A catatonic beer industry

After several years of careful consideration as to the future of Hardknott and in particular after I have examined the beer industry very closely it is my sad duty to inform you that our brewing facility at Millom will very shortly cease production. It simply isn't sensible for us to invest any more of our own personal equity in a market that is so saturated, and where brewery gate prices are stagnant when costs are rising year-on-year.

It continues to frustrate me that many commentators in the industry are heralding how massive the craft beer thing is, and yet stupefied by what appears to me to be an inevitable likelihood of massive attrition of many small brewers as they realise that making money at this daft job is the preserve of very few.

We do not know yet what the future holds. We have a hope that we may well keep the Hardknott ethos and beers alive in a way that stands by the provenance and spirit from which we were born. We are already engaged with potential partners in this regard and hope to have some news soon.

We also have beer in tank and some stocks. We think at current rates of sale, and with stuff in production, we'll have beer until May or June, and selling it would make me feel a little happier.

What I can say is that I am in many ways relieved. Also very sad, obviously. It is now over 12 years since we first started brewing. I have learned a lot, and potentially discovered some fairly uncomfortable truths about the beer industry. It is for this reason I am relieved, because I am likely to be much more forthright regarding the many things that are so wrong with the industry, and there is plenty, trust me.

A period of reflection, perhaps some time-out, perhaps a regroup and restart, or perhaps I'll just find a job, who knows?

Meanwhile I have a busy week. Two great things are happening this week. I do have a life outside beer and musical theatre has been a helpful therapy when I've been going through periods of disillusionment with the beer industry.  I am very proud, the week Andrew Lloyd Webber has his 70th birthday, to be involved with a likely sell-out¹ 7 performance run of an amateur² production of Cats.

This same week we have the micro-brewing legends that are Sue Hayward and Gazza Prescott visiting to take part in a Waen/Hopcraft/Hardknott collaboration brew, and laugh at me in a unitard. Watch out for what might be that swan-song of our endeavours.

I hope to return here in due course to start a constructive appraisal of life as a micro-brewer. I have a lot of damming things to say about the way the beer industry works. The way in which SIBA and CAMRA alike are missing some very important issues that could be resolved to make the micro-brewing sector much more sustainable for the poor souls who are brewing, and who often have nothing but a dream of getting good beer to good people.

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¹It is likely that all performances will sell-out. As I type this there are only 21 tickets for Saturday matinee. The rest of the performances are completely sold out. (I believe there may be a small number of returns available each night very much on a first come first served basis)

²Giving the company the term amateur really does not do justice to the talent in this society. I'm only a small cog in this 51 strong cast and the professionalism is incredible. It's going to be a great show.

SIBA - The Voice of British Brewing?

I may well get my arse whooped for this. Yes, I'm going to discuss SIBA AGM again in this publicly accessible medium. My robust defence is that those in favour of the current direction of SIBA can, and do send their points of view out to all members. We, those who are constantly exasperated by the failure by the exec to listen to what we are saying, have no way to reach the very same people unless we broadcast it.

There seems to be two motions being presented to the AGM. I discussed one on my previous post. The other motion is against what I believe to be the right course for SIBA and I shall try and explain why.

I only have one trade body. There is also the BBPA and the IFBB, but neither of those organisations are suitable for me.

SIBA wishes to have a vision statement that reads;

To deliver the future of British beer AS THE voice of British INDEPENDANT brewing.

The capitalisation is as written in the motion document.

I'd like to vote against this on the basis that I do not want my trade organisation to have this vision. Unfortunately the previous vision statement read;

To deliver the future of British beer and become the voice of British brewing.

It is this very vision that is used by the organisation to argue for much of the detail that it does, which is against the interests of the majority of members.

The reasoning behind this is that it is argued that SIBA should lobby universally as one voice to Government for the whole of the UK beer industry.

Having sat on the SIBA policy committee I can absolutely give the reader full assurance that SIBA will not look after the interests of brewers under 5,000hl. Indeed, they are planning on weakening SBR¹ and will be making representations to Government to that effect, if they haven't already done so.

If representation to Government is needed that is universally for the good of the whole beer industry then SIBA can join with the other trade organisations and deal with them on a case-by-case basis.

It is inconceivable to me that us little artisanal producers can be represented by the same organisation that represents some quite large Public Limited Companies who are listed on the stock market. They already have their own trade organisations.

I'm now kicking myself that I didn't get around to my own motion to counter this sort of nonsense. However, minded to vote against just to frustrate the process.

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SBR = Small Brewers Relief = PBD = Progressive Beer Duty. Currently every brewer below 5,000hl gets 50% discount off beer duty. Above 5,000hl brewers are capped at a cash relief per hl% and above 30,000hl up to 60,000hl this relief is slowly, and quite painlessly removed.

There is an argument that states that brewers find it hard to climb above 5,000hl because the shape of the relief inhibits growth. Actually, I have evidence that proves very much that although there is an elbow in the profitability curve that shows improvement in profitability slows as breweries go through the 5,000hl level, actually profitability still increases, all be it at a slower rate.

See output from a certain bit of work I've been doing in the chart below.

What is crucial is to note that profitability is rare below about 2,500hl, although the model data does show significant error bars and profitability is evident in a small number of cases; exploring this may be interesting.

This however, is the subject of a future blog post.

Who should be allowed as members of SIBA?

SIBA started life as the Small Independent Brewer's Association. Some people don't think that matters. I think it matters a lot.

SIBA was set up to try and tackle a specific problem in the beer industry; the beer tie, and the barrier that creates to access to market for the very smallest of brewers. The organisation has now moved to a place that is trying to be "the voice of British brewing" It is inevitable that, perhaps with the exception of a few like myself, the strongest voices are those of big business.

DDS was invented and then it changed its name to BeerFlex, apparently to reflect the idea that brewers could set their own price. However, us brewers have never been able to set our own price, the Pub Companies do that, and have recently driven the price down significantly to the point it is completely bonkers for us to even consider. Larger brewers, above say 3,000hl, can afford to consider this route to market as economies of scale permit a lower delivered price for the beer.

This is just one example where SIBA has turned away, be it deliberately or not, from the needs of the micro-brewer; the true small brewing business. They are not progressing any actions with vigour that might improve my route to market, but are instead protecting and improving the interests of brewers significantly larger than us.

There are a number of like-minded brewers like myself that feel SIBA is failing to represent the little guy. There were several motions at last years AGM calling for the largest of brewers to be removed from the associate membership category as it was felt very strongly that a disproportionate amount of  influence was being exerted by the big players in the business. Some of those motions succeeded, but the key one, to remove breweries from membership if they were above 200,000hl, was cancelled from the vote due to the success of a weaker motion put forward by myself.

It is my view, from the mood of the attendees at AGM, that the motion to remove completely the brewers above 200,000hl would have been successful had it been put to the vote.

This year there is a motion being tabled that rather than removing the breweries from membership who are over 200,000hl we permit any brewery in so long as it isn't a global brewery¹.

Now, that is all very well, and of course any region can submit a motion. The thing that has really got to me is the fact that news of this motion has been placed under embargo; we are not supposed to publically talk about it. However, SIBA exec can email every single member with their attempts to get this motion passed.

Furthermore, and really crucially, SIBA exec have cynically tightened up the rules regarding the organisation of proxy voting². This is especially important. It is important that for the sake of micro-brewing you do not let these barriers prevent you form voting just because you cannot get to the AGM.

There are around 1,000 SIBA members. The vast majority of them are very small businesses indeed, and yet direction is coming from a few brewers of much more significant size.

Breweries of my size find it very difficult to get to AGM. The costs, once you factor in travel and accommodation, run in to a significant amount of money. Even supposing your little micro-brewer is flush with cash, which he isn't, finding the time to get away from the business is extremely difficult. He or she is already doing 80 hours a week, as head brewer, van driver, accountant, HACCAP author, cask washer, copper scrubber and general all-round dogs body, finding time to get away is often impossible.

With urgency I am calling upon all brewers who are members of SIBA to reject the motion asking for the membership to be enlarged to take in the biggest³ PLC brewing businesses. If this motion succeeds we can be sure that SIBA will move even further way from the interests of the current membership.

Proxy voting has been made particularly difficult it seems. Couple that with a gagging order on us talking about the issue shows clear intent to subvert the course of this particular democratic process. It is your duty to ensure you get your proxy vote set-up up with urgency.

For this reason I have decided to break ranks and ignore the embargo, hence this blog.

Please do not let a few 10s of people dictate over 1,000.

Protect the future of YOUR trade organisation.

PUT IN YOUR PROXY NOW!!

Proxy voting nominations need to be in by 5pm Monday 12th March. IT CAN BE AN EMAIL ATTACHMENT.

Hardknott is happy to act as proxy, please get in touch.

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¹I fully expect that the detail of the motion will be pointed out to me: i.e. that only those under 1% of the total UK beer market will not be allowed.

Except there is a clause stating the the board can override that. Considering I have little faith in the board it'll not be long before we see even bigger breweries permitted membership.

²Apparently a simple email is not sufficient to register a proxy vote. It must be a signed letter on company headed paper. I mean, I don't know about the reader, but I haven't got company headed paper. OK, I've got a Word template.. but really, company headed paper?

For clarification, it can be an email attachment, apparently. But then why not just an email? For goodness sake this is what we do most of our business by, very rarely needing an actual wet signature.

³I believe it to be important to point out that SIBA is my only trade organisation. Larger brewers have BBPA and IFBB. One has to question why the largest of brewers want access to our trade organisation, the very trade organisation that is suposed to be protecting us against the largest of businesses. They claim we'll get benefits. Well, I have a lot to say on the supposed benefits of working with large PLCs. It isn't as good as you might think.

The state of Micro-Brewing

There is a lot wrong with the beer industry.

"What?" I hear you say, "There are loads of breweries out there, and the choice is fantastic"

"Not only that" you are bound to continue, "The Government has fixed the problem of the beer tie by forcing pub companies to allow market rent only deals"

"And look, I've seen various brewers, big and small helping each other out" no doubt you'll explain with exasperated irritation in an attempt to convince me that the whole brewing industry is a friendly place.

Well, it is a significantly less friendly place than you might believe. I have friends in the brewing industry, this is true. I even have some personal friends in organisations that I am probably about to upset. There are quite a few breweries that I would always be happy to pally up to, mostly they are either around the same size as my very modest business or perhaps just a shade bigger than me.

What I can say is that there is a growing underground of like-minded brewers that are becoming increasingly irritated at the way things are going. We are looking to fight back against what is becoming an apparent attempt by the established industry to do it in for micro-brewing.

Brewing is becoming a very, very aggressive and unpleasant place to be. Since I started brewing overall UK beer sales have dropped by 25%. In contrast the number of breweries has quadrupled. The wholesale price of beer is dropping and many of the people I am talking to on a daily basis are losing sales volume in an alarming way.

I want to write a lot about this, but have increasingly felt the need to hold my tongue over the last few years. Doing collaborations with large PLC brewers and working closely with SIBA have in particular inhibited me from speaking out as much as I'd like to.¹

Meanwhile I see my sales dropping, at a time when really I need to grow them to survive.

Coincidence? I don't think so.

I have a lot to say and the success of my business was built in the early years by my blog and the way I wrote it. I feel I have been gagged by engaging with the broader brewing industry and reigning in my thoughts in the mean time.

I am therefore intending on entering a new phase of engagement in a much more open and honest way, without fear or favour and explain where I think things are going wrong and how that might well see a partial collapse and retreat of the micro-brewing sector of the industry in the near future.

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¹The reasons for this are complex, multi-faceted and beyond the scope of this initial post, but I'll be following up with further posts explaining this in detail.

Is it good to do collaborations with Family brewers?

There are a lot of burning issues I could blog about at the moment, but there is one I need to get out of the way urgently.

In the wake of Fullers buying Darkstar does the reader think that our collaboration with Fullers has been good or bad for the image of Hardknott?

I would like frank and honest answers here. A good debate would be fantastic. I honestly want to know the answer because from my standpoint there are some huge positives and some huge negatives. I know which way the economics balance at the moment... but in business kudos often far outstrips short-term considerations and I simply cannot afford to be wrong on this one.

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