From the brim to the dregs
Words: Matthew Curtis
Saturday 01 September 2018
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The train has left the station. You are too late,” Alex Brodie, the now retired founder of Kendal’s Hawkshead Brewery once told me, when asked what advice he would give to someone starting a new brewery. “Unless you have something really special you now cannot be a pioneer, you can only be a follower. When I started I saw a gap in the market. There isn’t a gap now.”
Despite Brodie’s advice, few have been put off entering the brewing business over the past decade. For all its challenges, it remains one of the most appealing paths for the budding entrepreneur. Over the past decade the number of active breweries in the UK has doubled from fewer than 1000 to over 2000. According to the British Beer and Pub Association, there are currently 2250 active brewing licenses in the United Kingdom.
It’s worth noting before talking about brewery closures that, in terms of brewery openings, the British market is very much still in growth. However, with more competition inevitably comes an increased amount of business closures. With this in mind it’s fairly easy to point to a rising number of closures and say that the bubble has burst – but I don’t think this is an indicator that the craft beer dream is over. In fact, it’s more a sign of an industry that’s normalising. Excessive periods of industry boom will eventually hit their plateau, so I prefer to try and see it as signs of a maturing industry, as opposed to a failing one.
That said, it’s never comfortable when a brewery decides to pull down its shutters for the final time. At the 2018 Society of Independent Brewers (SIBA) AGM, held this year in Liverpool, Dave Bailey, owner of Cumbria’s Hardknott Brewery, took to the stage to deliver an emotive and somewhat scathing speech aimed at the association. In Bailey’s view, the market conditions are not favourable enough for small breweries, and he put much of the blame on SIBA.
“This organization is against small independent brewers...SIBA does not speak for the little guy,” Bailey said at the AGM. “I am closing down my brewery because it is no longer making sense.”
Thankfully, Hardknott, which was founded in 2005, is not closing down for good. Although, according to Bailey it will no longer be brewing at its facility in Cumbria—instead looking for facilities to cuckoo brew its products on. What this demonstrates though, is how much small business owners have on the line, and how challenging the process of closing down a business you’ve put your heart and soul into can be.
Quantum Brewery was established in the Greater Manchester town of Stockport in 2011. It’s founder Jay Krause looked every bit the archetypal craft brewery owner, standing tall with wide shoulders, a tidy-ish brown beard, and long brown hair usually tied back in a ponytail. Krause always seemed to brim with a quiet confidence when I met him – drawn from a seemingly obvious sense of contentment that he was making the beers that he wanted to make. Beers like the incredibly clever, pineapple and funk laden Brett C Pale, that used the Brettanomyces Claussenii yeast strain to deft effect. I must also mention his rich and rambunctious, brett-laden Stock Ale, that would just as happily take your head off with its farmyard and stone fruit notes, as it would lull you towards soft, gentle contentment.
At Quantum, Krause was only able to produce 8hl of beer per brew – about 1600 pints. This might sound like a decent amount of beer, but in commercial brewing terms it really isn’t. By way of comparison, BrewDog’s largest of its three brewing systems at its headquarters in Ellon is able to brew 300hl at a time – a whopping 60000 pints – and they are able to do so up to 10 times per day according to its head brewer, Jason Pond. When you look at these economies of scale up close, it’s easier to see just how difficult it is to make a small brewery work financially.
Regrettably, Krause made the decision to close Quantum in 2016, and I say this with a pang of sadness, because this was a brewery making some pretty formidable beers.
“When you start a company with zero cash to spare, there’s often zero cash in reserve should anything go awry,” Krause says. “Living month to month without any kind of buffer really ground me down mentally, and once the enjoyment started to disappear, I knew it was time to call it a day.”
Krause added that the months leading up to him calling time on his business were fraught with what he describes as the “normal difficulties” a small business owner faces on a day-to-day basis. These included what may be perceived as simple issues such as paying bills on time and making sure his product was received in as good a condition as possible when it arrived with customers. But some issues are more complex, such as how to stand out in what Krause calls a “saturated marketplace” and of course, ensuring that you’re keeping an eye on your own mental wellbeing while under the pressure that this can induce.
“I grew to normalise all of this on a day-to-day basis,” he says. “If I’m being honest, once I’d made the decision [to close the business] a huge weight shifted off me.”
Thankfully, the closure of Quantum wasn’t to be the end of Krause’s brewing career. In fact it would turn out to be merely the beginning. After what he describes as “a brief few weeks of turmoil,” having technically just put himself out of a job, things began to settle down when he landed a full-time job at what was then a fledgling Cloudwater Brew Co.
“After the dust had settled there was an immense sense of pride in what I’d been able to achieve during the previous years,” Krause adds. “From being involved in pivotal moments in the “new wave” of craft beer in Manchester, to making amazing friends in the industry, and having a direct hand in giving other people the confidence in their abilities to the point where they set up their own, successful operations. It was bittersweet for sure.”
The closure of a brewery is a whirlwind that amplifies emotions felt by brewery owner and consumer alike. The tactic of cultivating consumers and turning them into as fans — something the modern beer industry has relied on intensively — means that when a brewery does close, the impact can be felt tenfold by those closest to a particular brand.
Sometimes the impact that a local brewery has had on its base of local customers is often unnoticed until the Sword of Damocles does eventually fall. Such was the case when in November 2015, Pretty Things Brewery of Massachusetts in the United States, closed its doors for the last time. The news sent shockwaves through the local community, with newspaper the Boston Globe describing the brewery as “everything a local brewery is supposed to be”.
Like Quantum, Pretty Things was up against tumultuous market conditions; in this case owners Dann Paquette and Martha Holley-Paquette condemning so called “pay-to-play” tactics within the state. This practice involves breweries paying off bars, or offering free beer to ensure their beer remains on tap. It’s illegal in the US, but in the UK its perfectly legal via the tied-house system, which essentially legally ties a certain brand to a tap. If you’ve ever walked into a British pub and wondered why they don’t have any draught craft beer, it’s probably because they legally have no say over what they’re pouring.
Despite the Paquettes having to wrap up brewing operations in Massachusetts, as with Quantum, this wouldn’t be the end of their stint in the brewing industry. Reports are that the couple has relocated to Sheffield, here in the UK, with the intention to start a new brewery. And while they may not have to deal with the same market conditions as they did in the US – which is closing in on being home to 7000 active breweries – they’ll still face plenty of competition. On the other hand, the new brewery will likely be seen as a boon to Sheffield’s thriving scene.
Another brewery closure in the US that sent out shockwaves felt by the entire industry was that of Green Flash, in San Diego, California. This was a business very much on the opposite end of the spectrum to Pretty Things: a rapidly expanding, internationally recognised brand, attempting to grow its distribution network to all 50 US states and beyond, to territories such as the UK. It had even opened a second production facility on the East Coast of the US, a tactic also employed by the likes of Sierra Nevada and Oskar Blues, as they too eyed international expansion. In addition to this, it also owned fellow San Diego Brewery, Alpine, which it acquired in November 2014.
However, the difference when a brewery this size hits financial difficulty is that it affects a great many more people, both externally and internally. Upon facing the imminent threat of closure at the beginning of 2018, the brewery would lay off a total of 76 employees, including all 36 staff working at its Virginia-based East Coast facility.
Founded in 2002, Green Flash was ranked as the 43rd largest craft brewery by sales volume in the US. It’s rapid expansion towards the latter part of existence forced it into financial troubles, reducing its footprint from the whole of the US to just eight states, including its home California. Before the final curtain fell, the brewery was bailed out by an investor group called WC IPA LLC. Its shuttered East Coast facility was then acquired by the Altanta-based New Realm brewery, the project started by former Stone Brewmaster Mitch Steele in 2016. For now, both the Green Flash and the Alpine Brands have been saved in a form that’s not merely reduced, but with a difficult future ahead, as it begins to consolidates its losses.
With the US market being so large, and often portrayed as being more mature than its overseas counterparts, it’s often a great crystal ball to gaze upon when attempting to piece together a future for other markets. This is perhaps no truer when reflecting on the future of British beer. Trends in the US tell us that breweries are going to keep opening and keep expanding. More breweries will be bought out by major players, but that consolidation will not outpace the rate of growth for some time. And, inevitably, it means there will be more closures, large and small, and for various reasons. Some will be financial, some will be personal, but how do we deal with that inevitability?
What I’ve learned from looking at the brewery closures of the past few years is that it doesn’t always mean the end. Often it can clear space in the market for other breweries with smaller turning circles and fresher ideas. Sometimes that brewery can be given a new lease of life with a fresh management team behind it. Opportunities can even appear in other countries, as the international beer boom continues apace, just as we’ve seen with Pretty Things. But, most significantly, I have learned that there is no such thing as a bubble.
Craft beer exists as part of a wider global drinks market. It is reaching a point of maturity and, with that, conforming to a greater amount of industry norms. Closures are a natural part of that. So, when it comes to picking up your next armful of beers, be wary about placing too much emotional attachment into those brands. Breweries are businesses after all, and there is no such thing as an easy ride, even in beer.
“It’s really difficult to give advice [to someone in my situation] as mine was so specific, but when you know, you know,” Cloudwater’s Jay Krause says when I ask him what advice he’d give to other brewers that are in a situation similar to his with Quantum. “Follow your gut instincts and don’t be dragged into a pit of either financial ruin, or personal despair, in order to satisfy your pride.”
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