It is no secret that the past 12 months have been difficult for the craft brewing industry, but as we enter the 2025 financial year, breweries are adjusting to the new normal and developing strategies to respond to market challenges.
There are a variety of factors impacting the craft beer market at the moment, including softening consumer demand, the skyrocketing cost of ingredients, and mounting excise tax pressures. This is keenly felt by brewers, and a survey undertaken by the Independent Brewers Association (IBA) found that two thirds of its members feared that their businesses would not survive the economic downturn.
Callum Reeves, Chair of the IBA and co-founder of Kaiju Beer, said that excise tax is one of the biggest concerns for the industry.
“A significant recent challenge is the government’s shifting stance on excise tax’s role in the federal budget, treating independent breweries as a mere revenue source. This change in language and attitude from the government is concerning, especially after previous indications that our concerns were being heard.
“In contrast, other developed countries like Canada, the UK, and Japan have recognised the community benefits and substantial employment provided by independent breweries and have implemented excise relief measures,” he said.
IBA CEO Kylie Lethbridge said that the Government’s unwillingness to shift on excise tax has been a particular disappointment.
“We urged the Federal Government to pause excise hikes in the 2024-2025 federal budget. They chose not to. We are very disappointed the Federal Government did not see fit to use its power to help the small businesses that this nation was built on,” she said.
For Phil Meddings, co-CEO of Bintani, the cost-of-living crisis is a concern, as consumers are spending less on beer.
“The economy as a whole is challenging, especially for businesses selling discretionary products which is arguably where craft beer sits, even though for lots of us there is nothing discretionary about choosing quality and flavour when we have a beer,” he said.
Brent Burton, managing director of Cheeky Monkey, is also concerned about supermarket own-brands presenting themselves as craft beers, which confuses consumers.
“The major issues facing the craft brewing industry at the moment are craft-washing from the supermarket chains and the cost-of-living crisis,” he said.
Difficulties in the craft beer industry are having flow-on effects to other sections of the liquor industry, such as hospitality and retail.
Joel Beresford, co-owner of Dutch Trading Co, said that craft beer-focused venues are having to make tough decisions to cut costs.
“Pricing across the board is constantly chewing away any profit that is getting made. Plus the fact that cost of living is inhibiting the hospitality industry in general. It’s not the end of craft, it’s just making venues think very hard about where profits are coming from, where costs can be saved and how to operate a viable business,” he said.
New strategies
Over the past year, breweries have exercised remarkable resilience, developing new strategies to cope with market challenges. There has also been some positive change in the industry, such as Feral Brewing Co returning to independent ownership, and Rocky Ridge Brewing’s expansion.
“We are optimists, so we feel change is coming as long as the government does something about the cost of living,” Lethbridge said.
Reeves expects to see more breweries entering partnerships to help each other weather the storm.
“I foresee further consolidation within the industry, with brands collaborating through acquisitions or partnerships to strengthen their position against the market dominance of foreign-owned macro brewers. While this could be beneficial overall for independent brewers, it may increase pressure on those not involved in such alliances,” he said.
From a supplier side, Meddings has noticed a shift towards simpler brewing ingredients.
“We’ve seen brewers focus more on their core range products with relatively fewer specialty releases so products like base malts and lager yeast has become more prevalent. Also, we see great interest in products that improve brewing efficiency; things like acidulated malt, Abstrax hop extracts, quality yeast with its high viability etc that can shorten the brewing process or improve yields,” he said.
Reeves is also focusing on more popular beer styles, and is careful to respond to consumer demand.
“Winning Champion Medium Brewery at the AIBAs has been a significant boost for us, but we are not immune to the industry’s current challenges. We’ve had to downsize our team to maintain business viability.
“We’ve also identified opportunities in the mainstream beer space, launching a Cerveza, a long-term project for our brewmaster Nat. We’re proud of this achievement. Additionally, we’ve honed our lager brewing skills, winning Best Pilsner at the AIBAs for Koldsplif. We’re also testing the market with a mid-strength lager. However, we are now more cautious with all our releases, focusing on matching products to the market, which is difficult given the unpredictable consumer sentiment.”
For Rocky Ridge Brewing Co’s Hamish Coates, providing value is an important way to continue engaging the consumer.
“For us, it’s not so much about cost as it is about value. It’s about concentrating on the quality of the product, concentrating on our brand story, and continuing our sustainable growth,” he said.
In addition, the IBA will continue to support its members, and is implementing a number of new initiatives, as Lethbridge explained.
“We are working on a number of activities and resources to support members through tough times, including the launch of our HR service, Quality program, and new website. We are developing the phase two of consumer advocacy and building consumer channels, state-based strategies, and our 2025 advocacy platform in the lead up to the 2025 election. We are also working on our ACCC submission on market dominance and ensure the stability of the IBA through grants and non-beer related partners.”
Playing to the strengths
Despite the difficult economic period the brewery is experiencing at the moment, craft breweries continue to play to their strengths.
Burton said that Cheeky Monkey has focused on its core values during this difficult period.
“We’ve stuck to our values of quality, humour, community and authenticity. Obviously tough business decisions have had to be made and investment in other areas, but staying true to who we are has been a focal point of ours,” he said.
“We’ve seen growth in both our hospitality arm and wholesale arm of the business. It’s certainly been challenging but celebrating the small wins we’ve had along the way has kept our team motivated.”
Coates also emphasised the importance of relationships between brewers and breweries during this difficult period.
“The ability that people have in this industry to build long term relationships is huge. We have an ability to support each other but also support other ancillary industries around us. Those long term relationships are incredibly important to the success of craft beer, and smaller breweries in particular, because that’s what will get us through the next few years,” he said.
For Meddings, the high quality of product coming from craft brewers is also a sign that the craft beer industry will survive this difficult period.
“Despite this very challenging trading environment where we see costs rising and sales falling, I see enormous resilience amongst beer producers and importantly, continuing consumer support for independent, flavoursome beer.”