Cloudwater brew company

27.06.16

Hey, Whats Wrong With EU?

(Start off by getting this on in the background).  I’ve had a number of conversations over the past couple of years with folk about ideas and dreams for our respective breweries, and what we might like to work towards.  Conversations usually start off with how busy we are, and how busy we think we might be in some months time, through to how much beer we’re producing right now, versus how much more we can or would like to produce down the line.  Some folk have a production limit already, beyond which they imagine the fun is lost, and some are happy to see how things go and be led by the market, imagining the fun they’d have with a fancy lab, direct relationships with hop growers, or many other opportunities only afforded by greater size.

I feel something of a sense of duty to meet demand, and to grow a little if we have the chance to.  If we’re to forever stay a small brewery (in the grand scheme of things) we’d only ever be working in the same markets that we work in right now, and would have to rely on other people within the industry to really get the word out to ever wider circles that modern British beer is a thing worth investigating, enjoying, and relying upon.

More often than not, small, new breweries catch their first break with support from their local marketplace.  Unless the number of taps available to us all increases at a local level in line with increased total output from breweries both new and old, we are likely to see many times more competition than we work with now.  Whilst modern beer’s market share is undoubtedly growing, none of us know the limit or just how much local or modern beer each city can support, and I’d hate to see a well meaning, quality focused brewery find that limit by surprise and struggle or fail as a result.  So when an opportunity arises for a brewery to step up (or step out of an existing marketplace) and expand reach, I understand that as not just a good thing for that one particular brewery, but for all other quality focused local breweries too.

There could be space for us all, as long as we all keep doing things folks want to support, in a marketplace that’s drawing new folk in every week.  But the expansion of the marketplace we’re all experiencing and banking on right now is founded upon relative economic stability we previously enjoyed, in the years of growth between the 2008 crash until the EU referendum.

Those of us that are happy to expand a little to meet demand, looking to satisfy existing customers more often, and to reach those folks keen to get to our beer, are in some sense making room for folk just entering or working to get established in this wonderful industry.  Even breweries expanding at a ferocious rate help the cause of the little guy if their growth helps to convince more people that modern British beer is worth enjoying.

The growth in the number of bars, the moves towards more modern beer in pubs, and the ever increasing number of microbreweries from the smallest part time operations, to the biggest that support hundreds of jobs, have all come about because of relative economic stability.

Predictions made by experts (rather than the scaremongering and unqualified reassurances that have largely filled the media by power hungry politicians) paint a very bleak picture of what the UK might be like in the short and long term, now that we are faced with a leave victory.  I love what we’ve all worked so damn hard to achieve.  We’ve created a scene together that’s making ground on the best modern beer brewers out there, and the most experienced traditional brewers too, through some of the most inclusive social spaces I’ve ever had the pleasure of enjoying. Anything that could shake the foundations of what we’ve poured hours, life savings, all our inventiveness and intellects into, I’m deeply against.

Based on several recent private conversations, the percentage of modern UK beer that’s exported to the EU is significant (some breweries you know and love export more than 50% of everything they make, with the lion’s share heading to the EU).  Anything that could make UK brewed beer less accessible or less affordable to EU customers, or less profitable (because of a weak pound), will undoubtedly have a deep and lasting impact on almost all of the UK’s leading breweries.  The effect that a reduction in EU sales would have inside the UK could be severe as peers and friends could become competitors, and fiercer competition could stifle new breweries entering the industry.  Can you imagine if the top 10 biggest craft brewers in the UK suddenly had to find 10-40% more outlets in the UK in a short space of time (to prevent job losses, or loan defaults)?  We may well see some of the charm we all enjoy fade.  Overall, I believe modern beer drinkers would lose out.  A lot of breweries are already focused on quality as it is, so a more competitive environment could prove to just be a distraction.

On the continent are many countries just waking up to modern beer.  I think it’s fair to say the best UK breweries are largely level with the best modern beer in the EU, but any falter that could put pay to export would grant a great opportunity to brewers in the EU to fulfil orders in place of modern UK breweries.  Our current position as a country that is an attractive exporter of high quality modern beer must be maintained if we are to continue to make space for new brewers, and afford stability and growth to much loved breweries with any of the ease we previously saw.

The points above do not go into everything that has happen as we see the pound falling and we see more expensive bottles, cans, crown caps, packaging lines, brew houses, malt, hops, yeast, or any of the other essential items we all purchase to brew beer.  Nor do they go into what might happen if the industry can’t readily employ highly trained brewers from the EU.  There are many other far more foundational concerns we have on top of running a business in a turbulent economy or against greater competition, far beyond the scope of this brewery blog.  

I’ll unpack a little of what happened overnight in a list below due to the pound falling in value:

• Hops up by 20% overnight (that aren't already contracted), putting 30p per litre on a beer like Three’s Company.
• Key Kegs up in price, putting 10p per pint on a keg beer.
• Bottles up in price by 20%, putting at least 15p on each bottle (we hope labels aren’t affected too).

As you can see, we will end up having to increase our wholesale price, which will end up being passed onto all you folk.  We can’t afford to ride a smaller profit margin, and we won’t be alone in that position either.  We’re expecting to see bar/shop prices rise by between 5-7% as soon as more expensive goods take their effect on the industry’s cost of production.

As a company, we’re sorely disappointed that our immediate future is now a lot less certain than a week ago, as the economic and trade context we do business within moves from largely known and stable, to unknown and turbulent.  We're disappointed that whilst mortgages rise, interest rates go up, imports get more expensive, and industries assess the long term viability of the UK as a base, that we're going to see you all pay more for beer too.

As an industry sector we’ve worked hard over the past 8 years to make great beer, and to put progressive ideas into play.  I think it’s that progressiveness that makes up a large part of why we love working in beer ourselves.  Positivity, inventiveness, warmth, passion, and inclusivity are infectious, and when we caught the craft beer bug some time ago, it was mostly how craft beer made us feel that drew us in.  It was never all about the beer.  I’m not sure it’s that much about the beer now, even though that’s pretty much all we think about.  So if there’s something we feel positive about still, even as we hear economic experts repeat largely unheeded warnings, it’s that the space in which modern beer comes into being is a space that will continue to inspire new ideas.  We’ll have to find a way forwards, just like we had to last week, and the week before. 

We’ve taken everything from old dairy equipment, training in entirely unrelated fields, old hands and new ideas, and made something wonderful.  That same positive drive and determination that got us to where we are today, is the force for good to get to where we need to be tomorrow.  We already were the change we wanted to see.  

So whether you work in this industry, or do your best to support it, let’s build on what we’ve made together so far, and continue to show just how much better off we are when we’re defined by hopes and dreams…

Paul.

PS Sorry I couldn't fit an apostrophe into the title.  There's a formatting error that introduces a forward slash before any title apostrophe.

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