Unhappy hour: The downside of the craft beer businessby Max Towle
Many in the craft beer industry say the bubble is bursting. Are they just being sour?
Ruffell is the co-founder of Garage Project - the poster child of craft beer. Garage Project is the loudest voice in an industry that gets more crowded every month.
“Are you rich yet?” was the question. The answer - fuck no.
There are now about 200 craft beer brands in New Zealand, with the number of beer companies in New Zealand up almost 300 percent on a decade ago, according to Figure.nz. The amount of high percentage alcohol that’s available (anything over 5 percent) has risen 220 percent in the past 10 years despite, in the same period, less beer overall being produced.
If craft beer is a bubble, it’s getting pretty damn big. Some say it’s ready to burst.
Ruffell may have empty pockets, but he’s still a big believer in the industry.
In a converted printer’s factory in downtown Wellington, which Ruffell and co-founder Pete Gillespie call their "wild workshop”, he explains how they experiment with unpredictable native yeast, bacteria and wildflowers picked on the hills above the city.
“We’re doing what we find interesting. People set up breweries that aren’t positioned to try new ideas. For me, trying new ideas is how you learn and improve.”
Their attitude would revolt some business minds, but getting rich quick was never the plan.
“Pete and I have always reinvested every cent we’ve earned back into the brewery.”
An American number pops up on Ruffell’s phone. He glances at it and dismisses the call. “It would be a long conversation anyway,” he says and continues to talk about beer.
When Lee-Ann Scotti first started homebrewing in her Oamaru home almost 10 years ago, she melted down her new stove. So she moved to her basement.
She and her partner, Michael O’Brien, are still there, running Craftwork, a niche brewery that produces strong Belgian-style beer.
They’ve been friends for 30 years, a couple for 10 and they’re mainstays in the North Otago town. O’Brien has been Oamaru’s bookbinder since 1988 (he’s the inspiration for Emerson Brewery’s Bookbinder session ale).
The pair swapped homebrewing and selling their beer for koha under the table (they may, or may not have done this), to go commercial four years ago. They made the move because they felt confident their beer was unique. Now they sell small quantities to mostly beer geek bars and the local New World.
Scotti says she doesn’t usually like selling to supermarkets as “they make you jump through hoops”, but the local is the local.
They only brew beers they enjoy drinking.
“If, when we started, we had just said ‘let’s make a pale ale, a pilsner, an IPA …’ there wouldn’t be a point of difference. It’s too late for that. The industry moved on,” she says.
Among their beers are an 8 percent Flemish Floozie strong ale, a 7.4 percent Flanders sour red ale and a 10 percent quadrupel.
“We haven’t made any money for ourselves yet, but we still love it,” says O’Brien.
Their fastest beers take from six weeks to three months to produce. One of the beers they’re developing is midway through a four-year process.
Their advice for other fledgling brewers? “We’ve heard people in the industry be skeptical and say stick to homebrewing,” says Scotti. “I think if you make the beer you like to drink…” She pauses then adds, “though who are we to talk? We’re not successful”.
“But if you make beer you’re passionate about - that means something to people.”
A CROWDED WAR
Walk into any supermarket and there’s a battle for your attention. The beers are big and bright and fun, and there’s an infinite range of styles. What you’re seeing is an escalating war for relevance.
“Getting your beer on shelves and on taps has always been the hardest part,” says Tiamana brewer Annika Naschitzki.
“When people imagine owning a craft brewery, they’re running around making beer all day and it smells great and there’s bubbles everywhere and there’s great beer, but the reality is that sales suck up your time.”
And as competition grows, supermarkets are able to drive down the price.
Naschitzki co-founded Tiamana five years ago. The name is the Māori word for Germany, as she brews with German hops. When she first set up the company in Wellington, she worked with a fermenter called Helga and a carbonation machine called Brunhilda.
“Looking back, I don’t think I realised how lucky I was to be a part of a blossoming industry,” she says.
“When my business partner Llew and I started, everything new was considered interesting. Now, even if you’re Garage Project, your beer doesn’t sell itself. You can’t just open your doors and there are people lining up outside to drink from your kegs.”
She’s constantly sending emails and samples, visiting sellers or asking them to come to her.
“Take New World for example, you have to sell your beer to every single shop because it orders individually. So you have to spend time developing and maintaining relationships with owners and managers.”
Then there’s the fight to get your beer on tap at bars and restaurants.
“I’ve heard a lot of stories from people in the industry recently - some being close friends of mine - that their mental health is suffering. You spend 80 hours working tirelessly and you’re selling what feels like a big part of you. And you’re only barely getting by.”
No job is worth your health, she says.
“I don’t want mental health to be an elephant in the room. Many people would be just as happy brewing some beer at home - why does commercialising it make it better?”
Her advice to those just starting out? “I would honestly just not.”
“How are you going to get attention and find a bloody reason why you are different from everyone else? I’m not sure there is a way to be successful.”
“Just because you won some homebrew medals and have a great idea for a name, doesn’t mean you should pool together $50,000 with some buddies and start a craft brewery.
“Man, you are going to lose every penny.”
THE END OF RENAISSANCE
Around the time Naschitzki was establishing her small operation in Wellington, Andy Deuchars and his business partner, Brian Thiel, were being toasted as pioneers.
Renaissance Brewing, a craft brewer in Blenheim, had become the first New Zealand company to receive equity crowdfunding. They raised $700,000 in a week and a half.
Their porter and scotch ale were hailed as two of the country’s finest beers. By late 2014, Renaissance was making $1.5million per year.
Yet with so many people owning a piece of his action, Andy never became rich. It took the San Diegan four years to give himself a salary.
Late last year, Renaissance went bust.
The boutique brewer was sold and creditors were left with a shortfall of more than $600,000.
Looking back, Deuchars says they encountered problems with their distribution agent and then as sales plummeted, the company’s board pushed to send the beer overseas.
“Beer is more delicate than wine. If it’s shipped around the world, it arrives tired and at a higher cost than what you can get fresh and local,” he says.
“I told my board it would be more cost efficient to send actual lumps of coal to Newcastle than what we were doing.”
And then there was the obvious - the competition.
“Compared to when we started, it’s terrifying.”
He, like Naschitzki, sees dark days ahead: “I don’t think sour beer is going to take over the world.”
He puts craft beer drinkers into two categories - the ultra-passionate who love sours and reds and hoppy IPAs, and the vast majority who ask for whatever pale ale is on tap.
“Every man and his dog, and his dog’s friend, and his dog’s friend’s owner are now making craft beer. Even though the market has grown, everyone’s fighting over scraps.”
“You spend money with a fire hose, and get back barely enough to fill an eye-dropper. I’m very worried for the industry and I think there’s going to be a big shakeup that may just leave a few winners and everyone else destitute.”
Now, Deuchars works as operations manager for Wigram Brewery.
“It sounds like an exalted position, but I’m still cleaning tanks.”
Still, talk of the craft beer bubble has been around for at least a decade. When Jos Ruffell and Pete Gillespie were starting Garage Project 10 years ago they were warned another brewery was a bad idea. The market was already saturated with Three Boys, Epic, Yeastie Boys and 8 Wired. Why bother?
They were undeterred.
“There was a lot of good beer being made in New Zealand. Even back then, the country was held in quite high regard internationally, and there was concern about what we were going to be able to add,” says Ruffell.
“But we thought the industry was safe and static. There weren’t many seasonals being made and you might get one or two beers coming out of breweries each year.”
One of Wellington’s flagship craft beer bars, Hashigo Zake, opened in 2008 too. Together with The Malthouse bar, a real scene was burgeoning.
Yet while people were drinking the stuff, no one in the capital was brewing. Mac’s Brewbar was the closest you got.
Ruffell and Gillespie chose a dark corner of Hashigo Zake and plotted their masterplan.
They bought a small, glorified homebrew kit and began experimenting. They made 24 different beers in 24 weeks. Many of those beers, in some form, can still be found on shelves, including the Hapi Daze pale ale, Pernicious Weed IPA and Aro Noir stout.
Garage Project hasn’t had many failures.
“We’re not throwing shit against a wall,” Ruffell says.
“The end product may not be exactly how we imagined, but once we have an idea, it sticks with us and becomes an obsession and impossible for us not to do.”
Garage Project hires different artists to design their labels, and they’re winning the marketing game as well as the beer game as a result, evident by the countless awards and stack of medals in their office.
“We decided early on that we wanted to be a house of brands, rather than a branded house. In other words that we would push each beer, give them their own personality and let them be the hero.”
Despite the market flooding, Ruffell is confident about Garage Project’s place in the industry. It was named New Zealand’s best brewery at last year’s Brewers Guild Awards - the Oscars of local craft beer.
The mainstream names sat up and took notice of craft breweries a long time ago. Last year, Heineken-owned DB Breweries bought out Tuatara. Lion has bought out Emerson’s and Panhead. Garage Project has had offers, but turned them down.
Ruffell remains comfortable, because right now the demand is slightly ahead of supply, and supply is bigger than it’s ever been.
The company has a staff of close to 50 - massive for a local brewery - and self-distribution allows for control over where the beer is going and how it’s being presented.
“We’re starting to get our beer into places I’d never have expected to see it, like smaller towns that have typically been the domain of Lion Red or DB Draught,” he says.
“There are always going to be new players and breweries that go under. But look at the US, where craft beer has experienced a number of booms and busts.
“The bar is higher, people are less tolerant of bad beer, but if you’ve got a unique voice, you’ll be heard.”
MAKING OTHER PLANS
Ruffell’s optimism is easy to grasp. Unlike other, smaller breweries and brands, Garage Project knows its customers and no longer has to beat down doors and bloody up its knuckles.
The company has continually grown for 10 years, and while there aren’t people lining up for its next concoction, its brand is beloved.
Ruffell and Gillespie were the first to sign-up to bStudio last year, a massive new brewery in Napier that can produce 5 million litres per year. All they need to do is send bStudio their recipes and pickup the finished product, allowing them to focus on the new and interesting.
Yet there’s a fear big contract breweries like bStudio can undercut the smaller players.
Sensing this last year, Tiamana’s Annika Naschitzki sold Helga and Brunhilda and turned to contract brewing. She sends her recipe to North End Brewery in Waikanae and makes real money in her administrative job.
“I didn’t feel comfortable in terms of what money was in craft beer. This way, I still pay for storage and kegs, but I’m able to make as much beer as I can move,” she says.
“And I’m focusing on the core thing about Tiamana, and that’s making a really fucking good German lager.”
With a little 50L kit to play with at home, she’s rediscovering the joy in brewing.
“It’s been damn good for my mental health.”
After his experience with Renaissance Brewing, Andy Deuchars has no immediate plans for a comeback, but he thinks the future is in the brewpub model, despite the obvious difficulties that come with running a restaurant.
“You set up with a tasty, simple food menu at a good location, and you sell your own beer. That way you’re not reliant on the sales stuff. If you do have excess beer, then you can look at getting it onto a few other taps,” he says.
There’s no way he’d advise starting a brewery.
“When you’re running a brewery, you sell your beer to a distributor who clips the ticket, it gets shipped and the ticket is clipped again, and it goes to a retailer and the ticket is clipped again.
“Everyone is taking a piece.”
This article was originally published by RNZ.
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