The brewing industry in the UK and all over the world will see the most terrible slaughter in its history in the coming years. The sharp increase in the number of breweries and increased competition between them has led to an overcrowded market with shrinking margins. As craft beer sales near a peak the increased competition between the many players will lead to even more takeovers, mergers and closures in the next years.
“The brewery industry has become fragmented; 70% companies are run with less than £500 thousand of investment. Costs are rising faster than sales; for the first time in 9 years margins have fallen below 4%. This lack of investment means that some companies will struggle to grow, even if demand for their product is high,” says David Pattison, senior analyst at financial intelligence provider Plimsoll Publishing.
Limited financial resources are the main source of concern for startup companies like the many craft breweries which have opened in the last years. The problem is twofold. If the startup is not successful, the lack of capital inflow will lead to financial problems. The same is also true if the company is too successful. The fast growth will lead to the need to increase capacities and decrease costs per hectoliter. If the company has outgrown its first production site, its often time to find a strong financial partner to help taking the business to the next level.
Many small breweries in the UK have already taken up the option of acquisition.
Meantime Brewing Co. was acquired by SABMiller in May 2015. Following the sale of SABMiller to AB InBev Meantime was handed over to Japanese brewer Asahi in April 2016. (inside.beer, 11.10.2016). Next came Camden Town Brewery, which was sold to AB InBev at the end of 2015 (inside.beer, 7.8.2017), followed by Carlsberg’s acquisition of London Fields Brewery in July 2017 (inside.beer, 3.7.2017), and Heineken’s double strike with minority shares in Brixton Brewery in November 2017 (inside.beer, 28.11.2017) and Beavertown in June 2018 (inside.beer, 26.5.2018). This year saw also the purchase of Aspall Cyder by Molson Coors (inside.beer, 15.1.2018) and London’s Fourpure Brewing by Kirin’s Australian subsidiary Lion Brewing (inside.beer, 9.7.2018)
Since all of the big players have now their own chess pieces on the board the elimination contest is ready to begin. The major brewing groups have a clear advantage in this game in terms of financing power and access to distribution. The smaller and independent breweries can only play the card of authenticity, which is best displayed by personal commitment of the owner in the local community and a seal on the bottle or can. (inside.beer, 29.8.2018)
However, the battle has just started. The bloody end of the game is yet to come.