Microbrewery – Monitoring Market Trends, Analysing Market Health and Deciphering the Investment Opportunities
Drinking tea is an activity that has hardly changed since its inception, whilst drinking beer changed dramatically over a short period. This article looks at the evolution of the microbrewery industry and how the related innovations have affected consumers and brewers alike.
The article simultaneously delves into the opportunities for investment in this market while looking at drivers of growth within this industry to help you make an investment decision.
An introduction to the microbrewery industry
A microbrewery, or craft brewery, produces small volumes of beer. This means that the cost of production is lower than in macro breweries, which are defined as producing more than 12 million hectolitres in a year. Contrarily, craft breweries typically produce between 5 and 15 million hectolitres. (They also may produce less volume, but this is not the case for all microbreweries.)
The impact of microbreweries can be seen across all areas of the industry. Besides providing the opportunity for growth in markets, they offer consumers an alternative to regular mass-produced beer — this is beneficial to both consumers and suppliers alike. As craft breweries dominate the niche market, they pave the way for the availability of various beers. This increases beer choice and makes it more likely that people will find something to suit their tastes and preferences.
It’s noteworthy that the microbrewery industry has witnessed rapid growth over the last decades. It is predicted that this growth will continue as microbreweries evolve to meet consumer demand. For instance, CNBC reports that craft beers contribute 2-3 per cent of India’s beer market (currently valued at a little over USD 7 billion). However, as per the recent analysis and reports, the growth in the craft beer industry would be almost triple the growth of the entire beer industry in the country.
Drivers of growth in the microbrewery industry
The growth of microbreweries can be attributed to many factors. The first is consumer demand for craft beers. When you think of the word “craft”, artisan and small-scale are often brought to mind. Microbrewery’s consumers tend to be like this too. For instance, companies such as Pret a Porter are known for their Belgian dark beers. However, microbreweries not only appeal to consumers and beer drinkers; they also offer companies who produce beer ingredients an opportunity.
The second factor is the growth in craft beer consumers — closely associated with the first factor. Currently, Asia-pacific dominates the beer consumption charts with a 33.3% contribution compared to 26.3% of Europe and 17.3% of Central and South America.
The third factor is the globalisation of the microbrewery industry. Currently, craft beers are available in more than 50 countries across the globe. This development has led to an increase in exports of microbreweries around the world.
The fourth factor is the trend of micro-locations where consumers gather to drink beers. Breweries and pubs have been in the news for their special ‘breweries within a brewery’ — which is clearly visible in the popular areas of Amsterdam, Finland or Belgium, amongst others. This has provided a growing market for microbreweries as well as an opportunity for growth.
But, here’s the catch:
The aforementioned trend may not last forever and will need to change if it is going to continue. The growing number of microbreweries may lead to a conflict; this is because beer, and therefore profits, will become too low for the breweries with many brewpubs.
Investment opportunities in the microbrewery industry
Most microbreweries are located in regions such as the US, UK and Australia. The reason behind this is the high density of population and growth in consumer demand. This results in a larger market for microbreweries and allows them to generate higher profits from their operations. However, this growth can be seen across all countries despite variations in population sizes, which is clear proof of globalisation.
Investment opportunities are also seen for companies that provide materials required for manufacturing beer products. An excellent example of this is the recent acquisition of SABMiller by Anheuser Busch InBev. This acquisition has proved to be an effective growth strategy. The two companies’ combined employmentexceeds 120,000 people and produces a significant per cent of the world’s beer. Not only that, but they also have huge investments in every part of the value chain, from brewing and packaging to overseas sales.
Microbreweries are also attractive for investors looking for growth in a niche market. In fact, small and medium companies provide unique opportunities for microbrewery investors. These companies can achieve expansion quicker than bigger companies and thus, allow investors to receive returns on their investments faster.
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