Potential for craft brewers

New Zealand's more than 80 craft breweries may be on the cusp of a global explosion in popularity. ODT business reporters Simon Hartley and Sally Rae talk to some of Otago's oldest, and newest, micro-brewers.

An explosion in the popularity of craft beer around the world has been forecast, with no shortage of Otago brewers to capitalise on the expanding industry.

Whether it's Dunedin's 22-year-old Emerson's Brewery and its 1.5-million litre annual capacity, or new Oamaru start-up Craftwork Brewery, targeting production of eight dozen bottles from each brew day, there appears to be a solid thirst for their unique products.

John Bennett, ANZ's general manager, central region for commercial and agri business, believes demand for New Zealand craft beer is expected to triple during the next decade, but has raised concerns brewers might not be ready to capitalise on the demand.

''The potential for exporters is enormous, up to 300% in the next decade, but New Zealand brewers and hop growers will need to significantly expand production if they're to take advantage of the opportunity,'' Mr Bennett said.

The consumer move to craft beers has seen an increase of boutique buy-outs.

While Asahi's purchase of Independent Liquor in mid-2011 for $1.5 billion was a major-player headline grabber, DB Breweries bought cider producer Redwood Cellars in 2012 for $8.2 million, Lion got Dunedin's Emerson's for $8 million in 2012, while Independent grabbed Marlborough-based Founders Brewery in 2013, for an undisclosed sum.

Emerson's managing director Bob King was contacted and estimated that during the past decade craft beer demand had ''at the least tripled''.

He believed Mr Bennett's prediction for the decade could be right.

Emerson's has just installed four new tanks and could increase production from 1 million litres to 1.5 million, if required, Mr King said.

The company is still considering the possibility of relocating its brewery, for the fourth time, across the road from Wickliffe St in Dunedin to a large industrial site, of about 14,000 sq m.

''Yes. There's more than enough room there to expand capacity at that site,'' Mr King said.

While overall New Zealand beer demand was decreasing and people spent less on beer, Mr King said craft beer's share of the market was increasing, as was consumer expectations from craft brewers.

He said as with wine, ''consumers were now looking more closely at the flavours and aroma for a sensory experience'', while the other important driver was ''supporting local industry''.

He noted that craft brewers in Wellington were ''flourishing'' with five brewers ''dominating the market'' in the capital.

On Thusday this week, the 2014 Brewers Guild of New Zealand Beer Awards attracted a record 670 beers, from 74 New Zealand brewers and 10 overseas entrants. Emerson's won both the European ale and European lager awards.

A decision on the new Emerson's site, which could be developed for about $6 million, was expected in September.

When asked about future expansion of craft brewers, Mr King highlighted that Emerson's, which is now owned by brewing giant Lion, had capital for expansion at hand.

He noted Marlborough-based brewer Renaissance was looking at crowd funding opportunities and brewer Tuatara had sold part of its company for $5 million to raise funds.

SnowballEffect is handling the Renaissance offer and hopes to raise about up to $700,000 by September 12; the $2 shares amounting to 12.28% of the company.

Listed brewer Moa, which has had to overcome a disruptive distribution issue, said in May it had more than doubled its sales volume during the previous year and was set for a production boost, having aligned itself with Nelson's McCashin's Brewery.

Moa raised $16 million in an initial public offering last November, at $1.25 a share, to develop a new brewing facility.

Mr King said craft brewers were not constrained by becoming too big, noting some United States craft brands were bigger than either of New Zealand's two largest, mainstream brewers.

The ANZ research had noted seven Otago brewers in 2013, but the ODT found another four.

Craft beer specialist stockists, Castle MacAdam, in Dunedin's CBD, last year won Best Otago-Southland Off Licence, awarded by the Society of Beer Advocates.

Castle MacAdam director Darren Stedman said while stocking a core of craft beers, there was generally stock from more than 20 breweries on offer, including the seven ''fill-your-own'' draught taps, from brewers from around the country.

''There's been huge growth and a real evolution of customers, more knowledgeable and searching out new beers. A lot are brewing their own,'' Mr Stedman said.

About a year ago, Phil and Tyla Scott made the move south from Auckland, relocating Scotts Brewing Company and setting up a new, bigger operation in North Otago, where they both grew up.

While Mr Scott laughingly described the past year as ''chaotic'', the pair had no regrets and they had ''big plans'' for the business.

They were unsurprised by the suggestion that demand for New Zealand craft beer could triple over the next decade and they were prepared for it, they said.

Their brewery, in the old railway goods shed in the town's Victorian precinct, was set up with a ''nod to expansion'' and there was ''tonnes'' of space to increase capacity if needed, Mrs Scott said.

The brew house was four times the size of the company's Auckland operation, and was capable of producing 5000 litres of beer a day.

Given the business was based on production, moving south was ''not necessarily that much of a risk'' and there was an opportunity for a better lifestyle, Mr Scott said.

While they were not sure what to expect ahead of the move, the feedback from locals was very positive from the outset and the opportunities started becoming clear, Mrs Scott said.

One of the most exciting aspects of the past few months had been getting the Scotts name ''out there'' and also the increasing number of contract brewing opportunities.

Brewers were ''coming out of the woodwork left, right and centre'' and they kept fielding inquiries, she said.

While doing contract brewing work was an opportunity to utilise their infrastructure, their focus was still strongly on their own brands, they said.

Earlier this month, Oamaru craft brewers Michael O'Brien and Lee-Ann Scotti's start-up Craftwork Brewery was profiled by the ODT.

Craftwork is a collaborative brewing partnership, started in mid-March, and works from the basement of Ms Scotti's house; posibly the smallest legal brewery in New Zealand.

Their intention is to brew small idiosyncratic batches of Belgian-inspired beer, with the pair cautioning their mostly-organic beer was different.

They can produce about eight dozen bottles on each brew day, so can only have 12 to 18 stockists, who may get just a dozen bottles a week.

They have three Saison varieties on the market - Saison Zest, Saison Poire and Saison Anise, and also Sharkdealers IPA and It's Spelt Grisette, an organic Belgian-style farmhouse ale.

The organic beer is all bottle-conditioned, unpasteurised, unfiltered and it has some yeast in the bottle, which is refermented.

Mr O'Brien said at the time: ''It's really quite difficult to get a New Zealand-made Belgian-style beer. There aren't many styles out there,'' he said.

Getting the Belgian-style beer to market was challenge and the pair have been encouraged by recent success at home brew competitions, winning home best in class and silver and bronze awards in their first competition.

Mr Bennett, from the ANZ, said craft beer was the fastest-growing segment of New Zealand's brewing industry, currently at about 25% a year.

''In the US, one of New Zealand's biggest beer export markets, demand for craft beer has grown 10% annually, while overall [US] demand is shrinking 0.3% annually,'' he said.

Demand was also on the rise in Europe, but Asian markets, such as China, held the most exciting prospects for New Zealand brewers, Mr Bennett said.

simon.hartley@odt.co.nz

 


Our beer there, and here

• Craft - fastest growing segment of New Zealand's brewing industry, up about 25%.

• NZ brewery numbers up from 39 in 2007 to 96 in 2013.

• Big three - Lion, owned by Kirin. DB Breweries, subsidiary of Heineken. Independent Liquor, owned by Asahi.

• NZ craft beer 2% of annual sales; 10% if Lion, DB and Independent craft brands included.

• Beers with more than 5% alcohol volume; consumption rising.

• NZ beer consumption down 10.2% since 2008, from 322 million litres to 289 million litres (2013).

• 10 hop varieties grown in NZ, but global shortage 2011-12. High US demand creating domestic shortages.

• Prediction - craft export production expected up 300%, next decade.

• US craft beer demand grows 10% annually.

• US one of NZ's biggest markets, demand rising Europe, followed by China and other Asian markets.

- Source: ANZ

 

 


Otago tipples

 

• Bannockburn Brewing Company

• Berriman's Cider Company

• Craftwork Brewery

• Emerson's Brewery

• Green Man Brewery

• Jabberwocky Brewery

• Queenstown Brewers

• Scotts Brewing Company

• Steamer Basin

• Velvet Worm Brewery

• Wanaka Beerworks


 

 

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