Off-premise retail sales of craft beer in New Zealand have soared by over 40 per cent in a year, pulled by local brewers whose ranks have doubled since 2010, according to new industry research from ANZ.
"There's an unquenchable thirst for big-flavoured brews in a range of styles, some combining hops and malt with anything from coconut and coffee to lemongrass, lychees and even crayfish."
Pete Barnao, Communications Manager, Media | ANZ NZ
At a time when beer consumption overall is falling, there's an unquenchable thirst for big-flavoured brews in a range of styles, some combining hops and malt with anything from coconut and coffee to lemongrass, lychees and even crayfish.
Josh Scott, founder of Moa Brewing Company and member of a renowned wine-making family, puts it down to a fundamental shift in the appreciation of beer: "Even in my footy club it's changing – it's about quality over quantity".
With a brewery set amid vineyards in the world-renowned Marlborough wine region, Moa was among the pioneers of craft beer's Kiwi uprising when it was founded in 2003. Since then craft breweries have bubbled up in every corner of the nation – at last count there were more than 110, with New Zealand now reputed to have more per capita than any country bar the UK.
So, is craft beer the new wine? Pundits say it's too early to make that claim. But its potential should not be underestimated and parallels have been drawn with where New Zealand wine was 20 years ago, before it grew into a $NZ1.4 billion export industry.
The growing appetite for great beer is not confined to New Zealand and, with competition intensifying at home, brewers are increasingly looking offshore for future growth. Glancing at ANZ's insights report, one chart in particular jumps off the page. It's not the one comparing nations' per capita consumption, which past generations of Kiwi drinkers may have looked to as a source of national pride (Kiwis now rank 28th, by the way, and falling).
The diagram that captures the New Zealand beer opportunity of 2015 charts brewers' exports to Asia, which have doubled in just two years. The vast Asian market – including China, the world's largest beer consumer – is seen as holding the most exciting prospects as its fast-growing middle classes develop a taste for craft beer.
But breweries are also targeting other lucrative markets, with sales spilling over into Australia, the UK and North America. Overall, ANZ estimates 25 of New Zealand's craft brewers are pursuing sales overseas, with another 20 looking to follow within the next two years.
"Though many of our brewers are small beer on the global stage, they have enormous ambition," says ANZ's Rob Simcic, who presented the bank's research to the industry at Wellington's Beervana festival, New Zealand's largest gathering of craft brewers.
“We've seen a material shift in thinking over the past year with production soaring and brewers focussing more and more on overseas markets," Simcic says. "New Zealand beer is now enjoyed in over 40 countries and brewers tell us exports are just getting started."
New Zealand's highly distinctive hop varieties are a vital ingredient in its export success, lending themselves to award-winning brews whose taste can stretch the known limits of established beer styles.
Another is brewers' passion for their craft: 80 per cent cited it as the top reason they're in business; the figure is closer to a quarter in other industries. Unsurprisingly, the majority are also motivated by making money.
“All of this is not to suggest brewers are blindly optimistic," Simcic says. "They appear to have a healthy understanding of the issues and challenges that come with rapid growth and exporting.
"Managing capacity constraints, securing shelf space and a steady supply of raw materials stand out as key challenges – while those brewers who are exporting point to the impact of freight on beer quality, and the challenges of securing distribution and positioning their brand. “
Successful strategies include planning and forecasting well ahead, building strong relationships and calling in professional expertise to help fill any skill gaps.
The willingness of craft brewers and other players to collaborate is seen as one of the industry's greatest strengths. Examples range from collaborative brewing arrangements to joint sales and marketing initiatives such as the New Zealand Craft Beer Collective, which sees five brewers banding together to take on the UK market.
In another initiative, Auckland-based glassmaker O-I teamed up with the city's Unitec Institute of Technology to design a beer bottle specifically for the Asian market.
The truest measure of an industry's prospects is often the extent to which it can attract capital to fulfil its growth ambitions. Investors too are putting their money where their palate is, funding New Zealand craft breweries at around twice their annual revenue – at least double what's typically paid for brewers overseas.
"Investors are prepared to pay a premium to own their piece of this industry," says Simcic. "Why is this happening? You can only conclude that investors see exceptional growth potential, while understanding that the opportunities to invest are currently quite limited. I'd also suggest that some are people who personally share the passion we're seeing among consumers and brewers for great beer."
Views in the industry are mixed on the value of the New Zealand brand to exporters. Some argue that the true appeal lies in a distinctive New Zealand flavour. Either way, many are determined to keep the 'New Zealand' and the 'craft' in Kiwi craft beer as they grow rapidly and export and in some cases begin brewing in-market.
"You can take these businesses offshore and keep the beer 'craft'," says Jason Crowe, Business Manager for Wellington's iconic Garage Project, which in four years has grown from origins more nano than micro brewery into a multi-market exporter. "There's nothing stopping you from being 50 times your size and still producing the exact same product."
Luke Nicholas, Owner Brewer at Epic Brewing Company, believes there's no substitute for quality: "good beer, in good condition sells itself," he says. "The NZ Inc brand offers some degree of value but exceptional beer can be made anywhere in the world."
Bob King, Chairman of New Zealand's Brewers Guild, is confident the nation's beer industry is in good stead. “New Zealand has an incredibly proud tradition and talent for beer brewing. It's been a favourite pastime for many Kiwis and it turns out others think we're pretty darned good at it."
'New Zealand Craft Beer Industry Insights 2015', by Josh Newton, Senior Manager, ANZ New Zealand Client Insights and Solutions team. The report was developed closely with brewers and the supply chain enabling a thorough presentation of the industry, from opportunities to challenges. The full report can be seen here.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.