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Major acquisitions of craft beer could "fragment" industry
Published:  24 August, 2018

New research into the UK’s brewing industry suggests the recent acquisitions of small craft breweries by multinationals – such as Heineken’s £40M minority stake in Beavertown – could become an industry wide trend.

Over the past five years, the number of small UK breweries has risen by 64%, creating an overcrowded marketplace. This rise has been in part due to tax breaks introduced in 2002, but also due to the popularity of ‘craft’ beer produced by independent breweries.

David Pattison, senior analyst at financial intelligence provider Plimsoll Publishing, said, “The arrival of such a large number of small companies means that the brewing industry has become highly fragmented; 70% companies are run with less than £500k of investment.

“Costs are rising faster than sales and for the first time in 9 years, margins have fallen below 4%. This lack of investment means that some companies will struggle to grow, even if demand for their product is high.”

Many small breweries have taken up this option of acquisition in recent months, with Aspall Cyder, Meantime and Camden Brewery gaining investment from Molson Coors, Asahi and Anheuser-Busch Inbev respectively.

Pattinson added: “The crowded nature of the marketplace will lead to more small breweries seeking investment, and so with a large quantity of companies becoming available, prices may eventually stabilise.

“But among so much competition, small breweries may find attracting a buyer a challenge. What’s more, the increasing popularity of craft beer has also affected the market leaders and 22 of the UK’s 50 largest breweries have seen profits fall.

“Many large brands have already introduced craft-style beers to their ranges in an attempt to capture a share of this demand and boost profits”

Further research carried out by Yougov, backed by the Society of Independent Brewers (SIBA), has found that authenticity and clarity are important to modern beer-drinkers and as a result SIBA has introduced an ‘Assured Independent’ logo for what they designate genuine British craft beers.

Pattison said: “We have already seen a trend in the decrease of asset values, suggesting that companies are becoming leaner. But if a number of smaller breweries were to merge, share costs and resources, this could allow them to benefit from economies of scale, allowing them to raise more capital and ultimately become more competitive.”