Funding in the Microbrewery Sector Gary Bosworth

Funding in the Microbrewery Sector Gary Bosworth & Victoria Ellis 4 th Beeronomics Conference York, September 18 th - 21 st, 2013 www. lincoln. ac. uk

Focus for Research • What has been the impact of increasing funding for microbreweries? 1) How has funding contributed to local economic development objectives? 2) How has funding impacted upon the business approach of microbrewery owners. www. lincoln. ac. uk

Methodology • Analysis of market data to assess the economic context • Interviews with a sample of 15 microbrewery owners - both funded and non-funded • Thematic analysis – attitudes and behaviours, wider socio-economic impact • Inform a future survey of microbrewers to better understand future challenges and opportunities in the sector www. lincoln. ac. uk

Microbreweries – facts and figures 1, 000 No. Breweries 900 800 700 600 500 No. Breweries 400 300 200 100 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: British Beer and Pub Association and H. M Revenues and Customs www. lincoln. ac. uk

Microbreweries – facts and figures 45000 Total Beer Sales (000 Barrels) 40000 35000 30000 25000 On-Trade Off-Trade 20000 Total 15000 10000 5000 0 1985 1990 1995 2000 Source: British Beer and Pub Association www. lincoln. ac. uk 2005 2010 2015

Microbreweries – facts and figures 20. 0 Cask Conditioned Percentage of Total UK Beer Sales 18. 0 16. 0 14. 0 12. 0 10. 0 Percentage 8. 0 6. 0 4. 0 2. 0 0. 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (b) Source: British Beer and Pub Association www. lincoln. ac. uk

Routes To Market – Traditional Public Houses free of tie Public House tied to Microbrewery for ‘showcase’ Inter-brewery swaps www. lincoln. ac. uk

Routes To Market – Public Houses 65, 000 Pub Numbers 60, 000 55, 000 Pub Numbers 50, 000 45, 000 40, 000 1985 1990 1995 2000 Source: British Beer and Pub Association www. lincoln. ac. uk 2005 2010 2015

Routes To Market – Public Houses • In 2012, 49, 537 public houses in the UK • Brewery and Pub Company tied public houses account for 31, 500 pubs in the UK • Potentially 63. 58% of the total pub trade is unavailable for ale sales. Source: British Beer and Pub Association www. lincoln. ac. uk

Routes To Market - Entrepreneurial Beer Festivals Supermarkets Farmers Markets Farm Shops Onsite Shops English Heritage/National Trust shops Online www. lincoln. ac. uk

Infrastructure • High start up costs • Physical size of equipment is large • Size of premises • House Equipment • Storage of full casks, empty casks, ingredients • Risk of exceeding business footprint for small business rate relief • Beer Miles • Vehicles • Fuel • Beer Duty • Duty relief as outlined in HMRC Notice 226 Beer Duty www. lincoln. ac. uk

Micro-enterprise support • Lower population and business densities in rural areas make it more expensive to deliver business and training support than to comparable urban firms (Bennett and Errington, 1995; Smallbone et al, 2003). • However, if the aims of intervention take into account non-economic outcomes, approaches such as LEADER become more potent. • What is the goal of funding – to support a microbrewery or to support a farm or pub to diversify? • “There are very little incentives from the government to do anything unless you are in an area like Wales or if you are a farmer. If you are farmer you can get grants to do anything. There are quite a lot of farmers that have started up breweries and got a huge grant from DEFRA to do it” www. lincoln. ac. uk

Rural Entrepreneurship characteristics • Risk taking – financial, social, “uninsurable” • Innovation – including creativity and technology adoption • Perceptiveness – alertness to opportunities and the vision to make them happen • Personal motivation – independence, drive, profit orientation, social motive? www. lincoln. ac. uk

Grant funding and business outlook • Allows microbrewers to: “gain independence and autonomy in a business that is completely governed and run by big players” • “it meant that I could buy higher spec kit. . . it is semiautomated and can even be operated remotely” • “the grant enabled us to spend money on things that we weren’t really going to budget for before…for example, the grant will enable us to get a much better website. . . a much better vehicle, where without the grant, these would not have been in the frame” www. lincoln. ac. uk

Grant funding and business outlook 2 • Trade off between independence or accepting funding with consequent administrative burden • Application process sharpens up business planning • Environmentally friendly approaches • Increasing innovative thinking • Expanding horizons in terms of routes to market • Increased competition is also forcing unfunded businesses to review their strategies www. lincoln. ac. uk

Job creation and training • It is estimated that: ‘ 1 job in brewing supports 21 others in supply and distribution: 1 in agriculture, 1 in the supply chain, 1 in retail and 18 in pubs’ (SIBA, 2013: 17). • ‘If I went to a 30 barrel brewery tomorrow I wouldn’t have to increase my staff at all, I could maintain the amount of staff, but I could triple the amount of beer I’m brewing. ’ • One doubled in size without public funding and recruited a new marketing specialist, another with funding was expecting to need to recruit someone in the near future • Little requirement for training but still providing skills for employees: ‘We’re constantly bringing people through, we’re training them up and we’re getting nothing for this. ’ www. lincoln. ac. uk

Spill-over effects • The brewery provides an alternative route to sustain a village pub when local people do not support it enough – ‘they want it here to keep the house prices up’ • Impact for tourism and working with other local producers • Use local business services but many raw materials and equipment suppliers are national businesses www. lincoln. ac. uk

Concluding thoughts • Awareness and eligibility for funding is variable • Funding distorts the market • Competition is already tough • Any interventions need to be assessed against clear objectives • There are opportunities for innovation and business development and these should be supported • Networks and collaboration can add value • More detailed research comparing funded and nonfunded businesses can yield new evidence www. lincoln. ac. uk

Thank you…any questions? Gary Bosworth & Victoria Ellis gbosworth@lincoln. ac. uk vellis@lincoln. ac. uk Lincoln Business School Brayford Wharf East University of Lincoln, LN 5 7 AT UK www. lincoln. ac. uk