Micro and craft breweries

Fast facts

• Australia has approximately 400 craft brewing businesses
• Victoria has 115 microbreweries - is a 'hot' zone (>100 operators)
• Revenue expected to hit $518m (FY2019)
• Forecast 7.9% growth over 10 years to FY2024
• Over 100,000 jobs provided in the brewing industry
• $90m profit ($19.6m export)

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Positives

• Success of craft beer scene as drinkers seek new flavours and experiences from independents
• Growth industry which has seen businesses expand from 30 (2006) to over 400 (2018) and export tariffs diminish
• The industry supports growth upstream (agriculture) and downstream (hospitality) - $16.9m economic activity
• Barriers to entry are relatively low and supported by specialist bars and retailers
• Household discretionary spending forecast to increase in FY2019

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Negatives

• Impact on traditional market & product lines (dominated by Carlton & United Breweries & Kirin) which have previously held 90% of beer taps
• Major retailers and corporates have started to add or acquire craft lines and increasing marketing efforts to counterbalance
• Beer is in decline as a consumer preference – sales have declined (Vic 15.9% decrease whilst SA increased by 0.5%) - faster than wine decline, whilst cider has increased Imports expected to increase (next 5 years) as demand for variety increases
• Big retailer 'on tap' pub push will impact bottled craft breweries
• ACCC commenced an investigation on big retailer tactics but no action - found retailers responding to demand
• Funding is harder to obtain for start-up microbreweries
• Production cycle impacted by shelf life, input costs and any contractual arrangements (brewing & bottling may be outsourced)
• Marketing penetration is very difficult to establish and hard to maintain
• Highly regulated industry - rebate and taxes are high (to drive consumer behaviour) - changes from July 19 to reduce excise and increase rebates

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Watch commentary – key areas

• The industry is fragmented and going through change
• Competition will breed consolidations
• Retail space management strategies Market and positioning strategy – placement, brand & reputation are critical areas
• Working capital cycles are much tighter in comparison to bigger producers BAS & excise duty usually payable quarterly and weekly respectively - cash flow impact
• Production & distribution cycle must be well costed & managed - particularly stock on hand

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Did you know?

VAMI (Victorian Association of Microbreweries) members are all commercially focused microbreweries, located in Victoria with a brew length of less than 3,500litres and must use traditional brew ingingredients and processes, hold an excise license and not be publicly owned.

(Statistics: IBIS World – Sept 2018)

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How can Cor Cordis assist?

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