Could crafty beer giants crush small breweries before they take off?
“THEY’RE trying to crush us. They’re handing out €50,000 cheques. They’re confusing the market with faux brands. The publicans are using us as leverage. We’re caught in the crossfire.”
The craft brewers of Ireland don’t mince their words when lamenting the outbreak of the beer wars, which have kicked off since the big multinationals woke up to the tiny but growing threat from a wave of small-timers.
Worldwide beer consumption has trended downwards in recent years despite the economic recovery.
It’s part of a wider trend in which sales of alcoholic drinks globally have tumbled by 1.3pc in 2016, according to a report by industry monitor the ‘International Wine and Spirits Record’ published this week.
One bright light in the gloom is craft beer, which has showed steady growth albeit from a minuscule base.
The number of microbreweries in Ireland has quadrupled to about 90 since 2012 and now employ almost 500 people, according to a recent report for Bord Bia. The share of craft in overall Irish beer consumption has surged six-fold in the same period but is still just a wee drop of the market with about 2.5pc share.
“While we’re confident about the market and confident about our position within the market, the big breweries are doing definitely everything that they possible can to prevent growth,” says Rick LeVert, who is spokesman for the Independent Craft Brewers of Ireland. Former journalist LeVert also runs Kinnegar Brewing, a craft producer in Donegal established in 2011 that employs nine and is embarking on a €1m expansion.
“The big guys are doing it in a way that’s actually depriving people of products that would actually like to have.
“ The consumer is the one put at the disadvantage because they’re not able to get the products they would like to try.”
The quiet-spoken Bostonian has seen at first hand the pressures on small beermakers from supermarkets, pubs and the industrial booze giants.
He rails against below-cost alcohol sales by supermarkets and being used as a bargaining chip by some publicans to eke better deals from big suppliers. He reserves his fiercest ire for the multinational brewers.
“Most of the big multinationals, the way they approach access to the market is they want to overwhelm and dominate and remove anybody else from the marketplace,” says LeVert.
“The other thing you see happening a lot now is the introduction of what we call faux craft brands. I don’t know that many of those are intended as serious brands. I think a lot those are intended as smokescreens to confuse the consumer and bring a lot of disruption into the marketplace and then hope that the craft market dies away and then they can go back to doing what they were always doing.”
Small producers don’t have the financial clout of Big Beer, which leaves them at the mercy of the market, explains LeVert.
“Nobody has contracts. There’s no contract that says, you’re contracting with us to buy a certain amount of beer over a certain period of time. It’s a very fluid situation which makes it quite difficult for small brewers because you could be in one day and out the next.”
Inevitably, that spells trouble for the mushrooming number of new hands eager to crack small-scale craft brewing.
“If the competitive playing field remains uneven, what you will see is too many small breweries for the amount of market share that’s out there,” LeVert warns.
“The strategy from the big guys could potentially be successful if they can hold things in check and keep (small brewers) out of bars and off of shelves.”
Grainne Walsh, co-founder of Waterford’s Metalman Brewing, paints an even more intimidating picture of the competition.
“We’re being crushed by globalisation,” says the straight-talking former Amazon engineer.
“We’re getting feedback from publicans that says: ‘Look, I’m gonna take out your tap, I’d love to leave it in but I’m getting a cheque for €50,000’.
“The people who are being incentivised don’t want to lose that incentivisation because it’s worth a lot so people are not really prepared to speak up. We’re getting caught in the crossfire now. We’re like collateral damage on the pitch. It’s starting to really hurt.
Walsh also worries about the power of the supermarkets. “Breweries come under pressure from big retailers and distributors all the time to price themselves (like mainstream beers). It’s very, very challenging for us to do that.”
Spare a thought for the publicans, who now face the dilemma of what to stock from among hundreds of new beers. Yet it’s welcomed in the trade for shaking up the industry.
“Craft brewing is a terrific development, it’s brought a lot of innovation,” says Donall O’Keeffe, CEO of the Licensed Vintners Association, which represents more than 600 pubs around Dublin.
He too doesn’t look kindly on below-cost selling by supermarkets and warns that accepting incentives to stock only one multinational’s beer can be damaging for business.
“We would think that would be shortsighted of any publican or supplier. The publican owns the bar but (the variety of brands) should ultimately be decided by the consumer. Most right-thinking publicans want to have a range. You simply can’t go with an exclusive supplier in this marketplace.”
As for the majors, they also oppose below-cost selling, according to Jonathan McDade, head of the Irish Brewers Association, the lobby group for the country’s biggest beermakers.
McDade believes incentivisation is not a practice that is causing problems in the industry. “It hasn’t been reported to me by any micro-brewery or any larger brewer,” he says. “It’s certainly an issue that hasn’t come across my desk at all.”