An ambitious 15 per cent beer market share target and challenging policy focuses are the highlights of the Independent Brewers Association’s anticipated 10-year roadmap.
The FutureBrew2031 report was released last night to IBA members, following funding from the NSW Government in 2021 which allowed the organisation to commission accountancy firm KPMG to undertake the major research and planning project.
IBA chief executive officer Kylie Lethbridge explained that the roadmap will help define parameters of success for breweries and the industry body, including a focus on the independent seal and provenance, and will detail the steps required to achieve its “key vision” of growing market share for independent brewers.
But the IBA also set itself some major policy focuses. Tap contracts have been an issue for successive IBA boards, and the report revives them as an area of policy interest for the IBA.
Additionally, the nationalisation of the container deposit schemes, which have placed a regulatory burden on breweries, especially those who export interstate, has been made a priority.
Simplifying liquor licensing regulations and reducing the complexity and lack of flexibility within local and regional planning frameworks is also on the agenda.
The report, which surveyed consumers, brewers and industry experts, also focused on the need for brewers to enhance awareness of independent beer via the Independent Seal, launched in 2018, as well as expand into new market segments and develop new, innovative products and distribution methods to reach its 15 per cent market share goal.
“This was a big piece of work and now the hard slog comes from getting it done, launched and adopted,” Lethbridge told Brews News.
“We do really want engagement through this process and the work is not over once the plan is endorsed by our members and endorsed by our board. Then it’s hell for leather to get the government to acknowledge it. It’s an exciting time.”
While the consultation period is open mainly for members, the IBA has considered non-members as well.
“We have more than 400 brewery members and we know there’s a good 200 more and whatever is in that plan will impact them. We hope that this plan is a good example and reassurance that the industry association is on a very strategic path – this is the evolution of where we need to go and the next level of sophistication,” Lethbridge said.
“Hopefully those that are listening and watching what the IBA has been up to, maybe they will decide to be a member. While at this stage it’s focused on member consultation, I’m happy to hear from anyone that will be impacted by what that plan says.”
The brewing industry in 2022
Since 2012, the report shows, the industry has grown by 26 per cent and has more than 600 independent breweries around the country (with 567 physical breweries according to the Konvoy Brewery Database) employing an estimated 8,672 people and contributing over $304 million in direct wages in 2021.
The majority of the industry is based in rural and regional areas – the report approximates two-thirds of breweries can be found in these areas.
The report also highlighted that while Australian beer consumption is at a 65-year low, the independent brewing industry’s growth was being driven by increasing consumer demand for high-quality products with provenance and “a story consumers can buy into”.
Production volumes of independent beer have increased 67.8 per cent since 2012, a growth in market share from 1.9 per cent in 2012 to over 7.3 per cent in 2020.
On consumer trends, the report found that customer recognition of craft is derived from word-of-mouth, experimentation through sampling and tastings and events.
Interestingly, given the growing impact of private label beer brands within bottleshops, major retailers such as BWS and Dan Murphy’s are still the places where consumers are most likely to purchase craft and mainstream beer.
Fifty-four per cent of consumers surveyed purchase craft beer through large bottle shops, however they are increasingly seeking alternative distribution channels to purchase beer, including online, the report found.
The future of the industry
The FutureBrew report highlighted five key pillars which will support the growth of the brewing industry:
- Customers and channels – strengthening the independent beer brand, developing export capacity and responding to consumer trends
- Supply chain and manufacturing – digitising supply chains and embedding quality management systems, ensuring future supply of raw materials
- Workforce and skills development – upskilling and retaining talent with a focus on ensuring competitive salaries and “first-class” working conditions
- Regulation and Legislation – reducing regulatory burdens
- Breweries of the future – innovating, structuring for growth and embedding ESG considerations into breweries
Each pillar has key performance indicators and goals, such as growing independent beer’s export revenues to $3.6 million per year, the implementation of ale trails in every major city and regional centre, and a reduction in product recalls.
Some goals are less tangible, such as providing career development opportunities within breweries and having a strong pipeline of leaders supporting future growth, with the industry being recognised as an employer of choice and attracting talent globally.
Others targets are ambitious, such as suggesting that the industry becomes united behind a common set of policy priorities and a sophisticated advocacy platform, and simplifying regulations around town planning – which was also highlighted at state level in the States of Brewing report earlier this year.
The FutureBrew report also highlighted macro trends globally which may provide opportunities and challenges for independent breweries.
Among them is the increased demand for premium products which customers believe align with their personal values, and an awareness of the fickle nature of brand loyalty, with social media influencing demand for new and innovative trends and resulting in changing consumer preferences.
Health conscious consumers, and those that are concerned with environmental, social and governance outcomes (ESG) will be on the rise, and the other major factor is the shift towards ecommerce as the preferred channel by customers.
Role of the IBA
The FutureBrew report also explored the role of the IBA in the next 10 years, from marketing independence to legislative focuses.
As part of these policy focuses, the IBA will be directing its efforts in part on the development of greater recognition for its Indie Seal – implemented by 83 per cent of the breweries surveyed in the report.
There is currently low consumer understanding around ownership and the IBA, according to the report, which found that independence alone “does not appear to be enough to drive an increase in purchase and consumption across the board”.
This will require the IBA to define independence and what it means for consumers – that it is local, Australian and independent breweries are defined by “the use of high-quality ingredients and production standards, authenticity and diversity of flavour”.
Collaboration was also emphasised as a means to achieve the 15 per cent market share goal, and it highlighted the South West Brewers Alliance in WA as an example of a local cluster with straightforward locally-focused objectives.
“We cannot compete with the big players on resources and scale. However, by working together we can tap into a strong network of global and local knowledge,” said one brewer.
As a result, the IBA recommended support for the development of regional clusters, and expanding its own online platform to allow knowledge sharing.
Regulatory change was high on the agenda with some major projects set in motion for the IBA.
According to the report, 96 per cent of brewers surveyed believe tap contracts play a significant role in reducing the competitiveness of independent beer, and as a result, one of the focuses of the IBA will be improving access to tap contracts – reducing or removing them at bars which it suggested would give indie brands a more level playing field.
“The history of the IBA’s advocacy and our submission on the sale of Stone & Wood last year reignited the real concern about this and that it will be the biggest barrier to our industry.
“Conversations with the ACCC were good and they were robust enough for us to understand there was always an opportunity to go back and revisit it, but it requires a legal team and a lot of time, it’s a David and Goliath situation.
“We didn’t put a huge amount of resource towards it before, but it is the thing that brewers are telling us is important and we will work collectively and find a clever way of raising that conversation again.”
The report also suggested that policy priorities for the IBA include the nationalisation of the container deposit scheme to reduce regulatory burdens, the simplification of liquor licensing regulations and reducing restrictions and reducing the complexity and lack of flexibility within planning and local development regimes.
“I can only imagine what the beer market will look like in 10 years time,” Lethbridge said in her introduction to the roadmap.
“In 2031, I’m seeing independent brewers with 15 per cent of the beer market in Australia. There’s a local taproom or brewpub in every town, and indie brewers and beers are household names.
“Their stories are well known, embraced, and celebrated by our nation’s beer drinkers…The industry will be seen as one that minimises our impact on the environment, leads with a social conscience and independent brewers will be a valuable thread in the fabric of local communities.”
IBA members have received the report and are invited to submit their feedback here with a deadline of 13th May.
Brews News editor Matt Kirkegaard spoke with IBA CEO Kylie Lethbridge on the key areas of the roadmap. Listen to the full conversation below.