Uphill battle for indie brewers: Economist
Independently brewed beer cannot achieve the same market penetration in Australia as it has in US cities like Portland and San Diego, a leading economist says.
The Independent Brewers Association recently targeted a 15 per cent Australian beer market share by 2025.
It would be extremely difficult to imagine a scenario where the sector achieved an exponentially higher share than that, The Beer Monopoly author Ina Verstl told Radio Brews News.
Verstl reaffirmed that Australia is a very different market to that of the US, where Portland’s 45.8 per cent share for independent brewers exceeds the combined 40.6 per cent market share of AB InBev and Molson Coors.
“The three-tier system, although it smacks of prohibition, was actually quite conducive to the growth of craft beer in the US. And your distribution opportunities are not conducive to the growth of craft beer here,” she said.
“You deal with two supermarket chains and their liquor stores. It’s the choice between a rock and a hard stone.
“Also, the on-trade is fairly small in terms of numbers. You only have 6,000 outlets* where you can actually sell alcohol. That’s a bit more than London has so everybody is clamouring for those taps.
“Taxation is another obstacle in the sense that all the styles we and the rest of the world associate with ‘craft’ are basically nonexistent here because anybody who would dare brew these high alcohol beers would price him or herself out of the market, because they would have to charge probably $15 for a glass.
“Now how many Australian consumers would be prepared to pay $15 for a beer? Because we’re still talking beer at the end of the day, we’re not talking wine or spirits.
“Therefore, they end up in a category with the major brewers. Everybody’s doing a five per cent alcohol beer, some with more flavour, others with lesser flavours,” the economist said.
“It’s hard to differentiate yourself in that category from the big brewers flavour and taste-wise, and the trouble is also that the costs that the craft brewers have are much higher per hectolitre or per barrel than what the big brewers can achieve.
“They’re always at a disadvantage cost-wise and how you want to actually grow your business on lower profits is going to be hard.”
Verstl said it would take some extremely aggressive marketing for independent beer to achieve the dizzying heights it has in Portland.
“Craft brewers would really have to bring out the big PR bazookas and say, ‘all the major brewers are really evil and consumers; you have to really make political choices and by us, buy us, buy us, buy us’.
“And I mean, that’s not very friendly is it? That’s why I said it’s problematic,” she said.
*Verstl is likely referring only to pubs and draught beer. Total numbers of Australian on-premise liquor licences are much higher.