‘We can’t com­pete with the big guys, all we can do is be dif­fer­ent’

Irish Independent - Business Week - - IN PERSON - El­lie Don­nelly

IN an in­creas­ingly sat­u­rated craft beer mar­ket, Rye River Brew­ing Com­pany has set it­self apart by of­fer­ing con­sumers some­thing dif­fer­ent. The proof is in the pud­ding – or in this case the beer – as the Cel­bridge-based com­pany now finds it­self grow­ing yearon-year – this year at a rate of 45pc. Quite the change af­ter some sober­ing early years. Founded in 2013 by Tom Cronin, Niall Phe­lan and Alan Wolfe, to­day Cronin heads up the com­pany fol­low­ing the de­par­tures of Phe­lan and Wolfe in early 2017.

In the early days, Rye River strug­gled with a num­ber of prob­lems in­clud­ing man­ag­ing cash flow. In hind­sight, Cronin says that the busi­ness “prob­a­bly got a lit­tle dis­tracted”.

“Like all star­tups, we found our­selves mi­grat­ing in tur­bu­lent wa­ters, and with that came chal­lenges and op­por­tu­ni­ties. In hind­sight we prob­a­bly got a lit­tle dis­tracted, we took in some agency brands.”

Two years ago the com­pany un­der­went restructuring, part of which saw it part ways with third par­ties it was pro­duc­ing beer for, and it is now an ex­clu­sively craft-pro­duc­ing fa­cil­ity.

“We had to make some very tough de­ci­sions. In 2017 we am­i­ca­bly ended all our con­tacts and con­tracts with third-party brands, and that was the right thing, we had to fo­cus on our­selves.

“We down­sized in line, but we grew the pro­duc­tion, and it worked. We had a prof­itable year in 2017 com­ing from a loss-mak­ing po­si­tion in the pre­vi­ous two years.”

Cronin says that to­day they “only pro­duce the high­est qual­ity award-win­ning beer”.

Com­ing from the rel­a­tive com­fort of a multi­na­tional brew­ing com­pany, the big­gest chal­lenge for Cronin in go­ing from be­ing a big com­pany to be­ing out on your own is that there is very lit­tle room for mis­takes.

“You are re­liant on man­ag­ing cash on an ex­tremely tight ba­sis, yet try­ing to gen­er­ate growth in a busi­ness, and then you have to de­ter­mine at what point you make fur­ther in­vest­ment and cap­i­talise on that growth op­por­tu­nity and then rein­vest again,” he says.

“Craft beer is a cap­i­tal-in­ten­sive sec­tor. All our tanks and our brew house are 100pc Ir­ish-man­u­fac­tured and that is a nice thing to give back, but ev­ery tank has a huge cap­i­tal out­lay.”

Rye River, which to date has re­ceived in­vest­ment of €10m – pri­mar­ily from al­ter­na­tive lender Bluebay – cur­rently has three new tanks on or­der to ar­rive in De­cem­ber.

“As you grow, you need more ca­pac­ity and as you grow into that ca­pac­ity, you have to start think­ing down the line about ex­pan­sion again,” Cronin adds.

The de­mand and ap­peal for Rye River prod­ucts is both do­mes­tic and in ex­port mar­kets, with about 50pc of the beer pro­duced sold in Ire­land and the other half ex­ported. “The mar­ket in Ire­land is small, at a point in time you tend to lose the head­room that is avail­able be­cause it be­comes quite sat­u­rated, for­tu­nately we have re­ally good brands,” Cronin says.

“Our core brand is ob­vi­ously McGar­gles and do­mes­ti­cally that would be a con­sis­tent large vol­ume player within the main re­tail­ers in Ire­land.

“We hold our own in Dublin city cen­tre which we con­sider our back yard. In terms of re­tail in Ire­land we have very good part­ners.”

While Cronin says that there is “huge room” for growth in the craft beer mar­ket in Ire­land, he adds that there is “con­stant pres­sure” from the big­ger play­ers, “not just in Ire­land, but in­ter­na­tion­ally as well, so you just re­ally fight for ev­ery per­cent­age growth gain”.

The big op­por­tu­nity for Rye River, he says, is in Europe, where craft beer ac­counts for only 1.4pc of all beers sold in the mar­ket.

“The do­mes­tic mar­ket is ex­tremely im­por­tant and we have done very well in it, but now it is time to re­ally start look­ing out­wards.

“We are in most coun­tries in Europe with one or other brands – we do ex­cep­tion­ally well in Italy with the McGar­gles brand.

“That con­sumer in Italy or France, or Bel­gium or Ger­many, he or she is look­ing for some­thing that is more ar­ti­sanal. They want to know the prove­nance of the prod­uct – be it a cheese, a beer, or wine – and they are savour­ing the ex­pe­ri­ence more, so what we find is that we are able to charge that lit­tle bit more be­cause we go to the ef­forts we do to give that con­sis­tently high-grade Ir­ish craft beer.”

With in­ter­na­tional brew­ing gi­ants such as Di­a­geo and Heineken now pro­duc­ing their own range of craft beers, Cronin ad­mits that Rye River “can never com­pete” with such play­ers.

“I come from big beer, and I have a real re­al­i­sa­tion as to how the mar­ket works, we have to fo­cus on our of­fer­ing, we can never com­pete that’s a given. I pro­duce in 2,500 litre batches and I pro­duce 30 of those on any given week, it’s a very dif­fer­ent process, what we try and do, and I be­lieve we are do­ing it very well.”

How­ever he says that the busi­ness has re­ceived “great sup­port” from pubs and bars in Ire­land. “We are giv­ing them a prod­uct that caters to the 3pc that want some­thing dif­fer­ent. The chal­lenge for us against some of the big­ger com­pa­nies and some of our coun­ter­parts is to pro­duce the best beer pos­si­ble.

“We are there be­cause they want our prod­ucts and their con­sumers want our prod­ucts. We can’t com­pete with the big guys, all we can do is be dif­fer­ent.”

The craft brew­ing in­dus­try here is boom­ing and, with more than 100 craft brew­ers in Ire­land, it can feel like there are new brew­eries open­ing up each month. How­ever the rapid ex­plo­sion of com­peti­tors in the sec­tor is not some­thing that con­cerns Cronin.

“If you fo­cus on qual­ity and con­sis­tency and garner to that space you have ev­ery chance of hav­ing a suc­cess­ful busi­ness,” he says.

“The chal­lenge is cut­ting through what is a com­pet­i­tive mar­ket, in a mar­ket that in the con­text or Europe or the world is just a drop in the ocean.

“Is it dif­fi­cult to cut through? You have to be louder and bet­ter than your com­peti­tors and that’s where we take con­fi­dence, we be­lieve we are at the top end of the of­fer­ing in terms of Ir­ish craft beer.”

Cronin adds that mak­ing sure that the stan­dards are high for ev­ery sin­gle brew takes real ef­fort.

“We are 47 peo­ple in Rye River Com­pany en­sur­ing that hap­pens and we are very fo­cused on that. When I see a new brew­ery open­ing does it re­ally give me any con­cerns? No, be­cause I be­lieve that with what we are do­ing we will rise to the top and stay at the top.”

Ear­lier this month, the Drinks In­dus­try Group of Ire­land said that the im­pact of a hard Brexit on Ire­land’s drinks and hos­pi­tal­ity sec­tor could cost the Ex­che­quer €135m a year.

In ad­di­tion, the lobby group warned that many Ir­ish drinks prod­ucts are heav­ily re­liant on the Bri­tish mar­ket.

For Rye River, all the bot­tles that its beer is sold in are made in the UK, in ad­di­tion it sources some its raw ma­te­ri­als from Bri­tain.

“The bot­tle sup­plied to the ma­jor­ity of Ir­ish craft brew­ers is com­ing from the UK and that is a con­cern,” Cronin says.

How­ever, given the chal­lenges that the busi­ness has al­ready over­come, he is prag­matic about the pos­si­ble chal­lenges that Brexit will bring.

“Com­ing from where have come from in the past five years in this com­pany we take noth­ing to chance. If [a hard] Brexit comes through it will hurt us – it will hurt a lot of Ir­ish SMEs, I think.”

Look­ing for­wards, he says the com­pany is fo­cus­ing on con­tin­ued growth.

“We are grow­ing year-on-year, this year at 45pc, which is phe­nom­e­nal, and to com­ple­ment that, we got a fur­ther €2m in­vest­ment last year to help grow in scale.

“We cur­rently brew 22 dif­fer­ent recipes here. There is al­ways in­no­va­tion re­quired and we be­lieve now there is a play for a more pre­mium craft of­fer­ing. We have had four re­leases this year within that range and we are putting our fifth into mar­ket in De­cem­ber.”

Fresh from win­ning 19 awards at the 2018 World Beer Awards, Cronin cer­tainly has a lot to toast.

Tom Cronin of Rye River Brew­ing Com­pany which was founded in 2013 and, hav­ing made its mark on the home mar­ket, is look­ing to Euro­pean ex­pan­sion

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