The rise of craft beer is a major success story. Yet, the industry is reaching an important crossroads. A new study highlights major risks ahead — meaning continuous growth and success cannot be taken for granted. Meanwhile, there’s a great opportunity to find a new ‘sweet spot’ for growth and sustainability.
The festive season is once more upon us. Perhaps you will raise a glass or two, and enjoy your favourite beer. You might go for one of the many mass-produced beers on the market, or maybe you will opt for something different, and a little more ‘crafted’ — a bright golden IPA, perhaps?
As you take your first sip, spare a thought for the brewer that made this beautiful moment possible; reflect on the skill and craft involved, along with the hard work and dedication, to bring this highly enjoyable, quality product to your palate. And, as the hoppy notes subside — and before too many glasses have passed your lips — you might reflect more deeply on a few mindful questions:
Where did this beer come from?
How was it made?
Where did the ingredients come from?
How much water did they use?
How much waste was produced?
I know — too many questions this side of the New Year. Yet, as we look ahead, these queries touch on increasingly important concerns, which challenge the foundations of the craft brewing industry. Will our favourite craft beers still be around in the years to come? As with most things in these turbulent and disruptive times, there is little we can take for granted.
Risky business
A new study exploring sustainability in craft brewing finds that while the industry is in the ascendancy, there are significant risks on the horizon. The focus is on Ontario — where growth has been rapid — but also includes benchmarking with some of the most innovative craft breweries around the world. There are, therefore, important insights for brewers everywhere.
Having developed an enviable reputation for great tasting craft beers, Ontario now boasts more than 234 independent craft breweries, spread across more than 110 communities. The industry already accounts for 6 percent share of the total market for beer, and growing; contributing around $1 billion towards the economy each year. And, there’s more to come — with over one hundred new breweries in the pipeline.
Outwardly, there’s no sign of things slowing down anytime soon. According to Goldman Sachs, the Craft Beer segment is predicted to grow to around 20 percent of total beer volume, globally, over the next five years. This could see the industry more than triple in size by 2025, generating an extra 25,000 direct and indirect jobs, while yielding an overall annual economic impact in excess of $3 billion for the province.
The opportunity is there for the taking. Yet, there are a number of important risks and constraints facing the industry that will need to be addressed and managed. Expanding craft beer production by 300 percent will, of course, have significant implications for markets, resources, water systems and local infrastructure.
Rapid growth can lead to the market overheating, impacting resource availability and price. These effects can be further exacerbated by climate change events — which can cause major problems with the yield and quality of crop harvests. The drought of 2015 caused market prices for hops and barley to increase by 35–50 percent. Can craft brewers cope with such resource shortages — and will they be able to pass any associated cost increases on to their customers? Can customers afford and be willing to pay more?
This level of growth also means that craft brewery operational footprints will increase the load on local infrastructure, communities and the environment. This can affect the industry’s license to operate — as well as the bottom line.
Rapid growth is attracting many new players to the market, and will continue to do so into the future. Some will be nicely aligned with the independent craft brewing philosophy — producing high-quality craft beers — but we can also expect many craft imitation strategies: leading to possible quality-dilution, adversely affecting industry reputation. Once bitten, twice shy.
We can also expect protectionist behaviours from big-beer incumbents, whether lobbying for regulations that hinder growth of the craft sector, or by deploying aggressive acquisition strategies. Craft brewing might become the victim of its own success.
The impact of all these risks for beer drinkers is the likelihood of reduced availability, rising prices — and, possibly, the closure of some of our present-day favourite breweries. Clearly, the current trajectory of success is unlikely to continue, and the industry will need to continually raise its game.
Smarter pathways to growth
While the business landscape is challenging, none of these key risks and issues are insurmountable. Research within Crafting the Future finds that Ontario’s craft brewers have sustainability and a local community benefit mindset built into their DNA — with some players amongst the most sustainable breweries in the world.
Key strengths include high-quality craft beer products, a diverse range of income streams, investment in new technologies — and, in many cases, leading craft brewers are already incorporating sustainability thinking into their businesses, to ensure they remain efficient and competitive, and they can continue to add value within their local communities.
Ontario craft brewers will, no doubt, continue this great work. But, further innovation is vital. Sustainable brewing goes way beyond water, energy, carbon and eco-efficiency. Craft brewers will need to enhance all dimensions of business performance to deliver continued and sustainable growth, while delivering the best impact for their communities and the wider economy. A new model is needed.
Crafting the Future presents an objective yet practical vision that positions Ontario’s craft beer industry to ride the global craft beer wave and achieve a sustainable 20 percent market share by the year 2025. The new model is focused on three key dimensions:
- selling the most sustainable craft beer in the world,
- produced by the most sustainable craft brewers in the world, and
- all enabled by a supportive policy landscape.
Ontario craft brewers will be able to build on their local market successes, marketing freely within other provinces, and taking advantage of growing export markets. They could also harness the opportunity for sustainable craft beer tourism to help Ontario become the ‘Sonoma Valley’ of craft beer.
By 2025, Ontario craft brewers will be amongst the most sustainable breweries in the world — expanding sustainable production within their local environmental, community and resource constraints; towards closed-loop ‘circular’ operations; maximising reuse, and sharing synergistic flows of resources and innovations with other businesses.
The vision for industry success is supported by the continued nurturing of a connected craft ecosystem — with Ontario craft breweries at the beating heart of resilient local communities; creating jobs and shared prosperity, while also helping to rejuvenate community development.
A new, compelling conversation
Of course, this level of industry change does not happen on its own. At the heart of the Crafting the Future model is an approach that brings together key stakeholders, and leverages all available resources, as part of a coordinated strategy to achieve a new way of doing business in this industry.
As such, Crafting the Future is just the start of an ongoing conversation. As Kevin Jones, President and CEO of BLOOM, puts it: “Our hope is that the 20-by-25 vision and the ecosystem approach will inspire and stimulate consultations amongst key industry players that can lead to collective action and real change, and make Ontario a global leader in sustainable craft brewing.” An industry summit to bring the key stakeholders together is in the offing for early 2018.
The business case for change is certainly compelling — with continued growth and prosperity at stake. The industry is now at important crossroads. Should it carry on with business-as-usual, and hope that everything works out fine? Or, would it be better to maximise the opportunity, and minimise the downside risks, by exploring new models for sustainable growth? Time will tell — but, the most important move could be in taking the first step for a new conversation in 2018.
So, as we reach the end of 2017 — let’s get back to our seasonal beer-savouring moment. We’ll raise our glasses, one more time, and look ahead to a prosperous and sustainable new year for all: with positive vibes for the craft brewing industry, finding the new ‘sweet spot’ for growth and jobs — reducing the industry’s footprint — while generating shared prosperity within their communities. And , quite importantly, in sustaining the great craft beers we all know and love. Cheers!
This post first appeared on Medium on December 20, 2017.
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Mike Townsend is founder and CEO of Earthshine — an international consultancy and training provider focused on circular and sustainability transformations in business, economy, and society — unleashing the capability within people and their organisations.
Published Dec 28, 2017 7pm EST / 4pm PST / 12am GMT / 1am CET