The rise of the craft breweries
Formerly just for the hipster set, craft beers are taking SA by storm, writes Justin Brown
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.