The rise of the craft brew­eries

For­merly just for the hip­ster set, craft beers are tak­ing SA by storm, writes Justin Brown

CityPress - - Business -

The value of lo­cal craft beer sales could dou­ble over the next year to as much as R1 bil­lion due to chang­ing con­sumer tastes and bore­dom with mass-pro­duced lager, said Ja­son Cedar­more, the owner of Craft Liquor Mer­chants, this week. Cedar­more, who rep­re­sents craft beer mak­ers such as Jack Black, Cape Brew­ing Com­pany and Dar­ling Brew, es­ti­mated that lo­cal craft beer pro­duc­tion stood at be­tween 8 mil­lion and 10 mil­lion litres, and that the av­er­age retail value of craft beer was R50 per litre – so 10 mil­lion litres could gen­er­ate R500 mil­lion in sales.

In 12 months, Cedar­more ex­pects lo­cal craft beer pro­duc­tion to more than dou­ble, to 20 mil­lion litres.

“The craft beer mar­ket is strong, and Craft Liquor Mer­chants is ex­pe­ri­enc­ing strong growth ev­ery month. There has been a mas­sive shift in in­ter­est. Tastes are chang­ing in the mar­ket,” said Cedar­more.

Kevin Wood, owner of Dar­ling Brew in Cape Town, said he was also ex­pect­ing lo­cal craft beer out­put to more than dou­ble in the year ahead.

Dar­ling Brew last year spent R52 mil­lion on build­ing a brew­ery so that it could meet grow­ing lo­cal de­mand for craft beer, he added.

There was mas­sive scope for growth in craft beer be­cause the foot­print for the pro­duc­tion was “tiny”, said Wood.

There was a lot of in­vest­ment be­ing made in the sec­tor to meet grow­ing craft beer de­mand, he added.

On the other hand, Stan­dard Bank is fore­cast­ing that the lo­cal craft beer mar­ket will grow by only 35% this year, on top of 30% last year.

Craft brew­eries could pro­duce as much as 18 mil­lion litres by 2017, to give it a 2.1% share of the to­tal pre­mium and lite mar­ket of about 790 mil­lion litres – from just 0.3% in 2011, said Stan­dard Bank.

In the US, craft beer makes up 14% of the beer mar­ket and has ex­pe­ri­enced a 20% growth rate since 2012, ac­cord­ing to Stan­dard Bank.

Brendan Grundlingh, an ex­ec­u­tive from Stan­dard Bank’s con­sumer sec­tor team, said: “The in­dus­try is still so new, so it is yet to gain trac­tion. We have too many brands and there is not enough scale ef­fi­ciency.”

Brendan Watcham, the owner of Cop­per Lake Brew­eries, said when he started his craft brew­ery in Lanse­ria near Jo­han­nes­burg in 2010 there were be­tween five and 10 mi­cro­brew­eries in South Africa, but that had now grown to more than 150.

Cop­per Lake, which em­ploys 40 peo­ple, is sell­ing its beers to 300 out­lets in South Africa – mainly in Cape Town, Jo­han­nes­burg and Dur­ban.

“We are grow­ing all the time,” said Watcham. “Our or­ders have shot up by about 600% over the past year. There is a lot of in­ter­est in ar­ti­sanal beer.

“It is a fan­tas­tic in­dus­try to be in – it is a lot of fun. I love beer. Cop­per Lake would like to be a big role player.”

Frikkie Burger, di­rec­tor at Mitchell’s Brew­ery, said there had been an in­crease in the num­ber of lo­cal craft beer pro­duc­ers be­cause the in­dus­try was “un­ex­plored”.

The brew­ery is based in Knysna and started op­er­a­tions in 1983.

De­spite the in­crease in the num­ber of lo­cal craft beer mak­ers, there was still scope for growth, added Burger.

Cop­per Lake opened its first brew­pub in Broadacres in Jo­han­nes­burg in Fe­bru­ary last year to show­case its eight beers, and is look­ing at open­ing other brew­pubs in Lyn­nwood in Pre­to­ria this year. It’s also look­ing at open­ing brew­pubs in Cape Town, Soweto and Sand­ton.

Watcham said the ex­plo­sion in lo­cal craft beer fol­lowed the craft beer trend in the US.

Grundlingh said the move to craft beer was not quite a “beer rev­o­lu­tion”, but it was go­ing to shake the mar­ket up and cre­ate mas­sive op­por­tu­ni­ties for savvy busi­nesses and in­vestors.

Cedar­more said craft beer was catch­ing on, as dif­fer­ent styles of beer, in par­tic­u­lar ales in­stead of lagers, which have long dom­i­nated in South Africa, were en­ter­ing the mar­ket.

Ales are usu­ally de­scribed as “ro­bust, hearty and fruity”, while lagers are char­ac­ter­is­ti­cally “smooth, el­e­gant, crisp and clean”.

The fer­men­ta­tion process when the beer is brewed is dif­fer­ent for lagers and ales.

The fer­men­ta­tion tem­per­a­ture for an ale is warmer than for a lager – an ale fer­ments at be­tween 15°C and 25°C, while a lager fer­ments at a cooler 10°C or lower.

Cedar­more said: “For more than 100 years, one brewer – SAB­Miller – has dom­i­nated the lo­cal beer mar­ket. It has been a ster­ile, stag­nant, one-di­men­sional mar­ket. Pro­duc­tion has been dom­i­nated by big cor­po­rate man­u­fac­tur­ing of beer. Now the guys are start­ing to brew beer in their back yards and garages. Each beer has a per­son­al­ity, a story. With a craft beer, you can speak to the owner of the craft beer.”

SAB­Miller makes about 3.1 bil­lion litres of beer in South Africa ev­ery year. Namibia Brew­eries, which makes Wind­hoek and Heineken, is the other ma­jor com­mer­cial pro­ducer of beer in South Africa.

SAB­Miller has re­sponded to the rapid growth of lo­cal craft beer by mak­ing its own “craft beer”, called No 3 Fransen Street.

“Craft beers have cool names and brands. There is va­ri­ety. Once you switch to craft beer, it is very hard to go back,” said Cedar­more.

Craft beers come with names like Sx­ol­lie, Lum­ber­jack Am­ber Ale and Sungazer.

“A beer is nor­mally made from wa­ter, hops, bar­ley and yeast. How­ever, if you look at the la­bels of some of the mass-pro­duced beer, you see that rice and corn are be­ing used to cut costs,” said Cedar­more.

Four or five years ago, craft beer was just for the hip­sters, but th­ese days its tar­get mar­ket has ex­panded, he said. “The tar­get mar­ket for craft beer is peo­ple aged from 25 to 40,” said Cedar­more.

Watcham said the prod­uct ap­pealed to peo­ple with money to spend on some­thing new and un­usual. Craft beer fes­ti­vals are also a big part of the sec­tor’s scene.

Be­cause it is hand­crafted, craft beer is more ex­pen­sive than mass-pro­duced beer, and a bot­tle of craft beer can cost more than dou­ble that of beer man­u­fac­tured in an au­to­mated fac­tory.

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