The business of craft beer
The local craft beer market is flourishing, following European and US trends
The craft beer revolution hit California about 40 years ago, before sweeping through Europe and filtering down to smaller markets such as our own. The Anchor Brewing Company’s Fritz Maytag, one of craft beer’s founding fathers, tells the story of buying up an ailing San Francisco brewery on a whim, then belatedly realising he was short on several fronts. He had a product that deteriorated before it was poured and, crucially, he lacked a publicity machine. What to do?
Maytag used to drive his Porsche through San Francisco’s notoriously permissive Haight-Ashbury district to get to work at his brew house, and, on one such drive, had a eureka moment. The best way to get free publicity without a marketing budget was to get arrested, he decided.
"I put this green, leafy stuff on my passenger seat and drove back and forth for about a week," he says in one of his brewer’s promotional videos. "Of course it was hops, but the guy arresting me wasn’t going to know that. The problem was, no-one ever got arrested in the Haight, so that one didn’t fly."
Most wouldn’t put a date on the beginning of the local brewing revolution but many are happy to agree that 2012 was the year in which craft beer brewing became mainstream — almost 30 years since Maytag brought out his famous Liberty Ale in 1983.
"There was a time when every little European town had a brewery, just like it had a bakery," says the Cape Brewing Company’s (CBC) Andy Kung, who is Swiss.
For craft brewers, drinking is an experience, often closely associated with the consumption of home-grown or artisanal food
"Then the little guys got swallowed. But maybe 15 years ago in Europe people woke up to the fact that they wanted those local tastes and flavours back. The slow-food movement started in Italy, and a place such as Belgium never really lost its love of beer."
Kung’s CBC project started to materialise in 2011 and its "maiden brew" was poured the following year. The company operates out of Spice Route Farm, a brewery adjacent to the Fairview wine and cheese estate just outside Paarl in the Western Cape, where it is close to high-quality natural water and good highways. "We have Swedish partners who are sixth-generation owners of an independent brewery in Sweden," says Kung. "The owner had a keen affinity with the Western Cape and when the opportunity came to make a little dream come true, he jumped at it."
There is a natural spring on the CBC property that continues to provide clean, plentiful water despite the Western Cape’s drought. Kung says supervision of water is absolutely key in the brewing process and there’s a pre-treatment phase during which CBC is careful to monitor the water’s iron content for fear of it corroding the company’s stainless steel pipes and vats.
Ingredients are usually sourced locally, with the exception of hops, which Kung says is often flown in from Europe. It comes in the form of pellets and can be sourced and received in a matter of days. Transportation by sea is laborious and subject to temperature fluctuations; to any self-respecting independent micro-or craft brewer it’s not a chance worth taking.
Beer brewing does, of course, consume vast amounts of water. Traditionally the ratio is 11I-12I of water per litre of beer but Kung says that in CBS’s case it was never as high; it’s now at just over 4.5I per litre of beer, a figure of which the firm is understandably proud. "For us, independence is key," Kung says. "We source the best possible ingredients and we have a dedicated, passionate team with experience on three continents behind us. We operate on a six-week rolling cycle and employ about 70 people, from brew masters to assistant brew masters and sales reps.
"This is usually a slightly quieter time of year for us. We’re certainly not maxed-out in terms of production."
The logistics and processing of craft beer is one thing; the romance behind it quite another. Many of those in the craft beer game have a story to tell or a mood they’re trying to evoke or reproduce. For craft brewers, drinking is not simply an act, it’s an experience, often closely associated with the consumption of home-grown or artisanal food.
In turn, this experience is part of a journey, which has an identifiable beginning — and with beginnings come stories, which is why craft and independent brewers are traditionally big on founding stories and original pours.
Maytag, for example, first conceived of Liberty Ale to commemorate America’s bicentennial in 1976. He was disappointed to discover, however, that his initial batch of Liberty Ale was undrinkable. It was only years later, in producing an annual Christmas Ale, that Liberty was reborn. It took seven years for the right blend and recipe to be found.
All have their tales. Charles Bertram of Striped Horse beer, for example, grew up in Kenya, and for him beer drinking is indissolubly linked to the visceral experience of Africa — hence the distinctive rearing zebra on his product’s labels. "We wanted to evoke the idea of hot African afternoons on the Zambezi with a cold, refreshing beer in your hand," says Bertram, with a note of cheery nostalgia.
Not all local beers are as cannily themed, but the market is nonetheless growing (at 35% per year off a low base) and, because of it, methods of selling and distribution are changing apace. "We found that craft beers handled by third-party sales and marketing teams just wasn’t working," says Derek Szabo, MD of supply for Signal Hill Products, a company that markets and distributes a range of different beers and ciders. "We do sales and distribution of Striped Horse, Guinness, Alpha, Devil’s Peak and Fokof Lager. We put a great deal of energy into innovation and try to keep drinkers and consumers interested."
Many believe that growth will come from making inroads into the so-called "green bottle" or premium beer market — beers, in other words, like Amstel, Heineken and Grolsch. The "brown bottle" market, best identified by Carling Black label, say, is too removed in price and target market; besides which major brewers get volume reductions on glass from bottle manufacturers as well as significant reductions for malt and hops — something with which the little guys can’t compete.
Not without challenges
They can, however, compete in other areas. Many of the smaller breweries have tap rooms, which encourage the kind of easy conviviality that is part of the craft beer experience. They’re also often physically linked to other artisanal products close by, which is the case with CBC, or have visionary plans for the future. "We’re opening the Alpha Beer Hall and restaurant on September 1 on Constitution Hill," says Szabo "As well as that, we’re building a world-class facility in Epping. It’s custom-built from the bottom up and includes a brewery and a tasting hall. We’re hoping that it becomes a place people go to for craft beer."
For all the energy in this segment of the market (Szabo was about to jet off to a brewer in Aberdeen when he was interviewed by the Financial Mail) it is not without challenges. Szabo says, for instance, that cans are undoubtedly the answer, but it seems that craft beer is associated in the consumers’ mind with glass. "There are no negatives with cans," he says. "They transport better, they stack better and they get colder faster because they keep light out. They’re better for the environment too. They’re the answer, but we struggle to persuade the consumer that it’s the right thing to do."
Then there’s the fact that competition can get nasty, given that the craft beer market is small and there’s probably not quite enough elbow room, considering that the products in it range from Jack Black and Devil’s Peak to products of some of the smaller breweries of the Southern Cape and KwaZulu Natal.
An old hand, Kung counsels the long view. "I say to the guys that we’re all in this together. Growing market share is going to benefit all of us. We feel there’s enormous potential in the future. We just need to stay focused on what we do well and why we do it, and the market is going to grow."