.2m in a new brewery, added beers such as White Witch and trebled its capacity to 85,000 hectolitres (15m pints) a year. It now pays about 95 per cent of full duty.
Last year, it turned over £5.2m and made a £300,000 loss but the expansion has given it significantly more capacity, even as it pays more tax. “Forty-five per cent of our revenue goes straight to the exchequer,” said Mr Parkinson.
To compete, it has produced a beer called Stray Dog with the band New Order, following the success that another brewer, Robinson, had with Trooper beer and Iron Maiden. Camerons brewery has meanwhile launched Motörhead Road Crew beer, in collaboration with members of the band.
“There are advantages to being our size. A microbrewer could not do that. I think there are some big opportunities, especially in exports,” said Mr Parkinson.
Mr Parkinson has also led a marketing push and done deals with pub chains such as JD Wetherspoon.
There are also signs that some microbreweries are struggling. Ben Norman, director of Twickenham Fine Ales, London’s oldest microbrewery after 12 years in operation, said some rivals were giving up.
“The problem is that it’s very easy to set up a brewery and make beer — the start-up costs are low. But consistently making quality beer and selling it is tough.
“In the early days, local pubs want to support you, so you get a burst of sales, you buy more kit and brew more beer. But then, a mile down the road, someone more local than you begins brewing.
“And as you get bigger, duty goes up and your cost base rapidly rises.” He said he knew a number of brewers who were purposefully sitting just below the duty threshold.
Mr Norman added that with customers constantly wanting to try new ales, it was difficult to win customer loyalty. “We get a lot of customers saying: I’ve tried you now, I want to try someone else.”
Camerons: the last north-east brewer standing
At the Head of Steam pubs, “it’s about theatre”, said John Foots, finance director of Camerons brewery, which owns the brand. “It’s about the full experience.”
When Camerons was founded in 1865, its priority was slaking the thirst of Hartlepool’s working men.
Today, local shipbuilding has vanished and steelmaking is a shadow of its past self but Camerons is still prominently located in the town’s centre.
The ninth biggest single brewery by volume in the UK and the only survivor of north-east England’s clutch of historic brewers has now launched Motörhead Road Crew beer, in collaboration with members of the band of the same name.
This new brew ties in with an export strategy that Camerons will pursue in the new year. Consignments of the beer have already been sent overseas, from Sweden to Slovenia. China, India and the US are among the export markets that Camerons is eyeing.
After a stable first century, Camerons had a succession of owners, culminating in acquisition in 2002 by David Soley, a north-east businessman. He is now chairman; his son Chris is chief executive. The Soleys own about 76 per cent and Heineken the rest.
Heineken, Carlsberg and Diageo buy the majority of its near-one million hectolitres a year output of ales and lagers from Hartlepool; Camerons’ own products, including Strongarm, Tontine, A-Hop-Alypse Now and Road Crew comprise the rest. As well as brewing, Camerons’ 75 pubs are core to the business.
Customers today, Mr Foots says, are “more choosy” than they were. With this in mind, Camerons says it is training “beer sommeliers” for its pubs. Its Head of Steam pubs offer a huge range of beers and other drinks — the one in Newcastle city centre was this month selling six cask beers, 14 keg beers and 150 bottled beers. A customer drinking Wizards Sleeve cider praised the friendly atmosphere. “And there’s so much choice; something for everyone.”