A model to stem the tide of brewery closures

Approaching the dour former Quaker Meeting House alongside Chelmsford train station, there is little indication of the stunning interior that will greet you when you cross the threshold. The open plan, double-height structure houses a floor-to-ceiling back-bar and mezzanine level encircling the entire building that puts you right in among the giant lobster pot-like lampshades that throw soft lighting around the brewery.

Yes, within this structure is a brewery, or a brewpub to be precise. It’s the most recent opening for Brewhouse & Kitchen (B&K), which is defying the trend for brewery openings as it now operates 23 such sites and is on the lookout for more. This very much goes against the grain, because breweries have been dropping like flies of late.

Brewery insolvencies have tripled in the year ending 31 March, with 45 hitting the rocks compared with 15 the previous year, according to the accountants Mazers. Among those to have found themselves in trouble are Black Sheep, Brew By Numbers, Brick, Bedlam, One Mile End, Wild Beer Co and Beatnikz Republic.

These failures are undoubtedly partly down to the unsustainable rate of openings over the past decade, which has resulted in serious overcapacity in the market. In complete contrast, nobody else has sought to open brewpubs. B&K is the only player in town and largely follows a playbook that was created by David Bruce, who pioneered the brewpub concept in 1979 when he built out the Firkin chain. There had been no serious efforts to replicate the model until Simon Bunn and Kris Gumbrell opened their first B&K in 2013, in Portsmouth, and have since been rolling it out around the country since.

Successfully combining a comfortable bar and dining space with a chunk of square footage given over to the industrial kit required for a brewery is tough in the UK, where property costs remain high in the centres of towns and cities. It has proven to be too much of a headache for others to pursue. Bunn tells me B&K has pursued a strategy of taking on buildings that nobody else wants and then investing serious sums in order to create the right dual-function space. Chelmsford cost £1.1m for the freehold and required the changing of some odd Quaker covenants, and £700,000 was invested in the fit-out. Seven of B&K’s other sites have been carved out of former JD Wetherspoon pubs.

There have been brief talks about developing another model that does not include the brewery element, but Bunn says it’s not close to becoming a reality. The company is more than happy with its lot, and the unique selling point that an on-site brewery brings. As much as 50% of each unit’s beer in brewed on-site, while 30% (its two in-house lagers) are brewed under contract.

This situation is clearly healthy for margins and is boosted by B&K being confident enough to shun the big brand competition – so you won’t find the likes of Stella, Carling, Strongbow and John Smith’s, nor even the ubiquitous Guinness, on its taps. This is proving attractive to its core audience of 25 to 55-year-olds, of which 50% are female. Other fans include some local councils, which have taken the team around their town centres as they tout their suitability as the location for the company’s next site. 

At a time when cask in particular is under great pressure and cocktails are drawing more people away from beer, B&K is finding a receptive audience to its in-house brewed range. The secret sauce is that it is making beer accessible to a wider audience. There is no doubt that craft beer flies over the heads of many people – especially in the towns and cities where B&K has set up shop – and it has sought to counter this by representing it in an unchallenging way for a mainstream audience.

None of the outlandish brews found in many craft beer bars are on tap at B&K. Milkshake IPAs, pastry stouts, triple IPAs and kettle sours have no place on the menu. It prefers to cover off the accessible end of things with the likes of juicy pale, session IPA, tropical IPA and craft lager on its bars. This makes it less than exciting to beer hunters like me, but Bunn and Gumbrell will no doubt be unmoved by this as 23 B&K’s and counting is proof enough that their unique model is working for many drinkers.

Glynn Davis, editor of Retail Insider

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