Sunday, 16 February 2014

Reasons for UK brewery closures, 2010-2013: Revisited

One month has passed since I posted on the reasons British breweries may have closed between 2010 and 2013. At that point I had garnered information on why twenty-nine breweries ceased trading . Then the beer community delivered. In the ensuing weeks, underneith the post, informed drinkers and brewers gave of their knowledge. Because of this very excellent and appreciated response, my sample size is now up to forty-one. The revised results are found in the table below.

In short, the extra data has not really changed my results, although what are marginally more secure are my findings. What they say about the current state of the brewing industry is, however, still up for debate.

We still see that about a fifth of the breweries closed because of 'personal' reasons (19.51 per cent). For instance, Howard Christie, the owner of Great Gable Brewing in Cumbria, closed down its operation after twelve years, principally because he retired (other reasons were also cited). In an industry where a large proportion of the companies are small in scale and, perhaps, run by one or two people, we should not really be surprised that sometimes they close because of personal reasons. Their existence is dependent on a small number of people's dedication, thus the tragic event, an illness, or even a happy one, the birth of a child, may put pay to the brewery.

Fifteen breweries, 36.59 per cent of the sample, have ceased trading because of changes in business structures. In some cases the breweries have not really closed, they are just under new management or have been renamed.Why the Ufford Brewery was renamed The Stamford Brewery remains to be seen: did new management change the name, or was this just a change based on the owner's preference? Other breweries have closed because business partners entered into new brewing ventures, as was the case with the two partners of Chester Ales. Overall, the fact that over a third of breweries have closed (or been re-named), but beer is still being produced by the brewers elsewhere or by new owners, suggests that there is still a great deal of dynamism in the British brewing industry. Individuals are looking for new opportunities, moving on to bigger and better ventures and taking what they have learnt in one brewery to another operation.

There may however be a dark-side to these figures. The purchaser of an existing brewery may indeed be looking for a new opportunity, but what was the brewery sold in the first place? Personal reasons on the part of the owner may again be a factor, but the very real possibility exists that the brewery was unprofitable. The data shows that of the forty-one breweries in the the sample that have closed, in thirteen cases (31.71 per cent) the owners claimed they were financially unsuccessful. Thus, if we consider that some of the taken-over breweries were also not making profit, the reality could be is that this figure could be much higher; possibly as much as fifty or sixty per cent of the sample.

In the last post, I posited that such results may indicate that we are approaching a 'brewing bubble.' In short, my idea was that more breweries may be opening than the market can sustain, meaning there is less trade and less profit for all. Of course, this may be a possibility - only time will tell if this is so. Yet, in light of some insightful comments from various quarters, I am more skeptical about this argument . The most thoughtful and useful response was from Denzil Vallance, head of the Great Heck Brewery.  For me his most interesting comment was this:

My reading of the past 6 Cask Ale Reports by SIBA, which show locally produced cask ale volumes growing at approximately the rate that the producers are expanding in number and capacity leads me to believe that it is supply that is driving growth and supply is nowhere near the potential demand as the market matures.

I considered this point carefully, and have become increasingly sympathetic to it. Then I started thinking about the number of breweries that have actually closed each year between 2007 and 2013. As the table below shows, the ratio of opened to closed breweries has increased every year over this period, apart from in 2009, with the ratio jumping massively last year.

Okay, on their own these figures don't tell us that much. Yet, combined with the data from SIBA, it could easily be argued that the market for cask and craft ales is indeed still growing, as Denzil suggests.

Nevertheless, if the demand for quality ale is still growing - something that I need to find some way to prove - why would some breweries be unprofitable? Denzil makes the point that many of the breweries who fail to perform well could be managed poorly; an idea I am very open to. New breweries, he argues, are producing inspirational and innovative beer, which leads older concerns to raise their game. Consequently, the overall quality of beer sold to consumers in Britain is pushed higher and higher. A brewery's lack of profit could, therefore, be the result of it not raising its game to keep up with its competitors. Their beers, which were inspirational five or ten years ago, are now average in comparison with the newer products available. The final point of this resting on their laurels is, unfortunately, that they go out of business.

Management failure is present in all industries; the brewing industry will be no different. Of course, a brewery's closure because of 'management failure' and a subsequent lack of profit may not necessarily be the result of inferior output. The owners may expand their operations too quickly, leading to excessive capital costs and high debt repayments; they may negotiate disadvantageous contracts for supplies, or they may not appreciate the value or need for marketing. Truthfully, there are a multitude of reasons why breweries may be managed poorly. Clearly, I will have to undertake much more research to understand the extent and nature of 'management failure' in the modern brewing industry.


Blackawton Brewery
Blackfriars Brewery Limited
Brass Monkey Brewery Company Limited
The Chorley Brewhouse Limited
Cleveland Brewery
Croglin Brewery
Fallons Exquisite Ales
Fowler's Ale (Prestoungrange) Limited
Golden Valley Ales
Hetty Pegler Brewery
John Eastwood Brewery
The Jones Brewery
Justice Brewery
Malt B Brewing Company
Moorview Brewery
Nomad Brewery 
Norfolk Cottage Brewing
Poldark 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

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