We live in a world on uncertainty and Brexit has done nothing to change that. Everyday we are fed doom and gloom by various media channels. So to learn that Craft Beer could be heavily impacted by Brexit is a huge concern for everyone in the industry.
But why should we be worried that leaving Europe could impact what is such a growth industry. Over 200 new Microbreweries per year are currently being opened according to government data on start up businesses.
Well the answer is simple. We are a global economy whether we want to be or not. We are reliant on so many of our raw materials coming in from outside the UK. That is Hops from Europe and the US. Yeast from France, Brewing Vats from Holland. We are intrinsically linked to the rest of the world. Along with that, we have currency fluctuations that dictate how much the purchasing of those raw materials cost the brewer. With the dollar being at the lowest point following the announcement of Brexit for the last 10 years, it is likely that the currency fluctuations will continue for quite some time.
So what does all this mean for the industry. The cost of buying the raw materials is increasing and could increase to levels that are no longer sustainable for brewers to absorb if they are smaller companies. Larger conglomerates have massive purchasing power and can buy in such volumes that they can hedge the price of their raw materials. Meaning they can buy at much lower prices than a smaller company who doesn’t hold such sway in the market.
The Answer Is Simple… Isn’t It?
Surely we just stop buying from abroad and start buying from the UK. If only it was that simple. As economies have grown, people have adjusted to working within a global economy. Buying from overseas is now as competitive as buying locally. Equally as the pound drops against other currencies it is more expensive for us too import products but cheaper for other countries to import our products. This has had a reverse effect on grain exports which have now become much cheaper for countries abroad to import from the UK the price has almost doubled. With that in mind the farmer will sell to the highest bidder that being who is offering the best price. Well grow more crops! As simple as they may sound the American Hops don’t grow particularly well in British soil, they are much more accustomed to the climates and soil in the US.
How Worried Should We Be?
Well, as with every set of statistics and media report, including this one. It is all a matter of opinions.There are various think tanks that are predicting the Craft beer business will continue to see sustained growth. They see the smaller businesses being more mobile and less set in their ways. Able to adapt to an ever changing world. They forecast that the large mass producing beer companies will struggle to adapt to tax law changes and import export rule changes. They could be broken up to avoid being penailsed financially for having global operations.
There is a general consensus that the ‘Buy British’ brand is extremely strong on the back of the Brexit vote. The feeling of wanting to support home grown businesses is felt to be strong. Even brewers from Europe are moving operations to the UK to be ahead of the Brexit negotiations. Brewers from Belgium have set up base in the UK. Their feeling of not wanting to wait to see what will happen after the UK is a sure sign that confidence is riding high. They don’t believe that either the UK government or Europe will want to see each other fail at the first hurdle and that actually by being ahead of any changes will be advantageous to any deals that are struck bilaterally.
So What’s Next?
The answer to that is watch this space. Anyone that tells you that they have a dead certain tip on the 3pm at York Races will also most likely give you a very defined answer on what will happen to Craft Beer following Brexit. There is no defined answer that anyone can say for sure will happen after Brexit. But most importantly, enjoy the renaissance that craft beer is having now and what ever happens we wont go too far wrong.