This changes everything
12 months after Britain began its fractious new relationship with the EU, the nation’s craft brewers are still counting the true cost, writes Jo Caird
Saturday 18 December 2021
This article is from
Brewing the Future
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The 18 casks of Fyne Ales beer went on their way as normal that warm summer day. Anywhere between five and 15 pallets are dispatched from the Scottish farm brewery each week and this one – a mixed pallet made up of mainly Fyne Ales flagship Jarl session blonde ale – was no different.
The beer journeyed south though Argyll and Bute, crossed the border into England and arrived at a warehouse belonging to one of the brewery’s wholesalers. From there, the casks were supposed to be loaded onto another lorry and delivered to their final destination, one of the hundreds of pubs across the UK that stock Fyne Ales beer.
But that didn’t happen. A shortage of HGV drivers meant that there was no one available to do the drop. The beer, which needs to be kept at cellar temperature, stayed in the hot warehouse all weekend. By the time a driver had been found, all 1,300 pints of that tasty, tasty ale were unfit for sale.
“It had to come back to us and go down the drain,” says Jamie Delap, Fyne Ales’ managing director. While he’s not keen to repeat this “deeply frustrating” experience, it’s better than the alternative: “You'd always rather pour beer away than risk the customer not getting beer in perfect condition. If you have to do it, you have to do it.”
You'd always rather pour beer away than risk the customer not getting beer in perfect condition
Until quite recently, when that same shortage of lorry drivers caused us all to lose our collective shizzle at the petrol pumps, Brexit probably felt like quite an abstract idea to a lot of us. Whichever way you voted, chances are that Britain having left the EU hadn’t made a huge impact on your day-to-day life. Maybe you were miffed at having to pay a customs charge from something you ordered from the EU. Maybe you were thrilled at the arrival of your new blue passport. For plenty of us though, it’s likely that Britain outside the EU probably felt a lot like Britain in the EU.
That’s not something that can be said for those running craft breweries, however, who’ve been hit by a panoply of Brexit-related problems, all coming at a time when businesses are, thanks to the Covid-19 pandemic, least able to weather them.
“Brexit is a word that fills us with negativity, frankly. I can’t think of a single positive thing to have come out of it,” says Kerry Campling, director of Time & Tide Brewing in Kent.
Supply chain reaction
The HGV driver shortage – the result, at least in part, of 16,000 UK-based European hauliers opting to return to their home countries after Brexit – is a major headache all by itself. Not only are breweries finding it more difficult to get their beer to customers, the lack of drivers is also causing serious delays elsewhere in the supply chain, affecting everything from ingredients to packaging materials. That’s alongside the shortages caused by delays to products coming into the UK from Europe, the result of vastly more complex bureaucracy around imports. And, on the domestic front, a lack of workers at British factories.
It’s worth pointing out at this stage that many of the problems associated with Brexit are also bound up with the ongoing impacts of the pandemic. It’s extremely difficult to isolate causes and effects, particularly for brewing, a sector that was hit harder than most by Covid-19 lockdowns. That said, the chair of the Office for Budget Responsibility, a guy who presumably knows his stuff, is of the opinion that Brexit will have a bigger impact over the long term than Covid-19, reducing the UK’s GDP by 4 per cent as opposed to the pandemic’s 2 per cent. It’s fair to say that Brexit has a major pain in the butt for British brewers.
Whatever the cause, the result, says Eddy Dallas, co-founder of Freestar, a London-based company specialising in zero-alcohol beer, is that “there's just a lot more just problem solving and firefighting.
“Every supplier in the supply chain and every customer that uses the same manufacturer is much more irregular with how they can operate so everyone's production runs move all the time,” he explains. “And that has untold consequences.”
That might mean delays delivering to customers or, in the most extreme cases, having to throw away entire tanks of beer because the bottles and cans haven’t arrived in time.
Shortages are affecting almost every element of the manufacturing process. At Fyne Ales, they’re experiencing major issues getting hold of mini-casks, which are produced Germany. Time & Tide are seeing a shortage of cans and malt, to the extent that they’ve had to change their recipes. At the start of the year, says Mark Pether, founder of London-based Mammoth Beer, there were long delays for American hops because Yakima Chief, one of the big US suppliers, imports to the UK from a base in Belgium.
Some breweries were able to prepare for shortages by stockpiling ahead of the UK leaving Europe but that wasn’t an option for everyone.
As a small business, we don’t have a huge cashflow to buy in a years’ worth of can supplies
Those breweries that were able to invest in building up stocks also had to factor in the increased cost of storage, not a minor issue for businesses based in cities like London where space is at a premium.
Ultimately of course, those supplies couldn’t last forever. “Extra stocks put in place ahead of transition helped smooth the first months,” says Jamie of Fyne Ales, “but we are now way beyond the point at which those have been exhausted.”
Ingredients and materials aren’t just getting to breweries more slowly, they’re also costing more. A lot more.
“These days when you get a letter from a supplier telling you that they’re putting prices up by 10 per cent, you’re almost relieved because so many of them are going up by 20 per cent,” says Jamie.
As with shortages, price increases are widespread. Greg Hobbs, director of brewing at Five Points Brewing Co in London, reels off a list of materials that are now far more costly than they were before Brexit: cardboard, glass bottles, the crown caps for those bottles, aluminium for canning. “Almost everything I can think of has gone up,” he says.
The cost of loyalty
For goods coming to breweries from Europe, on top of those price rises are the additional costs associated with the fact that the UK no longer enjoys free trade with countries in the EU. Tariffs – more tax to pay on imported products – as well as extra fees levied by sellers needing to cover their own admin costs, and massive amounts more red tape, are all hitting breweries where it hurts.
Mark Pether of Mammoth recalls ordering a new piece of brewing kit from Holland well before the Brexit deadline. By the time it finally arrived, after the UK had left the EU, “there was a big surcharge whacked on top”.
“It's definitely made me reconsider my ordering tactics. I'm way more sceptical about ordering things that are outside the UK,” says Mark.
“For a pro-Brexiteer, that's probably what they want to hear: ‘Oh great, everyone's buying British.’ But sometimes the selection isn't as good, sometimes the price is much higher. You're not guaranteed quality staying inside the UK. There was a reason everyone was shopping around before.”
The increased paperwork around post-Brexit imports is bad enough. The hoops breweries now need to jump through to access the export market are something else altogether.
Exporting used to be a “fairly lucrative source of income” for Time & Tide, explains Kerry. Yet they’ve had to abandon this “area for growth” – at least for the time being.
“As a small company, we didn’t have the resources to send teams of people off to be trained how to effectively navigate the new rules and systems. The previous rules were convoluted enough! The result has been more red tape, huge amounts of admin, high costs for smaller companies using export partners, and a general feeling of, ‘Is it worth the effort?’.
“For us, it hasn’t been – although it is an area we will explore again next year in the hope things have become clearer.”
Greg at Five Points has been asking himself the same question: “All this extra hassle and all the extra costs, it's eating into our margins. It's getting to the point that we can either put the prices up or we double down on London or England or the UK and focus on here.
“Which is a shame because although [export] is not a big part of our business, we have relationships with our importers in various different countries in Europe and I'm sure they would be sad to see it go.”
It’s not just the hassle of filling in all the right forms – even if you’ve done everything by the book, there are plenty of ways things can go wrong. Greg gives the example of the faff he now encounters when Five Points’ European customers return the brewery’s kegs, empty, ready for refilling and sending back out.
“That was all fairly straightforward. What we're finding now is that those empty containers will get to customs and just get stuck there,” he explains.
“No one quite knows what they are. They’re metal with nothing in them, there’s no liquid in them anymore. There's all the different codes that you have to use and there isn't an accurate code for these containers to come back. It's just one of a list of issues that just feels really painful and a bit silly, if I'm perfectly honest. They’re stuck and we can’t get our hands on them.”
The means of production
There have been benefits to leaving Europe too, for some brewery production staff at least. In response to a labour shortage that’s being felt across the brewing industry – part of the labour crisis that’s also affecting logistics, hospitality and healthcare – Five Points has raised salary levels for entry level staff.
It’s something that Greg was happy to do – he points out that Five Points was the first brewery to become an accredited living wage employer, back in 2014 – but he is acutely aware that such a move has financial implications.
“It is adding quite considerably to our costs. We haven't put up any big price increases recently but we’re almost certainly going to have to cover these things. Almost every aspect of the business has become more expensive,” he says.
Punters pick up the pain
He’s not the only brewer with an eye on profit margins, though there’s little appetite to raise prices for consumers. For some, doing so makes poor business sense: “Because we're so new,” says Mark of Mammoth Beer, which began brewing in January 2021, “it wouldn't make our sell any easier if we'd turned up and said, ‘Oh, by the way, we're 10 per cent more expensive than everyone else’.
“So we've just had to roll with it and stick to our pricing plan which was price matching the people we see as our equivalents.”
For others, there’s an unwillingness to pass on the pain. “We haven’t increased our prices for two years,” says Kelly of Time & Tide. “Because the industry and our customers have had such a rough couple of years with everything that has happened - and it’s not over yet - we decided to maintain some stability and predictability as best we could for as long as we could.
Beer certainly helped get me through the really tough patches of the pandemic
Despite brewers’ reluctance, it seems like, before too long, something will have to give. Fyne Ales hasn’t raised the prices of any of its core beers but Jamie says that, when it comes to pricing up new specials, the increased costs of production are “already feeding through”.
“We brew a beer we want to brew because we think it's going to be good,” he explains. “We total up how much it costs us to make and then we say, if that's what it costs us to make then that's what we're going sell it for, and we'll see whether people want to buy it or not.”
It’s likely, however, that Fyne Ales will have increase the prices of their core beers too, before the year is out. And they won’t be the only ones to do so, Jamie believes. Across the industry, he says, “cost price inflation is going to feed through to consumer prices, no question”.
Brexit Britain is still in its infancy – it’s been less since the UK left the EU – and there are plenty who believe that all the challenges facing businesses, whether to do with supply chains, labour shortages or red tape, are just teething troubles. Let’s hope so. Whatever the future holds, one thing’s for certain: the UK’s tenacious craft beer industry is going to come out swinging.
As Kerry at Time & Tide puts it: “We’re a very positive team and love a challenge. The sorts of things we’ve faced these past years have been unprecedented and relentless, and we’ve come out of it strong.”
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