Craft brewery insolvencies triple amid rising costs and cheap competition
Wed, 07 Jun 2023 | BUSINESS NEWS
The number of craft breweries going into insolvency has tripled over the past year as the industry is hit by rising costs and an oversaturated market. As cheaper options continue to swell the market, the impact is being most keenly felt by smaller craft breweries.
According to figures from accountancy firm Mazars, brewery insolvencies rose to 45 in the year to March 31 2023, up from 15 in the previous year. This comes after a decade in which the craft brewery industry has seen massive expansion.
Growing from a relatively small market made up of local operators, the craft brewing industry has expanded dramatically, with brands now sold across major supermarkets and pubs nationwide and subject to major M&A activity – most notably the £85 million acquisition of Camden Town Brewery by Anheuser-Busch InBev in 2015.
As a result, the market has been flooded with brands, with Mazars associate director Paul Maloney commenting that the boom in startups “meant that there were too many breweries competing for limited shelf space in supermarkets and bar space within pubs.”
The boom has also seen brewery giants and supermarket chains begin to produce their own “craft” beers to capitalise on the trend. These bigger players are then able to offer their products at lower prices than smaller operators. With household budgets strained amid the cost of living crisis, Paul Maloney explained that customers are increasingly “turning to cheaper options”, impacting smaller brewers offering “premium” beers.
Maloney commented: “The craft beer market became heavily overpopulated over the last decade. The cost of living crisis now means many of these brewers are fighting for a place in a shrinking market. Some of them will not make it.”
This has now been exacerbated further by the soaring costs that craft breweries are facing, with the prices of energy and raw materials continuing to rise, pushing insolvencies up at a dramatic rate.
Distress is one of the main factors driving M&A in the manufacturing industry.
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