Report Claims UK Craft Brewing Industry Is Thriving
Britain’s appetite for quality craft beer is causing a boom for microbrewers, with London and the South East particularly developing a taste for artisan brews.
A new report, commissioned by Asset Match and written by Nigel Parson of Dryburgh Research and Stephen Clapham of Behind the Balance Sheet, reveals the investment attraction of smaller breweries as a sector that has weathered the economic downturn.
In contrast to real ale’s rural image, says the report, Londoner’s drink 18% of cask conditioned pints and the South and South East a further 23%. Drinkers in the North of England consume less than 20% of real ale pints.
Beer drinking by volume has been declining in the UK since 1976 — reflecting many factors including the decline of traditional heavy industries — but the cask ale segment has proved to be resilient, the report notes, and is outperforming the total UK beer market. Helped by tax concessions, the microbrewers are flourishing. The renaissance of traditional ale has also benefited from growing interest in provenance, taste and locality.
Today, the Society of Independent Brewers (SIBA) has 620 members compared with only 11 in 1979. One in three microbrewers fail, but it is a sector that holds promise, evident from the £20m acquisition of Sharp’s Brewery by Molson Coors in 2011 and the subsequent success of Doom Bar, the UK’s top-selling ale.
London and the South East also remain at the heart of the brewing industry with a total of 50 breweries located there compared to the handful in 2006. Since then, Chancellor Gordon Brown’s progressive beer duty, which gives brewers who make less than 5,000 hectolitres — about 900,000 pints — of beer per year a 50% discount on beer duty, as many as 80 new breweries have popped up in the UK every year. The report suggests that further legislation from the government in the form of an ‘income-tax’ banding would solve the current issue of capped growth for the larger microbrewers.
In an economy where big business is grappling with the volatility of the markets, private companies are growing their way out of the recession. The brewing industry is no exception. It has taken advantage of enterprise-friendly initiatives like the Government’s Enterprise Investment Scheme (EIS) and the Funding for Lending Scheme (FLS). The only problem, a potential issue faced by all privately held companies, is a lack of liquidity in their shares.
Iain Baillie, founder and co-CEO of Asset Match, said:
“One of the biggest challenges for any successful privately held company is a lack of liquidity in their shares. We estimate that there are currently between 40 to 50 independent brewers with multiple investors who would benefit from more liquidity and potentially 100 more in the pipeline.
“We commissioned this report because we believe that the platform that Asset Match provides is ideally suited to assist UK private brewers and pub companies. They make up an industry that, although flourishing, is grappling with the problem of trapped equity. Our mission, since we launched in 2012, has been to encourage a focus on private companies and redress the current City ‘pricing’ structure to help businesses, like private brewers, provide liquidity for their shareholders. Additionally many pub companies have raised funds through EIS and VCT schemes and it would be very beneficial to supply investors with a potential exit.”
Nigel Parson, of Dryburgh Research, added:
Stephen Clapham, of Behind the Balance Sheet, said:
Copies of the report, priced at £325, can be ordered online at www.behindthebalancesheet.com