The total number of breweries in the UK remained relatively stable in the first quarter of 2023, with the overall number down by just four. These figures were provided by the Society of Independent Brewers (SIBA) UK Brewery Tracker, which monitors new brewery openings and closures both regionally and nationally.
Andy Slee, the chief executive of SIBA, stated that despite the challenges faced by brewers such as rising raw material and utility costs, and market access issues, the numbers are better than many had predicted and continue to make a significant contribution to local communities.
Recent consumer polling revealed that eight out of ten people believe a well-run independent brewery has a positive effect on its local community. The demand for quality beer from local breweries is high, although competition makes it difficult for these beers to reach bars and consumers. To address this, many breweries are opening community taprooms to serve fresh beer directly to locals.
The SIBA Craft Beer Report demonstrated that 40% of independent craft breweries now have a taproom, a 10% increase from 2022. On average, 27% of an independent brewery's income now comes from direct sales to consumers through their taprooms, brewery shops, or webshops, marking a considerable shift for an industry historically reliant on the pub trade.
Regional variations were also noted. Wales led the UK in terms of brewery growth, up by five this year, while the West of England and the South East each saw a decline of four. The East and Midlands regions each saw a growth of two, and the North West of England and Northern Ireland maintained the same number of breweries as at the start of the year.
But how does Britain’s continued love affair with the humble pint translate into commercial success? This question is the subject of market analysts Plimsoll’s latest assessment of British breweries.
Plimsoll has produced its latest financial study of the health and future stability of the brewing sector. The latest Plimsoll Analysis individually assesses the top 800 breweries and shows a few developing trends that should be of concern or interest for business leaders throughout the industry, including:
Are over a third of the UK’s 800 leading breweries financially exposed?
321 of the 800 leading British breweries included in the Plimsoll Analysis have been rated as “Danger” in the latest Plimsoll Analysis. 9 out of 10 previously failed companies were given such a “Danger” rating up to 2 years prior to their demise. Soaring input costs, increasingly squeezed consumer pockets and a dearth of staff have combined to squeeze the financials of many in the sector. Will a prolonged cost of living crisis force some of these frail businesses to the wall?
M&A deals now appear to be inevitable
Elsewhere in the market, there are 207 other breweries that Plimsoll has rated as “Strong” or “Good”. With such polarisation in the market, there is fertile ground for a consolidation boom. As a result of this polarisation, the latest Plimsoll Analysis has rated 194 breweries as being “Highly Attractive” M&A targets. Watch out for deals in 2023 and 2024.
Demand continues to grow but profits are falling
Profits in the brewing industry plummeted by double digits during the pandemic, falling by more than 10% in 2021 alone. However, in the latest year, average profit margins bounced to 3% indicating there is margin in the market despite increased input costs.
Sales growth in the market has followed a similar trajectory. During the pandemic and the closing of the pub trade, traditional sales channels all but ceased for months at a time. The adoption of a more DTC model covered for some of the loss but not enough to make up the difference. In the latest year, demand for beer has rocketed by more than 11%.
The latest Plimsoll Analysis is an invaluable resource for anyone with an interest in the long-term health and exposure of the brewery sector. It separates the companies that are making healthy profits from those that are loss-making, those that are efficiently generating revenue from assets from those struggling to compete in 2023. It will also allow you to spot the best possible M&A targets across one of Britain’s longest-established industries.
Whether you are an executive, a regulator, an investor or just have a general interest in the brewing sector, the Plimsoll Analysis provides a convenient assessment of the market including a financial health performance check on the top 800 innovators driving the market into the future.
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