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.

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