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New research into the UK’s brewing industry suggests the recent acquisitions of small craft breweries by global multinationals – such as Heineken’s £40M minority stake in Beavertown – could become an industry wide trend.
Here’s the deal…
Over the past five years, the number of small and independent UK breweries has risen by 64%, creating what some analysts’ see as an overcrowded marketplace.
This rise has been in part due to tax breaks introduced in 2002, but it’s also due to the growing popularity of ‘craft’ beer in the United Kingdom.
David Pattison, senior analyst at financial intelligence provider Plimsoll Publishing, sees this trend as almost inevitable…
“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.”
“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 stabilize. But among so much competition, small breweries may find attracting a buyer a challenge.”
Just as in the states, the United Kingdom’s larger breweries are losing market share to craft beer upstarts and according to Drinks International, “22 of the UK’s 50 largest breweries have seen profits fall.” And many of those breweries “have already introduced craft-style beer in an attempt to capture a share of this demand and boost profits.”
Unlike in the US, where growth is finally showing signs of slowing in a more mature market environment, the craft beer biz is still at a youthful stage in the UK and ripe for plundering by global brewing entities desperate to shore up their fortunes.
So like it or not, this train has left the gate, and you can expect to see more deals like Heineken’s partial acquisition of Beavertown Brewery in the United Kingdom in the near future.
