Is the end of the beer boom nigh?

It is a cap­i­tal mis­take to the­o­rize before one has data. Insen­si­bly one begins to twist facts to suit the­o­ries, instead of the­o­ries to suit facts.” Sher­lock Holmes

Yeah, what­evs, pipe boy.

Though we’re still crunch­ing data on brew­ery open­ings, clos­ings and goings on between the 1970s and the present day, this opti­mistic post from Des de Moor, and some pes­simistic respons­es on Twit­ter, got us think­ing about pos­si­ble signs the cur­rent beer boom might be com­ing to an end. Here’s what we’ve come up with.

1. Few­er brew­eries open than in the pre­vi­ous year

Er, yes, this one is a bit obvi­ous. Pre­vi­ous UK brew­ery booms (ear­ly 80s, mid 90s) fol­low the usu­al ‘Bell curve’, and there’s no rea­son to think this one will be any dif­fer­ent. Here’s 2006-08 from fig­ures giv­en by CAMRA at suc­ces­sive Good Beer Guide launch­es.

Graph of new UK brewery openings 2006-08
Num­ber of new brew­eries open­ing each year accord­ing to CAMRA, e.g. 99 in 12 months pre­ced­ing Sep­tem­ber 2011; 158 announced from then until Sep­tem­ber 2012.

When the new GBG is launched in the autumn of this year, the ‘new brew­eries’ num­ber will be sig­nif­i­cant. If it’s more than 158, then the boom is still going; if less… well, it’s not the end of the world, but it means we can start to expect a slump the unfet­tered growth to slow down in the next few years. (Our guess (that’s a guess): it’ll be 180+, but then back down to 150 in 2014.)

2. The big-small oper­a­tors start sell­ing up

A final death knell for the 1980s boom was, we think, the moment when David Bruce of the Firkin chain of brew­pubs sold his inter­est to Mid­sum­mer Inns for £6.6m in 1987. Clever peo­ple invest at the start of the boom and sell before it peaks. So, if, say, Mar­tin Hayes of the Craft Beer Com­pa­ny, for exam­ple, decides to cash in his chips and sell his five (?) pubs to a big­ger nation­al oper­a­tor, alarm bells ought to ring.

3. Big brew­eries get in on the act

We’re not say­ing big brew­ers can’t or should­n’t ‘do craft’, but it might be a bad sign when they do. The 1980s boom was part­ly down to Whit­bread, Allied and oth­ers get­ting in on the action with their own ‘fake Firkin’ brew­pubs and the (half-heart­ed) revival of their own real ale brands. They under­cut small oper­a­tors and con­tributed to an over-sat­u­ra­tion of the mar­ket. The equiv­a­lent these days might be the ‘pilot plants’ all the big­ger brew­eries are open­ing; but a far big­ger dan­ger sign wil be the first Mitchells & But­lers brew­pub or ‘craft beer bar’.

4. Hip­sters move on from beer

Hip­sters might not con­sume much beer as a total share of the mar­ket, but they own the buzz. They write blogs, reviews, news­pa­per and mag­a­zine arti­cles, and work in TV pro­duc­tion. They attract atten­tion. If (when) they decide that Brew­dog isn’t cool any­more and move on to, say, sloe gin, or mead, or what­ev­er, it’ll be a rats- from-sink­ing-ship moment. This usu­al­ly hap­pens well before the peak of the boom, which sug­gests there might be a cou­ple more years to go yet. Thir­ty-odd years ago, c.1980, key indi­ca­tors were a drop off in CAMRA mem­ber­ship and in sales of the GBG, as those who’d got excit­ed by the ‘real ale craze’ lost inter­est. What’s a mod­ern equiv­a­lent? Sales of the Craft Beer Lon­don app? Brew­dog shares? Google search­es?

Sum­ma­ry

What we’re say­ing, we guess, is that there’s no rea­son to be gloomy just yet – there’s anoth­er year or more of boom to be enjoyed – but that any­one open­ing a brew­ery right now is doing so towards the peak of the curve and had bet­ter have a bloody good offer if they expect to be trad­ing in three or four years time.

If you’ve got any guess­es or sug­gest­ed indi­ca­tors, share them below.

UPDATED 09:30 24/01/2012 a slump is not what you call the end of a boom, appar­ent­ly! You live and learn…

25 thoughts on “Is the end of the beer boom nigh?”

    1. Yes, c.1980 there was a big cri­sis because they’d print­ed 100k copies based on pre­vi­ous year’s sales and only shift­ed 60k. Caused a major finan­cial prob­lem for CAMRA.

      Coin­cid­ed with the drop in mem­ber­ship from 30k in 1976 (?) to 15k in 1982.

  1. Does there HAVE to be a slump? Sure, the increase in brew­eries will inevitably end (just as the decrease in pubs will) and there will be con­sol­i­da­tion peri­od, but there is no rea­son to believe this will be some ter­ri­ble dis­as­ter. As long as there is demand for good beer, inter­est­ing beer, local beer, what­ev­er, then some­one will sup­ply it.

    1. Sure, the increase in brew­eries will inevitably end (just as the decrease in pubs will) and there will be con­sol­i­da­tion peri­od”

      Haven’t you just described a slump? We’re not economists/stattos, so stand ready to be cor­rect­ed.

      Won’t nec­es­sar­i­ly be a dis­as­ter, and the total num­ber of brew­eries will be high­er than at the start, but a boom is a boom – mad, unsus­tain­able expan­sion.

      1. I think a slump implies a def­i­nite decrease, as opposed to sim­ply no longer increas­ing. The num­ber of UK brew­eries will prob­a­bly sta­bilise to a dynam­ic equi­lib­ri­um some­where between 1000 and 1500 – and that’s fine. There will con­tin­ue be big MNC brew­eries, medi­um sized region­al and nation­al brew­eries and local micro­brew­eries and brew­pubs, and occa­sion­al­ly a brew­ery will jump up a size.

        I don’t think the num­ber of brew­eries is going to plum­met back to sin­gle or dou­ble fig­ures again any time soon.

  2. Here’s a graph…

    … based on data of open­ings / clo­sures record­ed on the Quaf­fale web­site.

    Which shows the dra­mat­ic decline in brew­ery num­bers when the Firkin chain closed. The steady rise in num­bers since then (Pro­gres­sive Duty + avail­abil­i­ty of Firkin kit?). The expo­nen­tial rise since 2009. Which may be attrib­ut­able to redun­dan­cy cheques being spent on com­par­a­tive­ly cheap kit that can be installed in small units brew­ing small batch­es to sup­port a lim­it­ed num­ber of out­lets.

    The real doozy stat I’d love to see is the aver­age size of kit installed since 2009. Here in the East Mid­lands we have at least 12 brew­eries that have opened in the last few years which sup­ply (reg­u­lar­ly) no more than one out­let… and that out­let could be a part-time bar (ie week­ends) or a microp­ub.

    Micro-lean­ing-towards-nano brew­ers who sup­ply one out­let – maybe as a part-time/hob­by ven­ture – is cer­tain­ly long-term sus­tain­able in my view. Dit­to for those who choose the bottling/export route (where price point isn’t an issue to the, ahem, dis­cern­ing craft cus­tomer.

    I’ll put ready mon­ey on the likes of M&B push­ing a pre­mi­um craft offer­ing – it’d be a straight devel­op­ment from the Nichol­sons ‘her­itage pub meets qual­i­ty beer’ con­cept. Will it hurt the sec­tor? Doubt­ful.

    The real oppor­tu­ni­ty wait­ing to be exploit­ed will be how pubs/bars will appeal to today’s craft drinker in 10/20 years time. Maybe the same kind of beer but dif­fer­ent atmos­phere. With cus­tomers who fell in love with craft as twen­tysome­things and now have more dis­pos­able income. But less tol­er­ance to naff music and small toi­lets.

    Maybe there’s a brew­er who owns craft bars across the UK with a can­ny exit strat­e­gy who’d be will­ing to sell their chain onto a nation­al pub group some­time beyond 2020…

    1. The real doozy stat I’d love to see is the aver­age size of kit installed since 2009.”

      That would be inter­est­ing. We’ll keep our eyes peeled.

      Worth not­ing, though, that quite a few brew­eries in the ear­ly 80s boom were real­ly home­brew set ups in back rooms of pubs pro­duc­ing a bar­rel at a time. (One land­lord had a two hour train­ing ses­sion in the car park at his malt sup­pli­ers before declar­ing his brew­ery, using plas­tic buck­ets, open.) Guess they were ‘nano’ before nano was a thing.

  3. The Firkin is a bit of an anom­alous result, see­ing as it was basi­cal­ly one com­pa­ny, but it count­ed as mul­ti­ple clo­sures. So that weird spike should prob­a­bly just be ignored.

    1. We’re look­ing into Firkin as a whole sep­a­rate thing. If you take them out of the equa­tion, Lon­don’s brew­ery num­bers looks *real­ly* pathet­ic from up until about 2008.

      But they did employ lots of brew­ers. Would each of them have opened their own brew­ery if they had­n’t worked for Firkin? Lots cer­tain­ly did after Firkin (and its imi­ta­tors) fold­ed.

  4. Great work, Simon in par­tic­u­lar. Now plot brew­ery openings/closures against (1) UK GDP growth/decline (2) demo­graph­ics of 25 to 35-year-olds (3) lend­ing rates – note the explo­sion since 2009 match­es his­tor­i­cal­ly low loan rates (4) infla­tion-adjust­ed indus­tri­al premis­es rental costs. I sus­pect (1) may show an inverse asso­ci­a­tion, (2) won’t show any­thing, (3) and (4) will again show an inverse rela­tion. That’s my null hypoth­e­sis, any­way.

    1. OK, teach, we’ve done some home­work.

      This graph (based on ONS data, via The Guardian) shows quar­ter-on-quar­ter growth 1979–2012. Pret­ty clear dips around 1980, 1991 and 2008, which seem to map to the bumps (booms) on Simon’s graph. (We think – hap­py to be cor­rect­ed.)

      This is an ani­mat­ed pop­u­la­tion pyra­mid, also from ONS, which shows a bump in 20–30 year olds c.2008-present, but no cor­re­spond­ing peak c.1980–82.

      Now to rental and loan rates…

    1. Maybe, but it’s not part of a Craft Beer Com­pa­ny-style chain. Whit­bread pubs had real ale back in the 70s and 80s, but the kind of thing we’re talk­ing about is when they launched pubs with brew­eries called things like The Dog & Dust­bin to cash in on the suc­cess of the Firkins.

    2. Prince of Wales Feath­ers is part of a brand known as Cas­tle inter­nal­ly and Metro Pro­fes­sion­al Pubs pub­licly. They do have a good beer range but I would­n’t put them in the same brack­et as things like the Southamp­ton Arms or the Euston Tap.

      The White Horse in Par­sons Green how­ev­er you prob­a­bly could put in the same brack­et.
      http://www.whitehorsesw6.com/

  5. It makes sense that invest­ment in brew­ing would cor­re­la­tion to low inter­est rates. But cor­re­lat­ing pos­i­tive­ly with reces­sions is an inter­est­ing idea, in direct con­tra­dic­tion to, say, the Key­ne­sian invest­ment mod­el, which sug­gests that invest­ment in new busi­ness­es and equip­ment should go up as the econ­o­my goes up and demand for lux­u­ry goods like beer increas­es.

    Per­haps its a sup­ply side issue: lots of ama­teur brew­ers lose their day jobs and decide that nows the time to give it a go pro­fes­sion­al­ly, and that over­rides the effect of the lack of demand in the mar­ket.

  6. I think the recent boom has­n’t real­ly been eco­nom­i­cal­ly dri­ven at all; its just that a) a latent desire for a dif­fer­ent style of beer in the beer buy­ing pub­lic has been awakened/discovered, and every tom, dick and har­ry thinks that he can make a mint sup­ply­ing it before the big MNCs catch up; and b) the ongo­ing (mid­dle class) pref­er­ence for small, local pro­duc­ers has made being a micro­brew­er a more eco­nom­i­cal­ly viable prospect than ever before.

    Are these per­ma­nent changes? Or just tem­po­rary fads? I think they’re prob­a­bly at least part­ly per­ma­nent.

    1. I think all of that explains the gen­er­al trend since about 1970, but not the spikes – those points where it sud­den­ly goes nuts for about three or four years. Those have to be dri­ven by some­thing exter­nal, whether its eco­nom­ic, demo­graph­ic, sun spots…

      1. If you treat the firkins clos­ing as one large, geo­graph­i­cal­ly dis­persed brew­ery, clos­ing rather than one hun­dred small inde­pen­dent ones – which is effec­tive­ly what it was – then the graph remains rather flat – a slow increase in brew­ing fol­lowed by a notice­able jump in the last 4 years.

        Obvi­ous­ly you are going to have fluc­tu­a­tions from year to year, thats just the nature of sta­tis­tics. They don’t have to all have the same exoge­nous cause. Its most like­ly just noise – I’m sure you could pro­duce con­fi­dence inter­vals on the sta­tis­ti­cal sig­nif­i­cance of the year on year cor­re­la­tions if you want­ed.

        When did the small brew­ery tax relief come into effect? Thats prob­a­bly relevent.

  7. pyO – while I’m sure you’re right that a large part of the cur­rent boom in new brew­ery num­bers, espe­cial­ly in Lon­don, is down to a new inter­est among the beer-drink­ing pub­lic in dif­fer­ent styles of beer that aren’t sup­plied by the big brew­ers, I can’t believe the boom has­n’t been helped by low­er indus­tri­al premis­es rents and low­er inter­est rates caused by the reces­sion.

    I also won­der whether the cur­rent gen­er­a­tion of 25 to 35-year-olds isn’t just more entre­pre­neur­ial than past gen­er­a­tions: need to look at gen­er­al busi­ness start-up fig­ures over the past 40–50 years …

    1. Yeah sure, it could nev­er have hap­pened if it was extor­tion­ate­ly expen­sive to set up a lit­tle brew­ery etc.

      Its basi­cal­ly Tobin’s q mod­el in eco­nom­ic terms: if the expect­ed return on the invest­ment ( in this case due to the per­ceived unful­filled mar­ket for micro­brewed craft beer) is greater than the cost of the invest­ment (due to low inter­est rates and indus­tri­al unit rents), then peo­ple will invest.

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