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Funding in the Microbrewery Sector

Gary Bosworth & Victoria Ellis

4th Beeronomics Conference York, September18th - 21st, 2013

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Focus for Research

• What has been the impact of increasing funding for microbreweries?

1)How has funding contributed to local economic development objectives?

2)How has funding impacted upon the business approach of microbrewery owners.

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Methodology

• Analysis of market data to assess the economic context

• Interviews with a sample of 15 microbrewery owners - both funded and non-funded

• Thematic analysis – attitudes and behaviours, wider socio-economic impact

• Inform a future survey of microbrewers to better understand future challenges and opportunities in the sector

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Microbreweries – facts and figures

Source: British Beer and Pub Association and H.M Revenues and Customs

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Microbreweries – facts and figures

Source: British Beer and Pub Association

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Microbreweries – facts and figures

Source: British Beer and Pub Association

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Routes To Market – Traditional

Public Houses free of tie

Public House tied to Microbrewery for ‘showcase’

Inter-brewery swaps

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Routes To Market – Public Houses

Source: British Beer and Pub Association

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Routes To Market – Public Houses

Source: British Beer and Pub Association

• In 2012, 49,537 public houses in the UK

• Brewery and Pub Company tied public houses account for 31,500 pubs in the UK

• Potentially 63.58% of the total pub trade is unavailable for ale sales.

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Routes To Market - Entrepreneurial

Beer Festivals

Supermarkets

Farmers Markets

Farm Shops

Onsite Shops

English Heritage/National Trust shops

Online

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Infrastructure

• High start up costs

• Physical size of equipment is large• Size of premises

• House Equipment• Storage of full casks, empty casks, ingredients

• Risk of exceeding business footprint for small business rate relief

• Beer Miles• Vehicles• Fuel

• Beer Duty• Duty relief as outlined in HMRC Notice 226 Beer Duty

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Micro-enterprise support

• Lower population and business densities in rural areas make it more expensive to deliver business and training support than to comparable urban firms (Bennett and Errington, 1995; Smallbone et al, 2003).

• However, if the aims of intervention take into account non-economic outcomes, approaches such as LEADER become more potent.

• What is the goal of funding – to support a microbrewery or to support a farm or pub to diversify?

• “There are very little incentives from the government to do anything unless you are in an area like Wales or if you are a farmer. If you are farmer you can get grants to do anything. There are quite a lot of farmers that have started up breweries and got a huge grant from DEFRA to do it”

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Rural Entrepreneurship characteristics

• Risk taking – financial, social, “uninsurable”• Innovation – including creativity and

technology adoption• Perceptiveness – alertness to opportunities

and the vision to make them happen• Personal motivation – independence, drive,

profit orientation, social motive?

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Grant funding and business outlook

• Allows microbrewers to: “gain independence and autonomy in a business that is completely governed and run by big players”

• “it meant that I could buy higher spec kit...it is semi-automated and can even be operated remotely”

• “the grant enabled us to spend money on things that we weren’t really going to budget for before…for example, the grant will enable us to get a much better website...a much better vehicle, where without the grant, these would not have been in the frame”

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Grant funding and business outlook 2

• Trade off between independence or accepting funding with consequent administrative burden

• Application process sharpens up business planning• Environmentally friendly approaches• Increasing innovative thinking• Expanding horizons in terms of routes to market• Increased competition is also forcing unfunded

businesses to review their strategies

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Job creation and training• It is estimated that: ‘1 job in brewing supports 21 others in

supply and distribution: 1 in agriculture, 1 in the supply chain, 1 in retail and 18 in pubs’ (SIBA, 2013: 17).

• ‘If I went to a 30 barrel brewery tomorrow I wouldn’t have to increase my staff at all, I could maintain the amount of staff, but I could triple the amount of beer I’m brewing.’

• One doubled in size without public funding and recruited a new marketing specialist, another with funding was expecting to need to recruit someone in the near future

• Little requirement for training but still providing skills for employees: ‘We’re constantly bringing people through, we’re training them up and we’re getting nothing for this.’

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Spill-over effects

• The brewery provides an alternative route to sustain a village pub when local people do not support it enough – ‘they want it here to keep the house prices up’

• Impact for tourism and working with other local producers

• Use local business services but many raw materials and equipment suppliers are national businesses

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Concluding thoughts• Awareness and eligibility for funding is variable• Funding distorts the market• Competition is already tough• Any interventions need to be assessed against clear

objectives• There are opportunities for innovation and business

development and these should be supported• Networks and collaboration can add value• More detailed research comparing funded and non-

funded businesses can yield new evidence

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Thank you…any questions?

Gary Bosworth & Victoria Ellisgbosworth@lincoln.ac.uk

vellis@lincoln.ac.uk

Lincoln Business SchoolBrayford Wharf EastUniversity of Lincoln

Lincoln, LN5 7ATUK