Global behemoths versus small brewers: The battle for the craft beer market

If there is one sector that has been front of mind for brewers in recent years, it is craft. While lager sale growth is largely flat, craft beer is growing rapidly: UK craft beer value sales grew 23% last year, according to CGA Strategy figures for the 12 months to April 2017.

This booming craft beer market has emerged as consumers move away from mass-produced beer and become more discerning in their choices, and so behemoth brewers like AB InBev, Heineken and Carlsberg have naturally wanted to get in on the action.

So how have the big brewers responded? Many have been aggressive with acquiring small breweries. AB InBev bought Goose Island in 2011, and has since snapped up another 11 craft brewers, ranging from Blue Point in New York to Camden Town Brewery in the UK. Meanwhile, Carlsberg’s UK division recently acquired Hackney-based London Fields Brewery.

Some have decided to launch their own products Diageo introduced ‘Hop House 13’ lager in 2015, putting a seven-figure sum behind it to promote it to the masses. Meanwhile, Carlsberg has been brewing a 133-year-old lager in a bid to reclaim its “craft beer heritage”, and launched a craft beer portfolio, The Crafted Handbook, which showcases its own beers as well as some independents and Brooklyn Brewery beers, which it markets and distributes in the UK.

And increasingly the major brewers are using their marketing to push their craft credentials using a message focused on quality and heritage. Carlsberg recently told Marketing Week it sees itself as “the first craft brewery”, and that it is “exactly the same as [those] craft brewers launching their products today”. That might seem counterintuitive to those that believe craft beer is all about small, independent brewers.

But Carlsberg thinks the only real difference is that its beers reach a global market.

READ MORE: How Carlsberg is using its roots as the ‘first craft brewery’ to drive success

“The real difference is that we have managed to stabilise the quality and handling of the production so that we could make craft beer for the many. Small breweries are using the idea of craft being about small-scale brewing as a marketing tool against us,” says Thomas Lohren Busch, creative advisor consultant at Carlsberg.

The independents fight back

With the major brewers expanding rapidly into craft beer, the independents are having to fight to retain ownership of the idea of craft beer. To do that, the Society of Independent Brewers Association (SIBA), which represents 870 British independent brewers has launched a ‘seal’ that gives independent brewers the chance to tell consumers their lagers are “made with quality ingredients on a small-scale”.

Smaller brewers only get the seal if they sign up to SIBA. But the company’s PR and marketing manager Neil Walker says it does numerous checks to ensure all brands that join are independently-owned, produce beer in smaller batches and adhere to its code of conduct.

“They can call it craft if they like, but [the seal shows it’s] craft from an independent brewer. It’s a different thing. Quality is a relative term – I won’t say Budweiser isn’t quality beer, as I’m sure they have high standards in terms of how they produce it. But craft brands have dexterity, they come up with a new idea and bring it out there, and react to customers,” he says.

What big guys can’t say is that they’re independent craft brewers. Consumers are being misled.

Neil Walker, Society of Independent Brewers Association

While SIBA thinks it can hold its own against major brewers trying to position themselves as craft, it is worried by the rise of these companies launching and marketing beers, such as Diageo’s Hop House 13, that look like they are made by an independent.

“What big guys can’t say is that they’re independent craft brewers. Consumers are being misled. There is nothing wrong with big breweries producing good beer. But we don’t want people to buy the product thinking it’s from a cozy brewery down the road. People deserve to understand what they’re buying,” he says.

Clashing consumer perceptions of craft

Yet research shows that the backlash against big brewers muscling in on craft might not have as a big an influence on consumers’ buying habits as independent brewers might hope.

Mintel’s research into consumer attitudes towards craft alcoholic drinks shows that definitions of what constitutes ‘craft’ vary heavily. The report shows consumers are most likely to associate craft drinks with having a unique flavour, at 47%. Some 13% list this as their primary consideration.

A few other factors also stand out as popular signifiers of craft alcoholic drinks: the use of high quality ingredients (42%), more care and time taken in production and produced in small volumes (41%) and a high level of human input (40%).

Not being owned by a large company (38%) comes fifth. Only one in 10 adults cite not being owned by a large company as their primary consideration for buying a craft beer.

So many things are seen as more important to consumers than being owned by a large corporation, giving big brewers leeway to get in on the craft act.

Emma Clifford, Mintel

The report suggests the wide variety of responses to its question on what defines craft proves it lacks a clear definition. This also provides bigger companies with an opportunity to get their craft beers high on consumers’ wish lists, despite being produced on a mass scale.

“So many things are seen as more important to consumers than being owned by a large corporation, giving big brewers leeway to get in on the craft act. It also shows the craft movement is not just the domain of small independent brands, it can be used by everyone and leveraged in many different ways,” says Mintel drinks analyst Emma Clifford.

She adds that larger brands currently tend to focus on their beers’ ‘heritage’ and ‘taste’, and is interested in seeing “what kind of effect that has on the market”. There is also more research in the pipeline at the end of the year, which will look at whether craft ‘seals’ are considered important by consumers.

Despite consumer research suggesting that people value taste and high-quality ingredients over the size of the business producing the beer, SIBA’s Walker believes that as consumers become more educated on beer and the way it is produced, more will switch to independent brewers.

He concludes: “People are starting to understand beer better, and how it can be [produced with] a bit more care. As soon as people understand that, they will seek out from smaller independent producers. There is a return to quality happening.”