A sign of decline

Many years ago, when I was a young man,¹ I was introduced to a local Cumbrian brewery called Yates. Their bitter was at the time an interesting addition to an otherwise well established traditional base of cask beers in Cumbria from the likes of Jennings in Cockermouth and Hartley's in Ulverston. Subsequent closure of Hartley's and the selling of Jennings to Marstons effectively made Yates the oldest independent brewery in Cumbria.

Yates has a place in my heart. In 1986 when it was first established there was very little in the way of microbreweries in Cumbria, if any at all. As a young man it awakened my interest in the brewing industry and was probably an important, if subliminal influence when I considered my own brewing career.

I was saddened to hear a few weeks ago that the current owners, after trying to sell the brewery as a going concern, have decided to simply close the brewery. Having heard on the local grapevine I was waiting until I saw an official word before comment. This brewery closure does sadden me somewhat for a number of reasons.

Quite apart from the fact it is a shame the oldest and most established independent Cumbrian brewery is closing, for me it is something of a weather-check on the state of the industry and the market for independent beer. Moreover, it is an indication perhaps of the likely value of such breweries should any owner wish to find an exit strategy. I feel this is a significant issue for anyone looking to invest in any brewery operation.

Profits for most breweries in receipt of full duty discount is tiny. Indeed, I have some data² that shows  the average brewery below 5,000hl annual production will be lucky to break even. Some will make a profit and some will make a loss. If it is not possible to sell a brewery upon retirement then it is highly likely an overall loss will be made on exit from the industry in most cases. It seems to me that if Yates cannot sell, as a well established business and known brand, then what hope is there?

Caroline and Graham Baxter, who wish to retire
and cannot find a buyer for their brewery.

Of course growth to a bigger and more healthy business might be an answer, but if a significant number of the estimated 1,400² breweries under 5,000hl were to grow to an average of say 10,000hl  annual production, which is where I believe we'd need to be to see significant value in the brewing business, then this would represent an increase of their combined share of the beer market from around 3%² to over 30% of the total beer brewed.

I cannot see how this is even remotely achievable without a much greater revolution in the beer industry. Total volume brewed currently by breweries under 200,000hl is about 9%³ of the total beer brewed and of that about 7%⁴ is brewed by SIBA full brewing members. To move a significant number of current sub 5,000hl breweries into a strong position we'd need to take significant volume away from the global giants, and although I'd love to see that happen, I doubt it actually ever will.

It remains for me to wonder what the future is. Personally some rationalisation and combined business collaborations would be a sensible move. I did approach Yates when I heard they were up for sale to explore how we could work out a deal. We couldn't afford the freehold, but might have been able to work out how to find value in the brand and the equipment and work out a deal. Apparently our approach wasn't welcome.

I think more innovative business solutions need to be explored if the current micro-brewing sector is to thrive. I've looked at a few options, and with only a few exceptions owners of micro-breweries don't seem to get it and seem determined to plough a lonely and pointless furrow.

--------


¹Indeed, it was a very long time ago.

²Data has been confidentially supplied to me by SIBA.

³Combined SIBA data and BBPA data

⁴Estimates by SIBA