Industry giants Lion and CUB will eye more craft brewers

The giants of the beer industry are expected to pick up more craft brewers, as changing tastes continue to put fizz into the sector despite the Covid devastation.

The thirsty giants of the Australian beer industry are expected to cast their eyes over more independent craft brewers, as changing tastes continue to put fizz in the sector despite the devastating impact of the coronavirus pandemic.

Multinationals Lion and Carlton United Breweries have over the last few years picked up a number of leading independent craft brewers, adding a creative and diverse product range to their offering.

Last year Lion paid more than $500m for Australia’s largest independent craft brewer — the Byron Bay-based Fermentum, parent to Stone & Wood, Two Birds and Fixation.

Independent Brewers Association general manager Kylie Lethbridge said the transaction was “the big news of 2021”.

“It certainly put a ripple through the industry but it’s very difficult to predict what will happen this year because we’re not privy to the strategies of the multinationals,” she said.

“But we do know that they’re going hell for leather to diversify and I don’t doubt that over time more independent craft breweries will be purchased.”

The independent craft brewers sector still has plenty of fizz.

Over the last decade independent craft breweries like Little Creatures, Mountain Goat, Pirate Life, 4 Pines, Green Beacon, Balter and Feral Brewing and many more have been sold to the big two and other large groups including soft drink manufacturers like Coca-Cola Amatil.

With craft beer the flavour of the month, big-brand bottle shops — owned by Coles and Woolworths — are also creating their own craft-style beer to cater for growing demand.

Lion would not be drawn on whether it was seeking new acquisitions but having recently acquired Fermentum it was unlikely it would seek a similar business in the near term.

However, Queensland University of Technology retail expert Professor Gary Mortimer said craft beer was “going corporate” and he expected more independent brewers to be bought out by multinationals and larger companies.

“Mainstream beer consumption is falling and craft beer consumption is rising,” he said.

“The whole mindset has changed. If we go back to the ’70s it was all about XXXX and VB and volume consumption. There was a lot of heavy drinking.

“Now we’re preferring craft beers. Australian beer drinkers’ tastes have changed.”

Richard Adamson, who co-owns Young Henrys in Newtown, Sydney.

Australia currently has about 625 independent craft breweries ranging from the largest — Young Henrys Brewing in Newtown, Sydney and Gage Roads Brewing Company in Fremantle, Western Australia — to microbreweries.

According to a 2020 survey, the sector contributes almost $2bn annually to the national economy and directly employs about 7000 people or around 50 per cent of jobs in the sector despite accounting for about 8 per cent market share which the IBA is aiming to increase to 15 per cent in a decade.

Although Australian beer consumption per capita has fallen 20 per cent in the last decade the survey found independent craft beer sector marketshare is growing at a rate of 15 to 20 per cent a year.

Ms Lethbridge said did not know of any IBA members who had to close their doors because of Covid and not reopen or have plans to reopen.

However, she said it’s been a hard struggle for the industry, especially those with a tap bar or restaurant component.

On the brewing side, those who could diversify by increasing their online presence and were not reliant on keg pub sales, instead focusing production to cans, were better equipped to withstand the pandemic and the Omicron variant tsunami.

“I did an interview last November and I said we were well on the road to recovery and things were fantastic,” Ms Lethbridge said.

“Independent brewers are well supported by a loyal following and online sales were going through the roof, although that did not mean they have come out of the pandemic without doing it tough.

“But the impact this current situation is having on hospitality and production is quite significant.

“Any brewer that has hospitality as a part of their operation, which is quite a lot of our industry, is very challenged with staff being sick or isolated and then there are the supply-chain issues and availability of materials.”

Corinna Steeb, Darren Hilditch and Alexander Stewart at The Prancing Pony in Rundle St, Adelaide.

For Prancing Pony founder Corinna Steeb the reality of the Omicron outbreak hit her on New Year’s Eve at her newly opened bar and restaurant on Rundle St in the heart of Adelaide.

“On New Year’s Eve at 7pm there were two people walking up and down the street. It was pretty sad,” she said.

Ms Steeb, who co-founded the award-winning Prancing Pony Brewery near Hahndorf in the Adelaide Hills a decade ago, says that like other hospitality businesses it has been a struggle to keep going during the pandemic

“But we’re not about walking away, we are about making it work. When you have 42 employees you have a significant responsibility on your shoulders so we have to make it work,” she said.

“We cannot give up what we’ve built over 10 years, We’re totally unimpressed with how the government has dealt with the restrictions, information, availability of rapid antigen tests and giving support.

“We’re not after a handout but we want the ability to make a living. We can only do that when the government stops scaring people and ruling with fear,” she said.

However, it is the very nature of the craft beer sector itself which is the brewers’ best form of defence.

Independent craft brewing is an experimental and creative business by nature with strong links to their local community. And being small they can pivot very quickly and create a new beer or a targeted marketing campaign in contrast to the slower-moving multinationals.

They are limited only by their imaginations with concoctions running the flavour spectrum from peanut butter, watermelon, peach, raspberry, chocolate and lemon infusions to the more way out ideas such as lollies, seawater, coffee, tea and more.

Wayward Brewing Company founder Peter Philip.

Wayward Brewing Co was founded in 2012 in the Sydney inner city suburb of Camperdown.

Founder Peter Philip said the name stems from their brewing style.

“It’s a bit out of left field with a twist on things,” he said.

Mr Philip described the last two years as difficult.

“It’s been impossible to plan anything. As soon as it looks like we are coming out of it we get knocked around again. This latest surge has probably been the hardest,” he said.

“We’ve had staff come down with it and it’s affected production and logistics and there is the fear we will have to shutdown the entire production facility but we have not had to do that yet. Our tap room is open but it’s pretty empty with this self imposed lockdown.”

However, Mr Philip said their off-licence trade had been up and down but overall he described it as their “saviour” with 75 per cent of our production now going into cans and sold through bottle shops.

“Consumers are recognising that independent craft beer is good and they want to support local business rather than Japanese multinationals,” he said.

“Recognition, locality and independence matters to consumers. We’re not as concerned about maximising profit and we’re more about maximising the flavour and the process.”