Hopportunity knocks for Kiwi craft brewers

Twenty years ago New Zealanders were starting to discover they could make world-class wine. Skilled enthusiasts were buying up gravelly hillsides, planting grapes and getting creative with what New Zealand’s unique climate and conditions could produce.

Since then the wine industry has grown into a $1.3 billion export success story for New Zealand, and is the country’s largest horticultural export by value.

Today, another tipple looks set to replicate the export trajectory of wine. Craft brewing, for decades a garage industry, is starting to come of age in terms of quality and market ambition.

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Last year $41 million of craft beer was exported from New Zealand, co-incidentally the same value as wine shipped from New Zealand in 1994. 

“Craft beer is where wine was in the early 1990s,” says John Bennett, ANZ NZ General Manager Central Region for Commercial & Agri. 

“A new breed of brewers have perfected the art and are producing beers that have a unique Kiwi character, but are as good as anything else in the world. Now they want to take on the world.” 

When hops became hip

Craft beer is the fastest growing segment of New Zealand’s brewing industry, currently at about 25 per cent a year. This mirrors an explosion of interest in craft beer around the world. At a time when overall beer consumption is falling, craft beers are showing double-figure growth. 

“People with money to spend are becoming more sophisticated in their tastes, and they are looking beyond the big beer brands,” says Bennett. “The potential for Kiwi exporters is enormous, up to 300 per cent in the next decade. 

“The biggest factor in how big this industry can get is Asia. Asia’s fast-growing middle classes are increasingly looking for premium products that are authentic, high-quality and were made by a craftsman, not a factory production line.” 

This week ANZ released its New Zealand Craft Beer Industry report at Wellington’s Beervana Festival – a gathering of many of the country’s top craft brewers.

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It showed the number of beer firms in New Zealand has more than doubled since 2008, driven by new small and medium-sized brewing companies. This is despite the overall volume of beer consumed in New Zealand falling 10 per cent since 2008. 

Historically the New Zealand beer industry has been dominated by two large brewing companies: Lion Breweries(owned by Kirin) and DB Breweries (owned by Asia Pacific Breweries, now a subsidiary of Heineken). However, emerging craft breweries are challenging their larger counterparts. 

Craft beer makes up around 2 per cent of beer sales in New Zealand. If the craft ranges produced by the three bigger breweries are included, this number is around 10 per cent. 

This, too, matches statistics in the US, where craft beers have grown by 10 per cent annually over the past five years. 

Helping this growth is the upward trend of increased consumption of beer with over 5 per cent alcohol content, and it just so happens that high-alcohol beers tend to be high-hopped craft beers. 

“Craft beer is the shining light of the New Zealand beer market,” says Ben Shaw, Head of Beer at Boundary Road Brewery. Craft beer is expected to grow as the Auckland market catches up with Wellington’s, and as New Zealand catches up with more overseas markets like Melbourne and Portland, Oregon. 

Creating brand loyalty and expanding supply to meet growing overseas demand for craft beer are key success factors. 

Challenges and opportunities

New Zealand has a large number of craft beer brands for its small domestic market and cultivating brand loyalty becomes increasingly important in a crowded domestic market. 

“Craft beer drinkers are not easily fooled by sleek advertising campaigns… if it’s a big brewery pretending to be a little brewery they can see it,” says Carl Vasta, founder of Tuatara. 

Successful craft brands have an authentic backstory, creating a connection with the region, the ingredients and the brewers. 

Craft beer drinkers enjoy variation and tend not to be loyal to a particular brand. Some breweries address this challenge by frequently creating new beers, so their range is ever-changing. 

However, large brewers are taking notice and encroaching on the craft space with their own brands aimed at the boutique end of the market. These companies have well-established distribution networks, large teams of sales representatives and high marketing budgets and are well placed to expand abroad. 

Bennett says that while the opportunity is enormous, New Zealand brewers and hop growers will need to significantly expand production to take advantage of increasing demand in overseas markets. 

The challenge for craft brewers is to grow production quickly and without compromising quality or uniqueness. 

“If brewers are serious about taking advantage of this growth, then funding for brewery plant and equipment, working capital commitments and managing foreign currency requirements must be as much a part of their business success story as the right bottle, bitterness and body.”

Stefan Herrick - Senior Manager External Communications, Corporate Affairs ANZ NZ.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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