Saturday, 18 January 2014

"It did not make sense for us to carry on": Reasons for UK brewery closures, 2010-2013

One of the most difficult challenges in my work to understand the modern brewing industry is to determine how profitable breweries are and the factors that influence their success or failure. After all, your average brewer is highly unlikely to let me look at their accounts book. So last week I decided that one way to undertake this task was to look why breweries have shut their doors and ceased brewing in recent years. After all, if a lot of them are closing for financial reasons, this may indicate that times are tough for the industry, despite media reports that wax lyrical about the plethora of breweries opening and the vast bounties of beer available to drinkers.

Determining the causes of brewery closures was not easy; in fact in a lot of cases I simply did not find any explanation, despite spending hours on the internet searching. Given time constraints, I was only able investigate closure reasons for fifty-three of the seventy-nine breweries that the Quaffale website listed as having ceased trading between 2011 and 2013 (plus one other known case). I only found the information I needed for twenty-nine of them. Okay, this is not a huge sample, but it is all I have for now (work continues). My results are shown in the table below, from which some tentative conclusions can be made.

It is clear that a significant proportion of the breweries sampled have closed for non-financial reasons. Five ended their operations for what I have termed ‘personal’ reasons. For example, Angus Ales in Carnoustie – which produced a range of golf-themed beers – closed in December 2012 because the owner was in an accident, after which he felt he sadly could not go on.

There are also a twelve breweries, 41.38 per cent of the sample, which closed because of changes in business structures (this is, however, a very loose category). The story Jolly Brewer microbrewery in Wrexham is one example. Its owner, Pene Coles, had started selling her own bottle conditioned beers from her shop – which by no coincidence sold home brewing supplies – in 2000. But around a decade later she was convinced by Sarah Atherton and Keith Porter to join them in running the fledgling Sandstone Brewery. There is however one major issue regarding the breweries that ceased trading because of alterations to business structures. Seven breweries were sold as going concerns or taken-over, but I have found no information on why their original owners put them up for sale in the first place, which raises further questions. For example, were unprofitable breweries sold to new owners who hoped - however misguided that hope might be – that they could be turned around? Anglo-Dutch Brewery, which was started by Mike Field and Paul Klos in 2000, was sold in 2011. Under the stewardship of Richard Sharpe and Paul Horne it has now become the Partners Brewery Ltd. Why Field and Klos gave up brewing is a mystery? It could be for financial reasons, but naturally many other explanations are possible.

Only four breweries have closed because of property issues. The Botanist brewpub, which operated between 2011 and 2013 in Kew, London, was taken over by another company who promptly shut the brewing operation down. In three other cases the pubs which hosted the breweries shut, which could be linked to financial circumstances of the pub trade and not necessarily to do with the profitability of the brewery operation.

Lastly, eight breweries explicitly stated that they ceased operations because their financial performance was poor. If we also consider that some of the other breweries above may have been sold because they were unprofitable, a maximum fourteen of those in the sample, just under fifty percent, possibly fell on hard times and ceased trading.

The Devilfish Brewery closed in January 2013
Although, what was noticeable in my research is that different breweries have given varied reasons for their poor financial performance and closure. Let’s start with the Devilfish Brewery, which closed in early 2013. Its owner stated that ‘…the truth of the matter is that over two years we've made loads of money for the Government and no money for ourselves.’ For them it was the case that the beer duty cut into their profits. They cited no other reasons for their profitability diminishing and their eventual closure. Conversely, the owners of another brewery, the Northcote Brewery in Norfolk which closed in early 2012, took a slightly broader view. They stated its closure was due to a ‘number of different factors…more people drinking at home instead of in pubs, and the rising costs involved in making beer, such as ingredients, transport and tax.’ To my mind this seems a more logical explanation for a brewery's closure than just blaming levels of tax – although this undoubtedly is a factor. Indeed, the impact of the cost of transport and ingredients on breweries' cost positions will have to be assessed in my future researches.

Lastly, and possibly forebodingly for the brewing industry, two breweries have cited a fall-off in trade as being the reason they closed their doors. Lynne Booth, manager of the Oakwell Brewery, which stopped brewing in late-2013, stated that ‘sales were down and not enough money was coming in.’ This was particularly a problem as the company had to maintain a huge building which was in a state of disrepair (This was the site of the Barnsley Brewery which operated between 1888 and 1976). The second casualty of note was the Breconshire Brewery in Brecon. Opened by C.H. Marlow in 2002, its beers soon won awards and its Golden Valley Ale was the star. Yet, when it closed on 31 December 2013 Harlow blamed “a competitive and fragile market”. When the Breconshire Brewery opened there were ten breweries in South Wales; by 2013 there were sixty, plus another in Brecon. Also, the closure of pubs had not helped the company's trade. As such, the brewery’s production had fallen from a peak of 40,000 gallons per year to 10,000 in 2012 and the business had lost “money during the last few years so we had no option but to close”.

The important thing to note here is that this is a clear statement from a brewer that suggests that the growing number of breweries in Britain is diminishing the available trade for them all. Combined with the evidence presented above, it could be possible that were are we currently in the era of a brewing industry bubble that is waiting to burst. As more and more breweries are open, and the number of ale drinkers flat-lines or, at most, grows slowly, it could possibly be argued that the amount of the market share each can capture will shrink. The result may be that many breweries will either struggle to get by month-by-month or eventually they will close.

Of course, a possible 'beer bubble' will not be the only reason why unprofitable breweries closed in the last three years. With many new companies entering the market it may simply be that some of their owners lacked the brewing or managerial skills to run a full-size brewery profitably. They may have expanded their businesses too rapidly, they may not be advertising their products effectively, they may not even be brewing good beer (and I think we can all agree we have had some ropey pints in our time). These considerations are particularly pertinent if we consider that numerous individuals are transitioning from the hobby of home brewing to full-scale commercial operations, two things which, apart from the fundamental aspects of the brewing process, are quite different.

But determining how well companies have been run will be hard, brewers are not going to admit if they were simply not up to the task. Yet, it is hoped that as my research progresses some information will be turned up. Who knows what this week will provide.

Edited: 20/01/2014, 22:22

Thanks to Denzil of the Great Heck Brewery for posting a response here which has alerted me to a few things and has certainly made me reconsider some points.

Thanks also to everyone who has contributed information, it is very appreciated!


Blackawton Brewery
Blackfriars Brewery Limited
Chorley Brewhouse Limited
Cleveland Brewery
Croglin Brewery
Fallons Exquisite Ales
Fowler's Ale (Prestoungrange) Limited
Golden Valley Ales
Great Gable Brewing Company Ltd, The
Hetty Pegler Brewery
John Eastwood Brewery, The
Jones Brewery
Justice Brewery
Malt B Brewing Company
Moorview Brewery
Nomad Brewery llp
Norfolk Cottage Brewing
Northcote Brewery Ltd
Oakwell Brewery
Poldark Brewery
Red Rat Craft Brewery
Ringmore Craft Brewery Ltd
Rudgwick Brewery Limited
Shifnal Brewery
Swaton Brewery
Tap House Brewery Ltd, The
Taunton Brewing Company Ltd
Thorne Brewery (Yorkshire) Ltd
Toad Brewery
Toft Brewing Company
Union Brewery Ltd, The
Urban Brewhouse, The
Windlestone Brewery
Wyre Piddle Brewery

Sunday, 12 January 2014

Success?: The Number of New Breweries in the UK 1993-2013

In my quest to understand the business of the modern brewing industry, one of my key questions is how successful are the plethora of new breweries that have started up in recent years? Do they make profit very early on, given the strength of the market for beer? Or do they initially struggle and only flourish when a particular beer, or for that matter a range of beers they brew becomes popular amongst consumers? Common sense, and my less-than-refined instinct, says that the latter is the case. For example, I do not think it is unreasonable to suggest that the Oakham Brewery's beer Citra, which remains commercially popular, was a major factor that led to the company’s sustained success.

However, in trying to get under skin of the modern brewing industry, I am acutely aware that for the most part brewers will not be willing to share their financial results with me. This is commercially sensitive information. So I am going to have to take another, less direct approach. We frequently hear in the press that breweries are opening every day, and as a beer drinker I rejoice at the beer bounty coming our way. Using data on the wonderful Quaffale site, the number of brewery openings between 1993 and 2013 can be tracked. As the graph below shows, without a shadow of a doubt we are in period when there is a boom new breweries, with 656 opening between 2009 and 2013.

Graph 1: The number of UK breweries opening 1993 to 2013
But this graph tells us next to nothing about success of breweries. It just indicates that an ever-increasing number have opened over the last twenty years, not how many have survived. Indeed, some breweries contained in the data set above have closed. Take for example the Devilfish Brewery, which was based in Hemington, Somerset. This opened in summer 2010 using a 4.5 barrel plant and then promptly closed in January last year for reasons that are unclear. As such, it could be that while the rates at which breweries have opened in recent years has been high, survival rates are low. Clearly, to get a better picture of the how breweries are surviving, the rate at which they have closed needs to be considered. The second graph below shows the number of brewry closures between 1993 and 2013, as well as the net number of brewies opening.

Graph 2: The number of UK breweries which closed, 1993-2013
Only in 1999 and 2000 did the number of brewry closures exceed the number of openings, which would heavily suggest that since that time more brewries are surving. But the survival of a brewry does not necessarily mean it is a success. Many may simply cover their costs, rather than making any profit. For instance, if we take (at random) the Adventure Brewing company, which opened in Chessington in 2012, it is highly possible that it is struggling to stay solvent week to week. Apply this logic to all the hundreds of breweries that opened in the last four years and, combined with the fact that there are growing numbers of breweries serving the around the same number of consumers, it may be the case that the majority of them are surviving by the skin of their teeth.

But how can I gauge whether this is so? Using the Quaffale database, as well as other sources, in the next week or so will be looking for information on how and why breweries have closed in the last four years, as this may give an indication of the state of breweries' finances. Indeed, some may have ceased trading because of issues with the profitability and performance of trade – as was recently the case with the Breconshire Brewery. Nevertheless, other factors may have put pay to breweries, like the demolition of rented spaces, take-overs or even the fact that the owners got bored. Hopefully by the next post I will have a full picture. Any contributions will, of course, be welcome.

Sunday, 5 January 2014

We don't understand Britain's beer revolution!

At the current time the beer industry is considered to be alive because of a massive injection of enthusiasm and ideas; according to the Campaign for Real Ale (CAMRA) in the past year 187 breweries have launched themselves into the market. This river of beer has also not gone unnoticed by the press. The Telegraph proclaimed that 'A Craft Beer Revolution is Brewing' (13 December 2013) and the Guardian urged 'all hail the British craft ale revolution' (26 October 2013).

For the consumer more breweries, more beer and more choice is undeniably a good thing. Living in London, near the South Bank, I don't have to go far to find evidence of this new beer revolution. Up the road from me is the wonderful Kernel  Brewery, across Borough Market is Brew Wharf, going a bit further would lead me to the Meantime Brewery, while in my local vicinity I have six dedicated ale pubs serving a cornucopia of different beers from across Britain. I am, without a doubt, sharing in the beer bonanza.

But can it be considered that because of these trends  the brewing industry is successful? The story of the new UK's beer revolution tends to be written, in large part, by those on the outside of the industry who consume its products. We hear precious little about what is going on inside it. For example, is the beer market is becoming saturated? Do changes in the price of ingredients alter which beers are produced or is this down to the whim of a brewer? How many breweries are producing beer that is poor that may lead to their eventual closure? Are brewers thinking the market for beer will grow, or is their uncertainty amongst them? Where do new entrants learn how to run a brewery and what is information sharing like in the industry? Lastly, are any of the new breweries making profit? No one outside the industry can realistically answer these and other questions...yet.

Being fascinated about the management and operation of the modern brewing industry - something that stems from my career as a business historian - yesterday I issued a simple request on Twitter: 'does anybody know of a micro/craft brewery that may want to talk about their finances and business model?' The response was not encouraging. I was advised to contact a number of breweries, but in general I got the impression that getting under the skin of the industry would be hard. But I am not fazed, I plan to go ahead a project to understand it as much as I reasonably can. My findings, I hope, will be documented here.

I have a starting point though. One brewery, the Pilot Brewery in Leith, replied to my request, albeit briefly. After less than a year of operation their finances were 'perilous' and their business model was 'ill-thought-out'. This was a slightly tongue in cheek comment, but could this be the case with some new and young breweries? I can't tell you, but I hopefully will be able to in the future....