New data gives us a unique insight into craft beer’s growth, and the picture isn’t as pretty as some have painted it.
I contacted Statistics NZ to see if it was possible to isolate craft brewers from the annual Alcohol Available for Consumption data. I developed a definition of craft brewing – based on production volumes and ownership – and Statistics NZ tried it for 2013-15, the same years covered by ANZ’s reports.
The results were better than I could have hoped. The definition* managed to capture the likes of Moa, Tuatara, Harrington’s, Emerson’s and Panhead with craft brewers, while leaving Monteith's, Mac’s, Boundary Rd and Founders with mainstream brewers. These statistics are derived from NZ Customs data, for beer produced in New Zealand, subject to excise duty, and not exported.
Unlike ANZ’s reports, this is hard data, not projections or based on samples, and the data is for production volumes, rather than estimated sales. The sole omission is imports/exports – these are relatively minor, and we’re looking at other sources to fill this gap.
Here’s what we’ve discovered:
- Overall beer production in New Zealand fell by approximately* 1.5%/yr from 2013-15
- Craft beer production increased by approx. 27%/yr from 2013-15
- The number of craft breweries increased by approx. 15%/yr from 2013-15
- Craft breweries’ average production increased by approx. 6%/yr during this period
There’s some very interesting contradictions happening here. Beer production is falling, BUT craft beer production is increasing rapidly, BUT the number of craft breweries is growing faster than the average production.
Craft brewing’s growth is supply-driven. Production is growing fast, not because breweries are growing bigger, but because new brewers are entering the industry. The industry as a whole is showing excellent (and very tempting) growth, but breweries are not growing nearly as much. I don’t know if economists have a name for this situation - it’s like a gold rush, when demand is high but supply is increasing fast.
So the brewer’s situation isn’t as good as it looks on paper, and when you look at the overall supply chain it looks even worse. While brewery numbers are growing, there’s only one hops producer, two malt producers, two supermarket chains, and just a handful of packaging importers, transport companies and liquor chains.
This makes craft brewers price takers at both ends of the value chain – they must pay what their suppliers demand, while having limited selling power with bars and retailers. If you can’t deliver a keg for $280, someone bigger and better-known can.
The Statistics NZ data give some insight to nano-brewer Annika Naschitski’s blog comment from last week. “In the last year it certainly feels that New Zealand’s craft beer market is reaching a level of the dreaded ‘saturation’ that makes it difficult for existing breweries to get by – and more or less impossible for new breweries to establish remarkable brands that can safely make it through the next years.”
Other brewers support Annika’s comments. Moa and ParrotDog both opened their books this year, and both are making a loss. Renaissance and Yeastie Boys told Beertown.NZ their shares continue to trade at or near the float price. And don’t hold your breath on getting paid a dividend on your craft beer investment.
“A rising tide floats all boats.” It’s been a mantra in craft brewing, reflecting the co-operative culture where brewers and bars support each other and welcome new entrants to the industry. The preliminary data suggest the tide is starting to turn.
I agree with ANZ’s observation that New Zealand craft brewing is transitioning from ‘cottage to corporate’ industry. I predict competition between craft brewers will continue to increase, especially for supermarket shelf space and untied bar taps. The biggest brewers will benefit most, due to their experience, recognised brands and economies of scale.
*Technical clarification – The definition and figures in this article are deliberately vague. Firstly, this data has been privately commissioned from Statistics NZ at considerable cost to Beertown.NZ, so I’m not going to give it all away just yet. Secondly, this was a test run to see if it is possible to extract craft brewing from the overall industry data. The test worked very well, and so I’ve commissioned more research to give a bigger picture. There’s a catch though – Statistics NZ’s Wellington HQ is officially munted and that work has been delayed indefinitely.
When (if!) that information is available, Beertown.NZ will publish a full and detailed report covering the growth of craft brewing, including the raw data and a full description of the methodology and definitions used. I’d like to give it to you now, but, you know, earthquakes!
Still interested? Here’s more reading
- Nano-brewer Annika Naschitski’s blog So you want to start a craft brewery
- Beertown.NZ Definitions and data-dearth
- Beertown.NZ Four myths about New Zealanders and alcohol
- ANZ’s Insight Reports are available here
- Statistics NZ’s Alcohol available for consumption data is available here