The party’s over…

Not that long ago, labels on smaller brewers’ bottles looked pretty much the same – dated imagery such as heraldry, dragons and other nonsense. The rationale for investing little effort into making products look more differentiated and professional was it gave the impression the brewer was more interested in superfluous marketing than producing beer.

There was little appreciation a differentiated look and greater professionalism might help small brewers stand out and ultimately sell more beer – but this was viewed as the land of the big guys, who were regarded with contempt. Then craft came along. A new crop of young brewers entered the market with radically different ideas in terms of beer styles and an appreciation of the power of marketing, many of them employing skilled graphic designers and artists to give their products shelf appeal.

The craft revolution has carried on for about a decade but sadly the boom times are over. It has certainly made the past decade fresh and interesting but all good things come to an end. The days when the big brands largely left small craft owners alone has well and truly passed and it will become increasingly tough for brewers, distillers, cheese-makers, chocolatiers and craft brand owners of all types to carve out a position in the market place. 

Things have been getting harder in the past couple of years as evidenced by big-gun buy-outs of a number of craft brewers including Beavertown, Four Pure, Magic Rock, London Fields and Brixton Brewery. We’ve also seen craft brewers increasingly sell packaged products into major supermarkets despite many of them espousing negative views of big grocers in the early days with such moves regarded as “selling out”.

While such moves reflect greater competition among the smaller guys, the major brewers have also realised craft is eating into their market share. This has been partly driven by a benign market place for food and drink and other FMCG categories. 

The rise of craft arguably started following the massive acquisition of Anheuser-Busch InBev (AB InBev) in 2009, which created a global beer-making goliath. AB InBev owner 3G introduced seriously aggressive cost controls and zero-based budgeting, as it did exactly with its other business Kraft Heinz. The strategy proved hugely successful and many other big brand owners followed.

While they all played around to boost short-term profits, little investment was being made in developing new products for long-term sustainable growth, while advertising and marketing was also cut dramatically. This provided a gloriously free environment for craft brands to grow and flourish with relatively little hindrance or threat from the big boys. It also coincided with the availability of cheap capital through questionable crowdfunding campaigns. 

Times have changed, however. After the cost-cutting regimes proved ultimately flawed – Kraft Heinz, for example, took a $15bn write-down last year – the big brand owners are now back in the game. They have been much more serious about investing in their brands of late and developing new lines – especially in areas such as vegan, plant-based, and low and no-alcohol, which all appeal to younger craft buyers. In addition, they have recently cranked up their levels of advertising, with all the major brands upping their spend in the past year.

This will place even more pressure on craft brands, which will find themselves swamped by marketing budgets and new craft-style brands hitting the shelves. It will make it tougher for them to gain listings in the major supermarkets. There’s more hardship for craft brewers on the cards as those acquired craft beer brands will play increasingly heavier roles in the on-trade, with many bar taps that were delivering genuine craft brews gradually being turned over to “craft” brands acquired by the big brewers.

There’s no doubt craft has had a tremendous ten years but from now on it will be increasingly tough for smaller operators to get a decent foothold in the market. Clever, arty, stand-out labels won’t be enough.

Glynn Davis, editor of Beer Insider 

This piece was originally published on Propel Info where Glynn Davis writes a regular Friday opinion piece. Beer Insider would like to thank Propel for allowing the reproduction of this column.

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