The Irish Craft Beer Industry

In terms of quality, the Irish Craft Beer industry use the finest ingredients, some even grow their own. They then carry out the entire brew process by hand and taste frequently to ensure that only the highest quality of product is provided to their customers.

We all know how hard Covid-19 has been and this has been even harder on the brewing community. On average pre Covid, 80% of craft breweries revenue was from the on-trade, which was shut down overnight. It took incredible determination to bounce back from this and survive. Any brewery that has made it this far is incredibly resilient and we believe that they are here to stay.

Growth

The Irish Craft beer industry has been achieving outstanding growth for the last number of years. It is even more impressive knowing that the broader category has been relatively stagnant. In 2012 we had only 15 breweries in Ireland, now we have over 70 and the range of beers being produced is growing constantly.

In 2019 we saw sales of Irish craft beer grow by approximately 18%, while we saw beer sales rise by only 2% (driven largely by low alcohol). Craft Beer market share has increased from 2.6% in 2017 to 3.4% in 2019. This is all in line with the following trends:

- Health and wellbeing: In every category around Ireland we are seeing a consumer trend towards health and wellbeing. Now, this may seem slightly counter intuitive to the alcohol category, but here we are also seeing a trend towards less, but better. This essentially means the gap between value and volume sales is increasing, consumers are upgrading to premium and consuming lower volumes. This benefits the Irish craft beer industry because craft is perceived as premium.

- Community and Identity: Consumers don’t just want quality products anymore, they’re now looking for something that expresses who they are and this trend, combined with rising protectionism will benefit the Irish Craft beer industry around the island. Consumers are increasingly supporting their indigenous producers and passionately so. 

- Per Capita Consumption change: Traditionally Ireland has had a high per capita consumption rate (68% above the global average), but this has been changing as younger generations become of legal drinking age. Their consumption patterns have reduced. Similar to the trend towards health and wellbeing, this generation are trading up to premium products, like craft beer.

Category challenges

So with all of these positives, you would wonder what has stopped the Irish craft breweries from really taking the island by storm?

There’s 3 main reasons that have really slowed the growth of the industry:

- Low supplier power: Larger companies have had a much larger influence over the on-trade and used this extensively to push smaller players out of the on-trade business. This has played a large part in stemming growth. While the consumer wants the product, they are not always able to get it. This was becoming less of an issue, but with the impact of Covid-19 we expect on-trade to be less resistant to incentivisation than perhaps they have been in the past. This means the off-trade will remain an important outlet for craft beer.

- Capacity Reliance: Capacity reliance refers to the nature of orders craft breweries have received. Traditionally there has been sporadic orders by both on and off trade accounts which have made budgeting and forward planning difficult. Essentially craft breweries have not had deep pockets to invest in themselves and without commitment of future cash influxes it is hard for them to invest heavily in marketing. Now that many of these breweries are a few years old, they have built up the capability and cash flow to invest in this and we will see it bear fruits in the near future.

- Third Party Investment: The Irish craft beer industry see the definition of craft as being ‘independent’ of external, deep-pocketed investors, and to a large degree, the craft beer consumer agrees. The category members are ferociously proud of their independence which has resulted in outside investment being kept to a minimum. This has impacted the category’s growth over the past 10 years, but we believe this will stand to them in the long term because they have developed their own capabilities and managed to maintain the passion required to succeed in the craft beer industry.