Seamus O’Hara optimistic about Irish craft beer industry’s future

It is almost 20 years since Seamus O'Hara founded the Carlow Brewing Company.

Back in 1996 the outlook for the discerning beer drinker was “very bleak” as he recalls. Ireland once had a proud brewing tradition with dozens of small breweries dotted around the country. In 1850, at the end of the famine, there were 95 breweries. By 1960, that figure had whittled down to eight and Guinness bought up many of those remaining.

The result was a dreary beer landscape dominated by tasteless imported mass market lagers, unlike any in Europe where the culture of small local breweries has survived.

To a certain extent that remains the same in Ireland. Most pubs and off-licences continue to serve only the established brands, but there has been a sea change in attitudes in recent years. Craft beer is now the David taking on the Goliaths of the brewing industry.

Britain has always retained its small breweries. The denizens of the Campaign for Real Ale (Camra) may have had a reputation for being hairy eccentrics, but at least they took beer seriously. Few people in Ireland were doing the same.

Seamus O’Hara lived in the north of England for many years where he witnessed the survival of the small local brewery.

He had graduated from DCU with a degree in biotechnology, which included brewing, and was an active home brewer. When he came home in 1996, he immediately set up the company that would produce O’Hara’s.

His first brewery was in a goods store beside the train station in Carlow town. Others who set up around that time were the Porterhouse and Franciscan Well. They started out as brew pubs and are still going. These three are still the dominant players in an expanding market, though O’Hara recalls seven or eight others who set up around the same time but did not last the course.

The Carlow Brewing Company produces the very successful O’Hara’s range of craft beers, an acclaimed stout, Leann Folláin, myriad seasonal and one-off beers and now a cider too.

The brand is now in 150 pubs and 25 countries worldwide. It also owns its first pub, O’Hara’s Brewery Corner in Kilkenny, and is on the lookout for some more “though it’s not the main focus of our business”, he contends.

Carlow Brewing Company has won multiple awards most notably for Leann Folláin, Curim and its Double IPA.

The company also produces the O'Shea's range for Aldi and a stout for Marks & Spencer. The O'Shea's sell at a price of €1.89 a bottle.

“It was a good way for us to get beer in that market. Our beer is the most expensive in Aldi. It is well priced but it is a premium beer for Aldi. They are good partners to work with. We would like to continue working with them, but the main focus is our own range.”

Tax incentives

The craft beer industry in Ireland only took off when Brian Cowen introduced tax incentives for microbreweries in 2005. His decision to halve the excise paid by microbreweries gave the industry the incentive it needed to compete in a world dominated by brewing behemoths with the deepest of deep pockets.

The success of O’Hara’s and others was recognised in the last budget when the threshold for the excise relief ceiling was raised from 20,000 hectolitres to 30,000 hectolitres.

Recently the Carlow Brewing Company began a collaboration with Starr Hill, an American brewer, producing a hybrid Irish-American beer called Foreign Affair. The beer uses Falconer Hops, hitherto only available to American breweries. Constant innovation and experimentation has been a hallmark of the Carlow Brewing Company.

Seamus O’Hara says they are currently operating towards the higher end of the 30,000 hectolitre scale. Carlow is among the biggest of the craft brewers, but it is a minnow compared to the likes of Guinness, which produces more than five million hectolitres of alcohol a year.

O’Hara maintains that the 30,000 hectolitre cap is a hurdle to growth. Ambitious breweries such as his cannot plan for expansion while an artificial cap is imposed and craft breweries cannot compete with the larger breweries without excise support.

“If we want the sector built up, we don’t need these barriers. It is a tough sector and we need this support,” he said.

He believes that the limit should be expanded and excise relief tapered over a certain amount. What should that amount be?

“The limit in most countries in Europe is 200,000 hectolitres. My gut feeling is that it needs to build up so that companies can achieve genuine scale and then be tapered beyond that in a controlled way.”

He would like the Government to raise the threshold to at least 50,000 hectolitres in the next budget and scale it up gradually to 100,000 hectolitres.

The relief on excise duty is absolutely critical to the microbrewing industry. Economies of scale mean it is much easier for the large breweries to produce alcohol cost-effectively. O’Hara reckons microbrewing is 10 times as labour intensive as industrial brewing. At present approximately 1,800 people are employed in brewing in Ireland. The microbrewing sector accounts for approximately 200 of those employed, some 11 per cent of all those employed in the industry.

O’Hara’s itself accounts for almost one in five jobs in microbrewing in Ireland. The company has just under 40 employees, but advertised for 12 people earlier this year. By the end of the year he expects, to employ 45 people.

Home, since moving out of Carlow town in 2009, is a premises in an industrial estate in Bagenalstown. It was the subject of some €1.5 million worth of investment last year and O’Hara has further plans to expand.

Brewing behemoths

Year on year, the craft brewing industry is expanding by between 40 and 50 per cent, and yet it may only be at the foothills of its potential. At present, it accounts for between 1.5 per cent and 2 per cent of the overall beer market in Ireland with sales which surpassed €15 million last year.

The United States had a similar beer culture dominated by a small number of brewing behemoths. Its beer revolution began in the late 1990s, meaning the industry is a decade ahead of where Ireland is, and it now accounts for 11 per cent of all sales by volume and almost 20 per cent by value – a $20 billion (€18 billion) industry.

Were the Irish craft beer sector to aspire to such success, it would need a five-fold increase in size. Such a target, O’Hara believes, is achievable. There are now approximately 50 microbreweries in Ireland and 15 to 20 companies having their beers contract produced while they build premises.

Many of the newest kids on the block will be exhibiting their wares at the RDS Craft Beer festival at the end of this month. His advice to would-be brewers is simple. If you are looking to make a quick buck, you are in the wrong business.

The market is fiercely competitive, O’Hara says, and brewing is hard and demanding work. When he started out, he delivered bottles and kegs all day and night.

“Be prepared to work hard and don’t underestimate the level of financing required. There is a bit of a buzz around craft at the moment. For people who like beer, they are doing what they love. It is not a nine to five business and our clients are not nine to five. You have to be there for them.

“To grow you need to invest significantly as an industry. The momentum is in the market. There is no reason why we can’t reach 5 to 10 per cent. This would have a significant impact on job creation because the industry is dispersed throughout the country. Every job created in a brewery creates another job outside.”

O'Hara has confidence in his products believing that, fundamentally, the craft beer industry is consumer-driven not marketing -driven. The money Heineken Ireland is spending on promoting its new cider Orchard Thieves would probably consume the entire marketing budget for the Irish craft beer industry many times over.

O’Hara’s logo is “brewing in the taste”. O’Hara believes the big breweries brew out the taste to produce products acceptable to a mass market.

But the larger brewers are also eyeing the industry and seeking to imitate what has been achieved.

The Independent Craft Brewers of Ireland (ICBI), of which he is a member, is working on a logo which will be placed on all Irish-made craft beers, but they have to be Irish-made.

“There are definitely some brands on the market that claim to be Irish and they are not,” he says.

Commercial clout

In order to qualify as a craft beer, a product will have to come from an independent brewery not attached to a major beer conglomerate. For that reason, O’Hara says a company like Franciscan Well, which has been taken over by Moulson

Coors

, is no longer a craft beer company by his definition.

“There’s nothing wrong with that, but they are part of the Molson Coors brand and that’s a totally different set up from a small independent brewery that is Irish owned in terms of its resources. You have a lot more commercial clout if you are part of a large organisation such as that. The whole culture changes, there is no point in pretending otherwise.”

Has he ever been tempted to sell up and allow O’Hara’s to expand using the clout of the major breweries?

“No,” he respond, “it is a different business as a small independent. Your resources are a lot more limited. It is only fair that consumers know the difference and then they can make their own choices, but mostly it is about producing good beer and the consumer doesn’t care where it comes from.

“Strategically, it would open up logistics and scale, but we would be a different animal. I like the freedom and flexibility in being independent.

"Independent breweries are run by people who are interested in beer and the focus is on the beer; the beer conglomerates are run by accountants." CV Name: Seamus O'Hara Age: 51 Position: Managing director, Carlow Brewing Company Family status: Married to Kay who also works at Carlow Brewing Company. Outside interests: Hurling (retired), golf, music . Something that you might expect: Co-founder of the Irish Craft Beer Festival (RDS, August 27-29th). Something that you wouldn't expect: Keen wind surfer while in sunnier climes.

CV