UK craft brewery bubble bursts in oversaturated market

After a decade-long boom, the UK’s craft beer scene has fallen on hard time – with the number of insolvencies in the sector more than tripling in the last year. A new survey suggests that market saturation and surging inflation both served as driving forces in the trend.

For some time, the UK has been Europe’s second largest beer producer, with 5+ billion litres brewed every year. Even while the UK high street has seen drops in trade resulting from Brexit uncertainty, low real-wage stagnation and the pandemic hitting consumer spending power, the alcoholic beverage sector has largely gone from strength to strength.

Even as the casual dining segment has struggled, the drink sector has boomed, with excessive drinking bringing in an additional £13 billion every year. It finally seems as though that boom may be coming to an end though – at least for one particular aspect of the market.

Craft beverages are made by independent breweries, who produce smaller amounts of beer, typically less than large breweries, but are generally perceived and marketed as having an emphasis on innovative new flavours, and varied brewing techniques. The market has grown consistently in recent years, but according to a new study from Mazars, the tide may be turning against craft brewers.

Mazars found that 45 craft breweries in the UK went insolvent in the 12 months up until the end of March 2023 – a significant rise from the 15 in the previous year. Exploring the numbers from the latest release of Insolvency Services statistics, the audit and advisory firm suggested that an “an oversaturated market” had been badly impacted by record rates of inflation – with drinkers left with less and less money to spend on ‘non-essential’ goods like alcohol.

Commenting on a “major shakeout in the market”, Paul Maloney, an associate director at Mazars, noted that craft breweries had been struggling to keep afloat due to “rising prices” bringing their “financial challenges to a head.” The rise in craft brewery start-ups has led to a surplus of premium goods competed for limited space on supermarket shelves or in restaurants, at a time when many customers were looking for cheaper products anyway.

Maloney added “Craft brewers often offer ‘premium’ beers, but consumers are turning to cheaper options. As such, discounted brands produced by large international brewers and supermarket own brands are increasingly the choice for consumers. The craft beer market became heavily overpopulated over the last decade. The cost-of-living crisis now means many of these brewers are fighting for a place in a shrinking market. Some of them will not make it.”

Another issue for such breweries is transport, as they rely on doing lots of business within local communities – running ‘taprooms’ and supplying to local ‘bottle shops’. Mazars stated that this limited the turnover of several craft breweries which had failed in the last 12 months.

One such case saw Somerset brewery Wild Beer Co fall into administration at the turn of the year, with inflation having made production costs untenable. Professionals from Undebt.co.uk were installed as joint administrators.