Home / Blogs / Discerning consumers / Craft sell-out

Craft sell-out

11rd November 2017

Australian craft beer breweries generate an estimated $500m in yearly revenue and sales are growing 10% every year.  The rise of small, quirky, independent breweries producing flavoursome brews is at odds with trends for the consolidated, homogenised mainstream beer industry. It’s a romantic notion that the IPAs, pale ales and stouts with entertaining brands are true artisan products, from quirky individuals. But is that the way it really is? In Australia, there are almost 400 craft brewers, global giants Lion and SAB controlling more than 50% of the market. Little Creatures, James Squires and White Rabbit (Lion), as well as Matilda Bay Brewing, Wild Yak and Goose Island (SAB) are prominent craft brands that are owned by large multinationals. More recently, local heroes Mountain Goat and 4 Pines have been scooped up by Asahi.

For true craft beer fans – or nerds – these brands no longer cut it. While the beers might still be interesting and high quality, they no longer meet the definition.

The latest sell out is WA-based craft brewery Feral Brewing Co, founder Brendan Varis sold 100% of the company to Coca-Cola Amatil. In a lengthy, heart-felt Facebook post Varis explained he had taken the business as far as he could on his own from its beginnings in 2002. In the best interest of the loyal craft beer consumers and the Feral brewing team, Varis chose to sell so future business plans could be funded and realised.

The sale of Feral highlights that craft brewers often need access to capital, better distribution and marketing deals. To achieve this, and realise the value of the brand they have built, the brewers need to relinquish control to bigger corporate players. However, Varis didn’t just hurry to sign the dotted line. Instead the craft brewer set three key conditions to be met by Coca-Cola; the Feral team would be able to continue what they love to do and have their futures preserved, the mission of the company would still be making beer that they love to drink and have personal respect for and lastly that Varis would stay involved with the brewery because of personal desire.

Based on the response Varis got on Facebook, craft beer fans weren’t convinced by the explanations and assurances. Responses ranged from savage to regretful congratulations – but most commenters maintained they would no longer support the brand. Based on these survey results, the response should not be surprising, and is unlikely to be confined only to those responding on Facebook. According to associate professor at the Queensland University of Technology Gary Mortimer, when small breweries sell out consumers can experience “incongruence”. Brand congruency describes the alignment of everything about the product, the message or story, the production and the ownership. When consumers realise that the hand-crafted beer they are drinking isn’t owned by a small local independent brewer they quickly become disillusioned.

Scottish craft beer brewery BrewDog suffered a similar backlash when it sold 22% of the company to San Francisco based TSG Consumer Partners. The founders of Scottish BrewDog were accused of behaving like big corporations.

When it comes to craft beer, it’s about the beer. For “real craft” fans it’s as much about the business. Mortimer points to the emergence of two segments – mass craft and true craft. So, while takeovers and new entrants will continue to shape the craft beer segment, the challenge continues to look small while getting bigger.