Cash in on the trend
The recent wave of consolidation among regional brewers appears for some observers to signal the beginning of the end of this breed. Speculation is rife about who will be next.
For the casual observer the evidence may seem overwhelming: rising energy prices, the smoking ban, the power of the big brand, the consolidation of customer base. For the City analysts these market conditions provide the obvious circumstances for further consolidation.
But this view misunderstands the market and the opportunity in beer.
Consolidation has been happening in the industry since 1900, when there were 6,447 breweries in the UK. And, while there have been brewing closures in one part of the market, this has been more than offset by the explosion in new micro-brewery openings at a rate of 50 per year. The takeover of five regionals within a year seems to me to be more coincidental than a step change of trend.
In the pub market, all the talk today is of the pain of licensing reform and future pressure from the smoking ban. But regulatory change, though unwelcome, often only exacerbates contemporary lifestyle trends.
Consumers want to be healthier. They want to eat higher quality food and drink finer beverages. Moreover, not only do they want to know where these products are sourced, they want to know how they have been manufactured.
They want to consume fresh, local and, ideally, organic produce. In mistrusting the "establishment", so too they mistrust big food and drink companies and prefer to identify themselves with small or local brands or brands "with personality". They want to deal with companies who protect the environment and contribute to their local community. At the same time they have become more wary, more inclined to visit regular haunts rather than risk new ones.
The market for beer and pubs whether driven by the consumer or regulator or both is now presenting different trends that should benefit those regional and local brewers in a position to exploit them.
Initiatives to improve the presentation of beer and to use branded glasses are at last gaining traction with licensees and the consumer. A pint of ale served in a branded lager glass now seems very odd!
The growth of beer with food and the growing awareness of different styles of beer is a worldwide phenomenon.
In Sweden or in the US there is the same consumer fascination with this new "knowledge" as there was with wine 15 years ago. Wine, meanwhile, has increasingly become "commoditised" by the overdone promotion of "Merlot" and "Chardonnay" in the supermarkets. For tomorrow's retailer of beer, wine in my view is there for the taking.
In short, the market for beer and pubs is reverting again to being more responsible, more local, more fragmented, to being "small" or "speciality". Those who offer the consumer provenance and a local branded personality but with contemporary standards of marketing and service have a great opportunity.
And the seemingly anachronistic regional brewers that have for generations reinvested their cashflow in people, premises, service, brands and their community will continue to prosper if they can recognise these positive trends and can adapt their business to exploit them.
Jonathan Neame is chief executive of Shepherd Neame
