Over a month on from the UK’s vote to leave the European Union, Mintel’s Global Drinks Analyst, Jonny Forsyth, examines the long term impact that Brexit will have on the UK’s beer market. We know from the 2007/08 recession that beer is impacted by economic headwinds, especially in the UK where it relies a lot on pub trade, and in times of uncertainty people tend to go out and spend less. However, learnings from the US craft beer sector – a useful comparison as it is much better established than it’s UK equivalent – suggest that craft beer will do better than “big beer”. For example, in the US between 2008-10, craft beer continued to grow (although not as healthily as prior or future growth) while mainstream beer brands took a big hit. The result was that craft beer increased its share of US beer volume’s significantly over this period. One factor behind this out-performance is that when people are going out less or have less money to treat themselves, they tend to go for something more premium. This is especially true when that premium means only paying 50p or £1 more, which, in the scheme of people’s overall household budget, is still a relatively modest amount. A weak pound offers opportunities for entrepreneurial brewers The current weakness of the pound would suggest that local, UK brewers will do well over imported beers on price. However, it is a big assumption to suggest that the pound will remain so weak for a prolonged time. Brewers will have likely hedged their pricing for the next few months at least. So, while we may see a pricing advantage for local brewers in 2017, we are very unlikely to do so in 2016 – nothing much will really change. In the previous 2007/08 recession, we saw that “Britishness” became a big selling point for British brands as people sought to support locals, so will this aid the UK craft beer scene this time? Less so. With nearly half of the UK population voting to remain, “Britishness” has become quite a divisive selling point. Local craft brewers will need to be careful not to overplay this card. However, one of the reactions to the Brexit vote could be that there will be a national mood to support entrepreneurial businesses, especially those who are making a strong export push. This, combined with the potential prospect of a price advantage, could potentially give the UK craft brewing industry a big shot in the arm during 2017 and beyond. A weak pound would also potentially give UK brewers a huge export opportunity in craft beer. US craft players are currently dominating this global opportunity (with the honorable exception of Brewdog), but British brewers have the credentials. Indeed, the UK is much more of a traditional brewing country than the US and now has the quality to pose more of a global challenge, with craft beer really taking off everywhere, from Brazil to China to South Africa. What it means The UK’s craft beer industry is already in a strong position and micro-brewers are now innovative in their own right and making a name for themselves overseas. This sets the craft industry up to weather a storm, as even if the economy slows, the “quality over quantity” mindset benefits brands offering a premium product at a relatively small additional cost over mainstream brands. Finally, although brands need to be careful not to overplay the “Britishness” angle in the light of what continues to be a hugely divisive political environment, there’s still scope to stress local credentials and to build on the UK’s long heritage of high quality brewing. Jonny Forsyth, Global Drinks Analyst, is responsible for researching and writing all of Mintel’s UK drinks reports. He brings ten years of experience working in the marketing industry, with roles at Starcom Mediavest, AB-Inbev, and Trinity Mirror. He is a regular contributor in global and national media outlets such as BBC, CNBC and Bloomberg. You might also be interested in: No related posts.