Following years of explosive growth, the craft beer industry stalled somewhat in 2018. The number of new breweries opened in the UK grew by eight throughout the year according to UHY Hacker Young – 98% less than the 395 openings in 2017. Likewise, according to the Brewers Association, there were 219 brewery closures in the US in 2018, bringing the total number to 7,231 down from a peak of 7,450.

“My first thought would be that due to the explosion in craft breweries, which was seen as great for the brewing industry, the growth encouraged many more people to set up who may have the investment but not necessarily the knowledge or expertise to make the best quality beer,” says Dr Debbie Parker, head of sensory research at Walnut Unlimited and accredited beer sommelier.

Craft has gone corporate

With sales growth slowing, startup costs increasing and competition at its peak, “only those consistently giving good quality beers of high standard will survive”, Parker believes.

Aside from thousands of other craft brewers, those fighting to find their feet in a saturated market are also now face a much larger, better resourced challenger.

While the craft label is traditionally seen as a way to differentiate small batch, unique beers produced predominantly by independent breweries from mainstream offerings, the craft definition has been blurred somewhat of late. With craft accounting for close to 25% of beer sales in the US and 5% in the UK, big breweries have been keen to capitalise on the sector.

In 2015, AB InBev purchased London-based craft brewer Camden Town Brewery in an £85m acquisition deal that drew plenty of criticism. In late 2019, it shelled out $321m to complete its takeover of the Craft Brew Alliance.

AB InBev isn’t the only industry giant to have bought its way into the craft market. In 2017, Carlsberg completed the acquisition of London Fields Brewery. The following year, Heineken purchased a $53m stake in another popular London brewer, Beavertown.

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Of the top five craft beer brands in the UK, only two – BrewDog and Innis & Gunn – are now independently owned. Even then, BrewDog is partly owned by equity firm TSG Consumer Partners.

Blurring the craft definition

“Craft beer as it was initially known has been hijacked,” says Simon Forster, founder of food and drink focused strategic branding agency Robot Food.

“Just like in food, consumers are looking for experiences, not products, and there is a certain social kudos that comes with discovering something new, eating and drinking something that your friends haven’t heard of yet. This is crucial for diehard beer experts who are often put off a brand once it goes mainstream,” Forster says.

However, recognising whether a craft beer is produced by an independent brewery or an industry goliath proves difficult. Both products will typically use the craft label, as well as the bold branding that has become synonymous with it.

“The term ‘craft’ is just white noise,” Foster says. “The ‘craft’ beer category is also so full of wacky, bold can designs, created because everyone is trying to stand out, which, of course, means very few actually do.”

According to Ian Stewart, founder of Brick Brewery in London, this inability to differentiate between the two has negatively impacted independent producers. With an industry leader behind them, acquired craft breweries gain access to finance to expand operations and market their product, as well as the network to get their brews in pubs, restaurants and shops.

“The consumer doesn’t always know that brands that were independent are now part of a macro company,” Stewart says. “The implications of this is that they still ride on the coattails of the craft image they used to be, but in fact they’re able to buy lines in the on-trade, and consumers may well be unaware of the change behind the scenes.”

A big hop from small to large scale

The main issue with big brewers entering the craft market is largely to do with quality. Brewers such as Carlsberg and Heineken pioneered the production of cheap, mass-produced beers that were a fan favourite among consumers for a long time. Given that 45% of consumers are willing to pay more for craft, it is easy to see why they might have taken issue. Should these corporations gain hold of the craft market, it is feared that quality would be sacrificed in search of greater profits.

“We’re seeing time and time again core ‘craft’ brands being bought out by big global players, then listed in supermarkets but sometimes being quickly delisted as product consistency is diminished and the core consumer is alienated, seeing the brand as mainstream and opting for another, more niche product found in bottle shops instead – and so the cycle continues,” Forster says.

This isn’t just a problem that those acquired by bigger names need to worry about solving, but also maturing craft breweries hoping to scale up.

“As craft producers enter the mainstream, they are faced with a difficult balance of growing at scale, whilst trying to retain the credibility that the ‘craft’ moniker carries and the very thing that brought them success in the first place,” Forster explains.

For Parker, rather than looking at the size of the brewery or the corporation behind it, a craft brewery should be judged on its originality and quality, as well as its ability to maintain these as it scales.

“As craft beers become more mainstream, I think the size of the brewery is now becoming more blurred as a definition,” she says. “I feel that a more important factor is for a brewery to be able to maintain the originality and quality of the beer as it grows.”

Surviving craft’s fermentation process

“In short, the industry has grown up,” Stewart says. Craft brewers need more capital and better equipment in order to survive in the saturated market than they did a decade ago. As the industry leaders continue to buy into and experiment in the craft market, and the competition develops, it is only likely to become more difficult for small brewers.

Is ‘going corporate’ and challenging the market’s leaders, as craft breweries like BrewDog have managed to do somewhat, the answer? With consumers heading to supermarkets over bottle shops, independent brewers certainly need to adapt.

“Ultimately, most craft beer is bought in a supermarket environment – it’s the category’s biggest market – so producers need to find a way to work with them, rather than ignore them in pursuit of staying core and not ‘selling out’,” Forster explains. “There are ways to strike that balance.”

Brick Brewery recognises the need to cater to the market. However, that cannot come at the cost of staying true to the brand and its customers.

“There could be more buyouts, more mergers, fall out. We just need to continue being true to ourselves, being market relevant – whatever that may look like – and innovating, whether that is through products or our environmental impact,” Stewart says.

As conscious consumerism grows, there will be new avenues for small scale breweries to explore too. The UK’s ethical food and drink market has grown by more than 40% since 2013 to £8.2bn, and that growth is tipped to continue by market research company Mintel.

“The way in which people drink is changing,” Stewart explains. “People are more mindful about what they drink and how much they drink and they seek quality products.”

Startups are typically better innovators than large corporations as a result of their less complex leadership structures and processes. This stands smaller breweries in good stead to react to and capitalise on these changing consumer demands, and help them to maintain their place in a changing craft market.