Craft brewers struggle in a market dominated by Big Brewers

Independently-owned craft breweries represented just 2.6 percent of domestic beer consumption in 2017, say The Independent Craft Brewers of Ireland (ICBI), a trade organisation representing independently owned microbreweries across the Republic of Ireland, in a November 2018 report. The Irish beer market is controlled by Diageo/Guinness, Heineken, Molson Coors, and AB-InBev.

Total beer consumption stood at 4.5 million hl, and per capita consumption at 79 litres. Beer consumption per capita decreased 2 percent in 2017. This is in line with an overall trend that people in Ireland are drinking much less, with the average per adult consumption rate falling 23 percent since 2001.

Of the 157,000 hl beer produced by independents, 126,000 hl were sold in the domestic market. Although the indies’ combined output went up by 10 percent over 2016, one in five craft breweries witnessed a decline in output.

Nearly two thirds of all craft breweries produce significantly less than 1,000 hl beer per year. Over a third of microbreweries have an annual turnover below EUR 100,000 (USD 114,000). To retain viability, the ICBI believe that the sector needs continued supports to grow, primarily to help educate consumers about the benefits to the local economy of switching to Irish owned craft beers. The multinationals currently attract the vast percentage of the beer market in Ireland.

The ICBI consider that the difficulties in gaining a more sustainable foothold in the sector are largely due to the dominance of the multinational beer brands. Members experience significant difficulties in gaining access to taps, for example, because of incentives offered to publicans by the Big Brewers. Ireland’s on-trade beer sales continue to outperform off-trade sales by 64.8 percent to 35.2 percent, although the on-trade’s share is declining.

There are currently 75 microbreweries, plus a further 50 companies which are brand owners and outsource their production to independently-owned microbreweries. The increase in newcomers would have been higher had it not been offset by closures, estimated at 7 since the beginning of 2017.

Given that capacity utilisation in operating microbreweries sits at just under 50 percent, it is clear that the current market will find it difficult to support new entrants unless craft beer’s market share increases significantly.

The dominance of the Big Brewers in Ireland, given their distribution clout and large marketing budgets, plays a significant role in hampering the growth of the independents, the ICBI conclude.