It might be a struggle selling beer through the taps, but brewers have been pumping millions into bottling facilities to cash in on a retail ale bonanza. Graham Holter considers if they’ve been brave or foolhardy
The sight of the latest sales figures is usually enough to make brewers cry into their beer. But when it comes to bottled ales, the numbers have just gone to their heads. Drunk on their own success, even the smallest have been falling over themselves to install bottling lines to satisfy a seemingly insatiable thirst for real ale.
In its most recent survey, the Society of Independent Brewers (SIBA), which represents smaller, local beer producers, reports that bottled beer production among its members is up by 16%, compared with just over 1% for cask. Although cask continues to account for 82.5% of volumes, SIBA says bottled ale now claims 15.6% of its members' output and it's growing fast.
"Craft brewers are increasingly seeing the value of packaging their beers as a specialist category," says SIBA. "This has always been the case in the developing microbrewing industries in the US and in European nations without a strong beer heritage, such as Italy. It is now a trend in Britain that goes hand-in-hand with a need to be less dependent on pubs."
Last year, Shepherd Neame spent £4.5m on a state-of-the-art facility; in October, St Austell unveiled a £750,000 in-house bottling line capable of handling 100,000 bottles a week; Derbyshire brewer Thornbridge recently moved to new £2m premises that included bottling facilities; and just last month northern off-licence chain Rhythm & Booze said it would build its own £2m brewing and bottling plant.
Hall & Woodhouse's upgrade of its Badger brewery in Dorset will also include a new bottling line. Marketing manager Rick Payne is confident the investment is well aimed. "When I first started here 12 years ago, 5% of what we brewed was for bottling. Now it's 65% and in that same period we've doubled sales of the Badger brand," he says.
"When the recession started to hit a couple of years ago, there were initial signs that the premium bottled ale market was starting to plateau, but it didn't really happen. This market has seen double-digit growth over the past decade and it shows no sign of declining.
"Just in the past two or three years consumer penetration in the category has doubled. There's a new group of younger consumers aged 18 to 24 who significantly over-index in premium bottled ales (PBAs), which is great news for the future of the category."
The boom driven partly by the downturn in pub visits has been good news. Not just for brewers, drinkers and producers of glass, but, of course, retailers too.
Sainsbury's PBA buyer Oliver Chadwyck-Healey believes brewers' optimism is well placed.
"With ale sales in the off-trade in a healthier position than those in the on-trade, breweries are realising the potential of bottled beer and investing accordingly. Even some of our smaller microbreweries are investing in the machinery and then bottling for other breweries as well as their own."
It's also taking the category in exciting new directions, according to Tesco beer buyer Ian Targett. "More and more suppliers are bringing unusually flavoured beers for us to look at. This is challenging what people traditionally think of as a premium bottled ale and will contribute to the evolution of the category."
The arrival of 33cl alternatives to 50cl bottles has added an extra dimension to Tesco's range.
"Smaller bottles allow lower entry price points and encourage trial. Previously, price points were all very similar, which limited promotional options, but now with higher and lower prices and different size bottles we can offer more variety and include the larger packed formats in deals as well," says Targett.
The Campaign for Real Ale's awareness programme for bottle-conditioned beers now involves 160 brewers. Spokesman Jon Howard says: "When we released the latest edition of our Good Bottled Beer Guide last August, we found that in just three years the number of bottle-conditioned beers on the market had gone from 800 to 1,300." When CAMRA was formed in 1971, there were just five in regular production.
Shepherd Neame's 1698 is a bottle-conditioned ale, and sales and marketing director Graeme Craig says more launches are on the cards. Specialist beers, he feels, help give the PBA category a point of difference, which may translate eventually into more premium prices, safeguarding its future and justifying investment.
"If you want to buy a beer and let it mature and develop, clearly that's an added value and an added opportunity. We want to experiment with more bottle-conditioned products," says Craig.
"The pricing architecture associated with the category is incredibly flat. Brewers of PBAs have got to work much harder in bringing out the character and points of difference in their beers. An element of that may be bottle conditioning."
But Rupert Thompson, former chief executive of Refresh UK, the Wychwood and Brakspear brewer now part of Marston's, sounds a note of caution. "As the sector gets bigger, the usual market forces apply and you find that the big supermarkets start putting more and more pressure on margins, combined with the brewers themselves competing ever more fiercely.
"Margins have fallen substantially in the past five years and they're likely to continue. As the margins get squeezed out, so do some of the companies, and consumer choice gets limited again.
"I don't think anybody should be unduly concerned at this stage but everybody needs to be careful. If they knock the profit out of the category and screw smaller suppliers to the ground in the long term, that's not good for the category."
Microbrewers tend to hold firmer on prices and Thompson believes their presence helps counteract some of the downward pressure on margins. He would encourage smaller brewers to launch bottled products, but not necessarily to invest in their own bottling facilities.
Many brewers subcontract the job to a larger rival with spare capacity, or a specialist agent such as Branded Drinks in the Forest of Dean, which bottles and markets on behalf of about 50 brewers.
Director Gray Olliver is convinced brewers of bottled ales are only "scratching the surface". "I'm not convinced growth is going to plateau, and if it does we won't have done a very good job," he says.
"A number of brewers have set up their own bottling plants and I think there's a danger there that if they want to bottle efficiently the scale has got to be at a certain level probably more than your average small brewer is going to need. Bottling is different from brewing. A number of brewers have gone into it and wished they hadn't, because it needs a new skill set and it's a diversion from what they're really good at."
Thompson agrees. "A competent brewer can produce a high-quality cask ale but it's much more difficult to produce a consistently high-quality bottled beer. It's absolutely essential they choose the right bottler and watch quality very carefully."
Quality is key, agrees Martin Swaine, MD of Rhythm & Booze. "The more unusual and different the beer looks, the better it sells, as long as it delivers quality." While independent retailers have largely left bottled ale opportunities untapped, Swaine has seen sales grow 87% in the past year and is now delisting cans in order to stock more bottled ales. For him one of the attractions of ale is provenance.
"Who the hell knows where Carling is brewed anyway?"
Bottling it
Shepherd Neame unveiled its £4.5m high-speed bottling line which can rattle through more than 36,000 330ml bottles per hour in 2009 to help it meet rising demand for its flagship bottled ales Spitfire and Bishops Finger.
Sales and marketing director Graeme Craig says about 38% of the Kent brewer's output now goes into bottles, most of it destined for the off-trade, with multiple retailers accounting for a substantial share of its sales.
"Shepherd Neame was very much at the forefront of bottling we had a bottling line 30 or 40 years ago," says Craig. "Bottling was crucial for a regional brewer because the bottles had a greater share of the pub market years ago before we moved into a period of draught."
In March the company reported that sales of its own bottled beers were up by 11.4%.
The sight of the latest sales figures is usually enough to make brewers cry into their beer. But when it comes to bottled ales, the numbers have just gone to their heads. Drunk on their own success, even the smallest have been falling over themselves to install bottling lines to satisfy a seemingly insatiable thirst for real ale.
In its most recent survey, the Society of Independent Brewers (SIBA), which represents smaller, local beer producers, reports that bottled beer production among its members is up by 16%, compared with just over 1% for cask. Although cask continues to account for 82.5% of volumes, SIBA says bottled ale now claims 15.6% of its members' output and it's growing fast.
"Craft brewers are increasingly seeing the value of packaging their beers as a specialist category," says SIBA. "This has always been the case in the developing microbrewing industries in the US and in European nations without a strong beer heritage, such as Italy. It is now a trend in Britain that goes hand-in-hand with a need to be less dependent on pubs."
Last year, Shepherd Neame spent £4.5m on a state-of-the-art facility; in October, St Austell unveiled a £750,000 in-house bottling line capable of handling 100,000 bottles a week; Derbyshire brewer Thornbridge recently moved to new £2m premises that included bottling facilities; and just last month northern off-licence chain Rhythm & Booze said it would build its own £2m brewing and bottling plant.
Hall & Woodhouse's upgrade of its Badger brewery in Dorset will also include a new bottling line. Marketing manager Rick Payne is confident the investment is well aimed. "When I first started here 12 years ago, 5% of what we brewed was for bottling. Now it's 65% and in that same period we've doubled sales of the Badger brand," he says.
"When the recession started to hit a couple of years ago, there were initial signs that the premium bottled ale market was starting to plateau, but it didn't really happen. This market has seen double-digit growth over the past decade and it shows no sign of declining.
"Just in the past two or three years consumer penetration in the category has doubled. There's a new group of younger consumers aged 18 to 24 who significantly over-index in premium bottled ales (PBAs), which is great news for the future of the category."
The boom driven partly by the downturn in pub visits has been good news. Not just for brewers, drinkers and producers of glass, but, of course, retailers too.
Sainsbury's PBA buyer Oliver Chadwyck-Healey believes brewers' optimism is well placed.
"With ale sales in the off-trade in a healthier position than those in the on-trade, breweries are realising the potential of bottled beer and investing accordingly. Even some of our smaller microbreweries are investing in the machinery and then bottling for other breweries as well as their own."
It's also taking the category in exciting new directions, according to Tesco beer buyer Ian Targett. "More and more suppliers are bringing unusually flavoured beers for us to look at. This is challenging what people traditionally think of as a premium bottled ale and will contribute to the evolution of the category."
The arrival of 33cl alternatives to 50cl bottles has added an extra dimension to Tesco's range.
"Smaller bottles allow lower entry price points and encourage trial. Previously, price points were all very similar, which limited promotional options, but now with higher and lower prices and different size bottles we can offer more variety and include the larger packed formats in deals as well," says Targett.
The Campaign for Real Ale's awareness programme for bottle-conditioned beers now involves 160 brewers. Spokesman Jon Howard says: "When we released the latest edition of our Good Bottled Beer Guide last August, we found that in just three years the number of bottle-conditioned beers on the market had gone from 800 to 1,300." When CAMRA was formed in 1971, there were just five in regular production.
Shepherd Neame's 1698 is a bottle-conditioned ale, and sales and marketing director Graeme Craig says more launches are on the cards. Specialist beers, he feels, help give the PBA category a point of difference, which may translate eventually into more premium prices, safeguarding its future and justifying investment.
"If you want to buy a beer and let it mature and develop, clearly that's an added value and an added opportunity. We want to experiment with more bottle-conditioned products," says Craig.
"The pricing architecture associated with the category is incredibly flat. Brewers of PBAs have got to work much harder in bringing out the character and points of difference in their beers. An element of that may be bottle conditioning."
But Rupert Thompson, former chief executive of Refresh UK, the Wychwood and Brakspear brewer now part of Marston's, sounds a note of caution. "As the sector gets bigger, the usual market forces apply and you find that the big supermarkets start putting more and more pressure on margins, combined with the brewers themselves competing ever more fiercely.
"Margins have fallen substantially in the past five years and they're likely to continue. As the margins get squeezed out, so do some of the companies, and consumer choice gets limited again.
"I don't think anybody should be unduly concerned at this stage but everybody needs to be careful. If they knock the profit out of the category and screw smaller suppliers to the ground in the long term, that's not good for the category."
Microbrewers tend to hold firmer on prices and Thompson believes their presence helps counteract some of the downward pressure on margins. He would encourage smaller brewers to launch bottled products, but not necessarily to invest in their own bottling facilities.
Many brewers subcontract the job to a larger rival with spare capacity, or a specialist agent such as Branded Drinks in the Forest of Dean, which bottles and markets on behalf of about 50 brewers.
Director Gray Olliver is convinced brewers of bottled ales are only "scratching the surface". "I'm not convinced growth is going to plateau, and if it does we won't have done a very good job," he says.
"A number of brewers have set up their own bottling plants and I think there's a danger there that if they want to bottle efficiently the scale has got to be at a certain level probably more than your average small brewer is going to need. Bottling is different from brewing. A number of brewers have gone into it and wished they hadn't, because it needs a new skill set and it's a diversion from what they're really good at."
Thompson agrees. "A competent brewer can produce a high-quality cask ale but it's much more difficult to produce a consistently high-quality bottled beer. It's absolutely essential they choose the right bottler and watch quality very carefully."
Quality is key, agrees Martin Swaine, MD of Rhythm & Booze. "The more unusual and different the beer looks, the better it sells, as long as it delivers quality." While independent retailers have largely left bottled ale opportunities untapped, Swaine has seen sales grow 87% in the past year and is now delisting cans in order to stock more bottled ales. For him one of the attractions of ale is provenance.
"Who the hell knows where Carling is brewed anyway?"
Bottling it
Shepherd Neame unveiled its £4.5m high-speed bottling line which can rattle through more than 36,000 330ml bottles per hour in 2009 to help it meet rising demand for its flagship bottled ales Spitfire and Bishops Finger.
Sales and marketing director Graeme Craig says about 38% of the Kent brewer's output now goes into bottles, most of it destined for the off-trade, with multiple retailers accounting for a substantial share of its sales.
"Shepherd Neame was very much at the forefront of bottling we had a bottling line 30 or 40 years ago," says Craig. "Bottling was crucial for a regional brewer because the bottles had a greater share of the pub market years ago before we moved into a period of draught."
In March the company reported that sales of its own bottled beers were up by 11.4%.
No comments yet