430 new craft breweries opened in just the last year across the UK

Publications that covered this story include City AM and Daily Mail on 28 January 2019.
  • Craft breweries still too reliant on crowdfunding to fund expansion
  • Debt finance can be preferable over the longer term

430 new breweries were opened in the UK in the latest year (year-end Dec 31 2017), as craft beer increases its market share in pubs and supermarkets.

In 2009-10 UK brewery openings were running at just over 100 per year (101).

Whilst Brexit might slow the shift in the UK from big brand beers to premium niche beers, the craft beer market is still some way from peaking.

The market share of craft beers is still below 5%* of overall beer sales in the UK compared to 23% in the US. Craft beer sales have been growing sales at around 90% in the last year versus a decrease in sales of big brand “classic lagers” by 1.3%*.

Increased spending power amongst the key ‘millennials’ market (as they age) is thought to be a significant part of this growth.

However, whilst the craft beer sector has now reached a significant scale funding of these breweries is still relatively hard to come by and many are still having to rely on issuing shares through crowdfunding to expand.

Issuing too many shares to fund company expansion, rather than debt, could see the stake of the original founders diluted away. Debt finance also allows companies to deduct interest from any taxable income.

Recent examples of craft breweries using crowdfunding include:

  • Leeds-based brewery Northern Monk raised £1.5m from 2,161 investors
  • East London brewery Five Points raised more than £950,000 from 1,350 investors
  • London’s Hop Stuff Brewery raised over £770,000 from its third round of crowdfunding

High street banks have been reluctant to lend to craft breweries as most do not fit their risk profile. However James Simmonds says that smaller brewers should be able to access asset-based finance and invoice finance.

Equipment leasing allows breweries to avoid the large down payments required for purchases, which frees up cash for other business expenditures.

James Simmonds, Head of Drinks at UHY Hacker Young, says: “The craft beer industry continues to fizz with hundreds of entrepreneurs looking to tap into high consumer demand.”

“Breweries face high fixed costs and startups tend to burn through cash quickly. That risks giving away too much of their equity before they can start using lower cost bank loans.”

“Alternatives like invoice finance or leasing should be considered – these can offer a much more stable form of finance than a bank loan that can be called in at short notice.