Craft beer’s part of new Government 10 year growth strategy

Food Wise 2025, the new national strategic report for the agri-food sector was published this week. Craft beer and whiskey are designated key areas of focus over the next decade. This is the latest acknowledgement by Government that efforts must be made to allow these producers to continue to grow and expand.

The overall objective for beer and whiskey is to nurture the entrepreneurial spirit of the producers. A dedicated sectoral strategy is needed setting out “supports, targets and best practice for the entry, development and progression of these companies to 2025”. An increase in R&D and innovation across the sector is needed but for that to happen there needs to be a 10% increase in funding per annum. The need to develop skills in brewing and distilling is recognised, particularly in the areas of mentoring and training. I would like to see this progressed further into the development of a formal apprenticeship scheme for aspiring brewers. This would result in a blend of formal qualifications and on-the-job experience in a structured format.

Develop a sectoral strategy for food and drink SMEs, which sets out supports, targets and best practice for the entry, development and progression of these companies to 2025      Food Wise 2025

It is little surprise that a key focus is in boosting export sales. We’re a small island with a small but growing population. Yes, there’s plenty of room for breweries to expand at home but for those that want to, we need to help them gain access to international markets. One just needs to look at the approach that Carlow Brewing Co took all those years ago, a big effort in exporting because the market wasn’t really available in the country. That was when there were only a handful of craft breweries. We’ve over 70 now and the domestic market still has a long way to go in order to open fully to them. That is not to say that craft isn’t growing, it is and will continue to do so. I’m just saying a craft beer export strategy could really boost those already able to ship internationally. However, we also need to support those not yet ready but have aspirations to do so. Food Wise 2025 recognises the need to “continue to work directly with indigenous companies to identify new export market opportunities and develop services and supports for companies to facilitate export growth”. It also sees that specific market knowledge of the US market needs to be provided. This maybe more targeted at whiskey but there’s room for Irish craft beer too. The time has never been better for crafting an export strategy for beer.

Continue to work directly with indigenous companies to identify new export market opportunities and develop services and supports for companies to facilitate export growth   Food Wise 2025

The focus on beer in whiskey and beer in the report is hardly surprising. Minister for Agriculture and the Marine, Simon Coveney TD has been a more than a fair share of beer events during this time in the department. It’s a good news story, entrepreneurs starting up, producing products in the country and looking to export – what more could you need! However, there’s a growing trend that whiskey is getting more attention than craft beer. Yes, a distillery requires far more investment in capital than a brewery, not least with the three years needed for maturation alone. Also, whiskey has the snob factor and beer suffers unfairly for not been seen as civilised as other mainstream alcoholic drinks, with the possible exception of cider. The need to “develop an Irish Whiskey and food pairing trail as a major tourist attraction and to differentiate Irish food and drink produce” is singled out but we should also be pushing for a brewery tap licence to be introduced.

Beer, cider and whiskey makers must be equally respected, supported and championed. They all tell the same story. We can produce excellent, diverse and quality products on this small island of ours.

Perfect timing for crafting an export strategy for beer

Back in January, I wrote about the effects the European Central Bank’s quantitative easing (QE) programme will have on beer. The Euro exchange rate has, for want of a better word, tanked. We’re on course for parity against the US dollar and sterling is strong and only getting stronger. This could bad news for imports of US and UK craft beer into the Eurozone but great news for Irish breweries exporting or looking to export.

Exports of Irish beers could be boosted further by positive indicators within the Eurozone. Consumer sentiment for March 2015 is at its highest levels since 2007. Confidence has been boosted by the QE programme combined with falling unemployment and low oil prices. What does this mean? Quite simply private consumption is expected to rise by 2% this year and 1.5% in 2016 (source: Capital Economics). People will socialise with confidence and in economic terms this could involve boosts to nondurable goods (e.g. off licences) and services (e.g. bars, restaurants etc). This would underpin economic recovery within the Eurozone but sadly it’s one that will not be felt equally across all countries/regions.

Global finance and trade

So Irish breweries can benefit from the weak Euro currency to export to the US, UK and further afield and they can take advantage of the recovering consumer demand in the Eurozone. Irish exports would not only match quality but they could also be competitive alongside US and UK products exported to these markets. The costs associated with small batch exports may be offset by the strong dollar and sterling.

It is timely then that two significant events took place last week that hopefully will result in Irish breweries delivering on their export potential. Bord Bia’s Marketplace International 2015 saw 150+ Irish food and drink companies having access to 400+ buyers from over 25 countries. They could showcase their offerings in a sort of speed-dating format (i.e. a series of 20 minute one-on-one meetings). It was great to see Brú Brewery, Jack Cody’s, Metalman, Rye River and Trouble Brewing involved. Franciscan Well was also there as Bord Bia promotes all food and beverage products produced in Ireland. By and large each of the breweries have limited exports to date (e.g. average 5% of total sales) with the exception of Rye River reporting 40% export sales.

The other event was IFE 2015, a biannual food and drink event held in London. It brings together approximately 27,000 buyers and suppliers of food & drink products and takes over the entire Excel Arena in London. I worked at this event in 2005 and the scale is simply staggering. Whilst there was no Irish brewery exhibiting this year, the event is extremely useful for networking in the trade and meeting potential buyers and distributors. It was great to see the likes of Cotton Ball in Cork making it over to the expo.

Breweries at Bord Bia's Marketplace 2015
Breweries at Bord Bia’s Marketplace 2015

Hopefully events such as these can help these breweries and the others in Ireland take advantage of the extremely favourable export conditions. Irish breweries should be confident that they can follow in the footsteps of Carlow, the Porterhouse, Eight Degrees, Rye River and White Hag in having a significant export strategy. They should also aim to build on one-off or limited exports if it’s in keeping with their own business strategies. Isn’t it great to see the likes of Kelly’s Mountain on sale in Russia?

Scale’s obviously going to be an issue but improved market access can help attract additional finance. They may need ongoing help from Government agencies and the sector could benefit from more hands-on support from Enterprise Ireland. If negotiations on the Trans-Atlantic Trade and Investment Partnership (TTIP) are concluded, Irish SMEs are expected to benefit most from the new EU-US trade deal. This is some time off however and while it would make it easier to do general business in the US, the peculiar post-prohibition regulatory regime will remain in place.

This is not to forget that the market is still growing at home and the weak Euro may have a positive knock-on effect on consumer demand for Irish produced beers over UK and US imports. So far their prices have been steady but for how long can Irish distributors keep them steady? It will be interesting to watch effect, if any, does the exchange rates have on Wetherspoons’ prices as well.