Craft beer sector builds on incentive

Sector thriving with sales up 42.5% last year, says Bord Bia

Brian Cowen 's tenure as minister for finance is remembered mostly for the profligacy of the dying years of the Celtic Tiger but, in at least one sense, he showed a degree of farsightedness.

Cowen’s decision to halve the excise paid by microbreweries in the 2005 budget revived an industry which had shrunk to a few hardy suppliers. Excise is paid on product leaving the brewery. Halving the excise made it possible for microbrewers, defined as those breweries producing up to 20,000 hectolitres per annum, to retain more of their capital.

It also allowed them to offer their product at a competitive price in pubs and off-licences because the economies of scale make craft beers much more expensive to produce. The Irish craft beer market has never looked back. This St Patrick’s weekend, a t Dublin’ s George’ s Dock, the craft beer makers have set up their beer village for the third year in a row.

Ten beer suppliers and two craft cider makers – producing everything from a stout kept in a whiskey cask to a long list of ales and beers – will be displaying their wares. Some 11,000 customers passed through the doors last year.

The Irish craft beer market is booming. According to a report produced by An Bord Bia obtained by The Irish Times , sales rose by 42.5 per cent last year and are expected to rise by a further 35 per cent this year. The growth is mostly focused at home despite the recession and the waning drinks trade. Domestic sales were up by 55 per cent while exports were up by 26 per cent.

The endorsement of craft beers by the influential food writer John McKenna has had a “very positive” effect on consumption, Bord Bia said. More pubs and restaurants are seeing benefits of stocking craft beers to increase footfall at a time when the overall trade is declining, the report added.

These figures are impressive until one considers the craft beer market’s share of the total market. Last year, some 36,860 hectolitres of craft beer were sold worth €7.5 million. But the total beer production amounted to 8.514 million litres so craft beers are just 0.3 per cent of the Irish market. The even smaller craft cider market with four suppliers accounts for just 0.08 per cent of the Irish cider market.

The microbreweries have about 70 full-time and part-time employees. By comparison some 1,584 people work in what is known as industrial brewing.

Growing industry
There are now 22 Irish craft breweries. The Donegal Brewing Company, which opened at Christmas time, has just got a distribution deal with Superquinn for its Donegal Blond beer. There are now two microbreweries in Donegal, the other being Kinnegar beers. Across the Border the newest kid on the block, the Red Hand Brewing Company in Donaghmore, Co Tyrone, produces its first beer this weekend.

Half of Ireland 's microbreweries have come on stream since 2009 when the recession really started to bite. It remains, however, an infant industry. Britain, where the traditions of local breweries never died out, now has 1,009 breweries at the last count, the highest on record.

Craft beers account for between 5 and 6 per cent of all beers sold in Britain and US. A similar target in Ireland would see the nascent industry increase fifteenfold.

"If you look at the models of other countries, I would say there is room for about 100 breweries. Every major market town could support a brewery," said John Duffy from Beoir, the beer consumers' association for Ireland.

“It’s on a huge upswing. It started to accelerate in 2007. The number of pubs specialising in craft beers is increasing. We are seeing normal pubs, that would have not paid much attention to the craft beer bubble, as it seemed a few years back, now starting to sell them and the range is growing that way.”

Traditionally, Ireland’s reputation as a world-class drink producer has been centred on a small number of products, most notably Guinness, Jameson and Bailey’s.

That reputation masked the absence of a microbrewing or microdistillery culture, which is only creeping into Ireland. It also explains the dreary lack of choice which still confronts the majority of Irish pub drinkers offered mass-produced industrial lagers such as Heineken and Budweiser.

“It’s been a very difficult market for any brave or foolish soul who has raised the finance to open a brewery,” explained Duffy. “You’re competing against every billboard, every TV ad, every sports tournament that is sponsored by the big brands. Trying to build a brand against that is very difficult.”

The difficulties have not stopped Englishman Tim Barber (37) setting up Metalman Brewing Company in the Tycor Business Centre in Waterford city two years ago along with his girlfriend and two others.

They have three employees and Mr Barber is now confident enough to quit his job working in IT to go full-time with Metalman. He said setting up a microbrewery needs “at least” €100,000 in capital and a year’s planning.

“It is not a cheap exercise and not to be entered into lightly. Times are tight for all small businesses,” he said.

The product, most notably the beer Metalman Pale Ale, is now in 45 pubs throughout the country. “We have nice cash flow now and we’re investing in new product.”

O'Hara's in Co Carlow is proof that microbreweries can endure and are not a passing fad. Founder Seamus O'Hara, who also runs the beer village, set up O'Hara's in 1996 when it was neither popular nor profitable.

The microbrewery produces 15,000 hectolitres a year making it one of the biggest of its kind in the State. Half of its output is exported, but those export sales are under pressure from domestic demand, a happy problem.

“A few years ago, every pub was busy. They all had the same product. They didn’t care about the customer because they came in anyway,” he said. “Since the recession started they have had to reinvent themselves. Five years ago we were in five pubs, now we’re in 100. The whole pub scene has opened up.”