Tuesday, 17 October 2017

Hardknott Crowd Rewards

This post is about our new rewards engagement scheme, Hardknott Crowd Rewards. No, it's not another crowd funding scheme, indeed it is the exact opposite. You can skip the post below and just hit the link to find out what it's all about.



"Find somewhere with lots of chimney pots" he said. Because smoke makes people want to drink more beer? I have to admit I found the connection between chimneys and a demand for beer somewhat confusing when I initially heard the adage. The confusion only lasted a few seconds as my decaying grey matter caught up with the metaphor. It is the case that for some decades that heavily populated areas no longer rely on open fires to heat houses and chimney pots are indeed artefacts of a bygone age, what with central heating and such like.

It is true, it is much easier to sell beer in areas that have a reasonable population density, like big towns, cities and large conurbations. Hardknott certainly is not located in an area that could be classed as highly populated. Indeed, if we measured the total population we could reach in 30 minutes from our town of Millom and compared to all the other towns in Cumbria we would rank very low indeed, beaten perhaps only by Kirby Stephen1

Our success at Hardknott has undeniably been as a result of our activities online. Selling outside of Cumbria by reaching out through this blog, Twitter, Facebook and developing a reputation via these means. Selling into city centres via various distribution modes has helped us get where we are.

As the Craft Beer scene matures, as it certainly is doing, and more and more breweries become savvy to the power of social media it becomes more difficult to be heard. Equally, more and more breweries are setting up closer to, or even in the middle of cities. Right there, right where they need to be and very visible to the local populations, especially if they stand on their chimney pots.

On top of that maintaining social media accounts is something of a time-consuming activity. Lately I've been trying to claw-back parts of my life that have been missing over that last 12 years, mainly because my knees will fail me before long and I want to use them whilst they still work. I have rekindled two of my favourite passions lately, mountaineering2 and musical theatre3. Doing all of this means that I do not spend all my waking hours tweeting, blogging and makes it more difficult to attend beer events and the like.

So, how to engage with people? How to reach more people and get Hardknott more noticed?

I had an idea a few months back, and I've spent most of my time since developing it. Today I decided it was good enough to launch.

Hardknott Crowd Rewards


Go on, click on the link. I'm hopeful it'll be self explanatory, but it is brand new and we'll be developing it over the next few weeks. Either way, help us out by sharing the love and you might end up with some really great goodies. We've even had some t-shirts made as you can see from the pictures here.


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1I did consider Kirby Lonsdale and Grange-over-sands in that list, but they are both less than 30 minutes from Kendal. Yes, these places do seem to be listed as towns. I do look at these things as part of my research into development of my business.

2I spent two very glorious weeks in Chamonix this summer. I climbed a mountain called Mont Blanc du Tacul (4248m, my first and hopefully not last 4,000m peak). Next year I hope to summit Mont Blanc itself. The reader is highly unlikely to know just how important this is to me.

3This year I took part in a fantastic musical in Abbey Musical Society production of Barnum. I enjoyed it hugely and was a brilliant diversion from some of the nonsense I have to deal with in the beer world.

Next spring I'm in a production of Cats with the same group. If you have ever seen the show you will understand why I need my knees. I'm playing Alonzo, in case you are interested.

Thursday, 28 September 2017

A sign of decline

Many years ago, when I was a young man,1 I was introduced to a local Cumbrian brewery called Yates. Their bitter was at the time an interesting addition to an otherwise well established traditional base of cask beers in Cumbria from the likes of Jennings in Cockermouth and Hartley's in Ulverston. Subsequent closure of Hartley's and the selling of Jennings to Marstons effectively made Yates the oldest independent brewery in Cumbria.

Yates has a place in my heart. In 1986 when it was first established there was very little in the way of microbreweries in Cumbria, if any at all. As a young man it awakened my interest in the brewing industry and was probably an important, if subliminal influence when I considered my own brewing career.

I was saddened to hear a few weeks ago that the current owners, after trying to sell the brewery as a going concern, have decided to simply close the brewery. Having heard on the local grapevine I was waiting until I saw an official word before comment. This brewery closure does sadden me somewhat for a number of reasons.

Quite apart from the fact it is a shame the oldest and most established independent Cumbrian brewery is closing, for me it is something of a weather-check on the state of the industry and the market for independent beer. Moreover, it is an indication perhaps of the likely value of such breweries should any owner wish to find an exit strategy. I feel this is a significant issue for anyone looking to invest in any brewery operation.

Profits for most breweries in receipt of full duty discount is tiny. Indeed, I have some data2 that shows  the average brewery below 5,000hl annual production will be lucky to break even. Some will make a profit and some will make a loss. If it is not possible to sell a brewery upon retirement then it is highly likely an overall loss will be made on exit from the industry in most cases. It seems to me that if Yates cannot sell, as a well established business and known brand, then what hope is there?

Caroline and Graham Baxter, who wish to retire
and cannot find a buyer for their brewery.
Of course growth to a bigger and more healthy business might be an answer, but if a significant number of the estimated 1,4002 breweries under 5,000hl were to grow to an average of say 10,000hl  annual production, which is where I believe we'd need to be to see significant value in the brewing business, then this would represent an increase of their combined share of the beer market from around 3%2 to over 30% of the total beer brewed.

I cannot see how this is even remotely achievable without a much greater revolution in the beer industry. Total volume brewed currently by breweries under 200,000hl is about 9%3 of the total beer brewed and of that about 7%4 is brewed by SIBA full brewing members. To move a significant number of current sub 5,000hl breweries into a strong position we'd need to take significant volume away from the global giants, and although I'd love to see that happen, I doubt it actually ever will.

It remains for me to wonder what the future is. Personally some rationalisation and combined business collaborations would be a sensible move. I did approach Yates when I heard they were up for sale to explore how we could work out a deal. We couldn't afford the freehold, but might have been able to work out how to find value in the brand and the equipment and work out a deal. Apparently our approach wasn't welcome.

I think more innovative business solutions need to be explored if the current micro-brewing sector is to thrive. I've looked at a few options, and with only a few exceptions owners of micro-breweries don't seem to get it and seem determined to plough a lonely and pointless furrow.

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1Indeed, it was a very long time ago.

2Data has been confidentially supplied to me by SIBA.

3Combined SIBA data and BBPA data

4Estimates by SIBA

Thursday, 13 July 2017

Reduce beer duty or defend PBD?

Hundreds of small breweries in the UK benefit from Progressive Beer Duty (PBD). The discount we enjoy has helped to see a huge increase in the number of small breweries in the UK. It is aimed at helping, to some extent, offset the economies of scale that larger breweries achieve.

The smaller a brewery the more manpower is needed to brew each pint of beer. For example, it takes around 6 hours minimum to brew a batch of beer1. There isn't much can be done to make this a lot faster, and in some cases it might take a lot longer with inefficient brew kit. To a large extent, irrespective of brew-length2, it takes perhaps one person to do a brew with little other help3.

For this reason production costs are generally higher per unit of volume the smaller the brewery. In fact one study I am looking at4 indicates an exponential fall of costs as the brewery gets bigger. PBD is there to help small breweries with the diseconomies of scale suffered by small craft brewers.

As beer duty has risen over the years, and so many more new breweries have sprung up, bigger breweries have started to complain about the increasing perceived cash "discount". It is certainly true that as beer duty becomes a bigger part of the overall costs of brewing beer so we see PBD working better for us smaller breweries. Perhaps we shouldn't object quite so much when beer duty increases? It hurts, but it hurts the bigger breweries more.

It is also seen as unfair that the maximum amount of PBD in cash terms is limited to about £200,000Once a brewery hits production of 5,000 there is no benefit to produce more in terms of beer duty savings. Arguably every drop of beer produced above 5,000hl is charged at full duty rate. However, economies of scale do really make a difference.

There are moves to change the structure of PBD. The thing that scares me is that SIBA is looking to engage with various organisation in a bid to create unity in the beer industry. It is likely that there will be increasing moves to change the shape of PBD so much larger breweries gain some significant benefits. The reasons for wanting to engage with the wider beer industry, it is argued, is that we should have a common lobbying voice to put to Government to reduce beer duty.

Number of breweries by size in the UK

Personally I would much rather SIBA fight to keep PBD as it is. There might be a little bit of a painful step at the 5,000hl level, but frankly there are a small number of breweries that will get close to this.

Looking at the chart above, there are a huge number of breweries below the 1,000hl level. Many of them cannot, or do not want to grow towards 5,000hl, and if they do, their barriers are generally the stiff competition that exists.

Although SIBA are saying that the 5,000hl limit is sacrosanct and the 50% discount below that cannot be touched, and frankly there are scary noises around to fiddle even with that, there will be unintended consequences of giving breweries in the 5,000 - 200,000hl range added benefits. Any duty benefit given to breweries larger than 5,000hl will inevitably give them a competitive edge that will directly impact on those breweries less than 5000hl, who will receive no added help.

Looking at the spread of brewery size it is quite clear that there are very few breweries above 5000hl. Indeed, more than 50% of the breweries in the UK are in fact under 1,000hl and stand no chance of ever achieving 5,000hl.

Total share of volume by brewery size
The reasons for considering a dialogue that might change PBD is to help have a unified voice to lobby for an overall reduction in beer duty. I fail to see how that might help me, and hundreds of other breweries like ours. Indeed, I am of the view that lobbying for major changes to the now fairly established policy of increasing all alcohol duties in line with RPI is a somewhat futile activity.

The vast majority of beer brewed in the UK is made by huge companies. Over 90% is brewed by only 25 massive breweries. An increase in beer duty hurts them much more than it hurts me. A decrease benefits them much, much more than it benefits me. The vast majority of the electorate is now convinced that these big companies are evil and deserve to be punished.

A change in PBD will give me no benefits, and likely make a very small number of larger breweries more competitive, so hurting my sales. Indeed, this is the reason there is a driver for change anyway.

It is this, more than anything else, that has made me fairly convinced that we need to look more carefully at how SIBA view it's members. If you are a SIBA member and have yet to vote in the membership ballot, I would urge you to do so as soon as possible.

I do hope the reader is impressed with my pie charts. This is a beer blog after all, and we all know that beer and pies are an ideal combination.


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1The brewing process from point of mash in to having the fermentable liquid, called wort, in a tank ready to pitch the yeast.

2The brew-length is the volume of wort produced in a single brew-day.

3I am of course generalising here. However, the bigger a brewery installation the more likely labour saving features have been introduced. For us we still have small mash tuns which necessitate digging out the grain from the top. A brewery with a brew length of say 25hl will almost certainly have side access door enabling spent gains to be raked out with comparative ease. A 100hl brewery might well have a self-digging mash tun and be operating a whirlpool type copper which generally only uses pellets. Cleaning such brew-houses

There are variations on this with smaller brew-houses where automation allows more brewing per shift by use of parallel vessels and mash-in possible for a second brew while the first is still in the copper.

4Unfortunately, because of the nature of the data it is unlikely that I'll be able to publish the exact details of this study.

5This assumes an average beer strength of 4.2%. The current full duty rate is £19.08 per hectolitre percent (HL%). Full PBD discount gives a reduction of £9.54/HL%. So for a brewery producing 5,000hl of 4.2% beer their total savings on beer duty is 4.2 x 5,000 x £9.54 = £200,340.

Before the duty rate increase in March it was £192,990. So a brewery between 5,000hl and 30,000hl annual production saw an increase in this benefit over the very biggest breweries of £7,350.

Thursday, 29 June 2017

SIBA membership ballot

I entered the beer and pub industry because I felt there was something wrong with it. That was just over 13 years ago. A lot has changed in that time, but frankly so much more has remained steadfastly unchanged. The beer tie still exists, most pubs still fail to have anything of an interesting beer range and that is largely due to the massive force of brewing businesses that control much of the market.

It doesn't seem unreasonable to me to think that changes to the industry should be led by my trade body, SIBA.

There are various discussion within SIBA (Society of Independent Brewers) regarding a number of issues. I have engaged in an attempt to get the best out of the organisation for my business, and currently I am of the view that my efforts have largely cost me time and money with very little to show.

I presented a couple of motions at SIBA AGM this year. One was asking for a ballot of members to ascertain if the membership criteria was in accord with the membership's views. The motion was passed with a healthy majority.

Motion 1:
SIBA will carry out a ballot of all members to ensure that the membership is happy with the current membership criteria.
Should the results of the membership show that the majority of the membership is unhappy with the current criteria SIBA must fully, demonstrably and transparently consult the membership to determine a new membership criteria.

The ballot is now being conducted, and after an initial technical hitch, the vote is now live for all SIBA members.

I spent yesterday trying to write further words to support my reasons for a "no" vote. I have to be honest and say that I fail to add anything that I haven't already written, and again, or that I have said in my speeches.

The speeches were recorded by the SIBA photographer. I've lifted my bits out of the official video that languishes behind a password. This may not meet with total approval of the officialdom, but I'm only showing me, so hopefully I'll get away with it.

There are further points made by other brewers at the AGM. Some of them rather splendid. I'd strongly recommend logging onto the SIBA toolbox and looking for the membership ballot link and finding the video. The motions start 45 minutes into the video.


BeerX 2017 SIBA AGM - Dave's speeches
from Hardknott Brewery on Vimeo.

I would really like a "no" vote. Not because I really think that it'll make a lot of difference tightening up the membership, but because I would like SIBA to realise that they do not do enough for small brewers like me.

If the vote goes to a "yes" then it might just be the end of my time trying to engage with SIBA as it will then be proof that SIBA will fail to adequately align with my view of what the beer-world should look like.

Some extra information;

It is estimated that;
over 60% of breweries in the UK produce less than 1,000hl per year
over 80% of breweries in the UK produce less than 2,500hl per year
over 90% of breweries in the UK produce less than 5,000hl per year

And yet the focus from SIBA is on providing for breweries who produce over 5,000hl per year.



Wednesday, 29 March 2017

Hardknott past, present and future

Hardknott is just over 11 years old. We started with a two-and-a-bit barrel (3.5hl) plant brewing occasionally for the pub we then owned. We almost exclusively brewed for cask with only a tiny bit ending up in bottle and a couple of highly experimental kegs. It was a most useful trial period that culminated in us setting up as a separate stand-alone production brewery after selling the pub early 2010.

Meanwhile, during 2009 I started to discover some very interesting beers. Jaipur of course, and Punk IPA. Big imperial stouts and barley wines also hit me big-time that year. My view of beer, it turns out, was going through a humongous shift of perspective, initially started by a visit to Oregon late 2008. Massive hop-hits of American style IPAs. Beers with more body and interest due to higher ABVs.. and all manner of preconception-busting styles that shook my own perspective to the very core in a very good and exciting way.

Of course there was then, and still are some great brewers doing some fantastic things in the UK. Fullers remains a solid favourite of mine, and there might even be some more I'll have to say on that soon. But that seminal year, with the discovery or Thornbridge and BrewDog made me want to look further at how I could develop my own brewing passions. I wanted to be a craft brewer, because I believed that meant more than just being a "real ale micro-brewery" even though it seemed many commentators treated that concept of craft beer with a huge level of contempt.

When I set up my stand alone production brewery I wanted to follow the more contemporary style that was emerging and I believe I have a rightful claim to be Cumbria's first and best independent craft brewery.

Whatever your view of craft beer, one thing is certain, we remain very independent. There have been various take-overs of bigger entities. Meantime, Camden Town and now Hawkshead to name just three that are high above my event horizon.

Just this week we hear of BrewDog bullying tactics over brand names, applying similar corporate style pressure that they have previously fought against. Indeed, admittedly with some amusement to me, Martin and James changed their names to Elvis by deed poll after a law suit was filled by the late Mr Presley's estate.

Meanwhile we remain frustratingly small. We have produced about 1000hl every year for the past 4 years. We have also, due to the combination of the inefficiencies of our size, increasing costs and downward market pressures on brewery gate prices seen increasing losses that cannot be sustained. We cannot continue to do what we are doing the way we are doing it.

So, big choices to make. Huge choices to make. We have a buyer for our house, which will realise a chunk of hard cash. In a few weeks, hopefully, we will complete on the sale our house and pay down some scary loans that are partly to blame for our losses1. We will then be in a position to decide exactly what we are going to do next. We will have some hard cash left with which to consider investment in the business, but it will not be enough by itself to make it work, so we will have to take out some more scary loans, but a lot more carefully this time.

In reality, the most obvious thing to do would be just to wind up our operation. Ditch the dream of making a successful competitive, exciting and unique craft brewery as just a ridiculous idea that cannot work commercially from where we are. The market information does not make it look great; with the increasing competition, dropping wholesale pricing and increasing costs like no tomorrow. Stopping production that actually costs us money to keep doing, selling all our equipment and binning Hardknott often seems the only logical thing to do.

Is this what we will do? Not if I have my fucking way it isn't.

We have lived, breathed, dreamed and sweated Hardknott for 11 years. I'm damned if I'm giving up now. But we need to be bigger and better and different to how we have been.

So, how do we make it work? Well, I could tell you all my ideas, and my plans, show you all my blue-prints for success, but you'd have to get me very drunk before I did. They are all fairly exciting and progressive, and if I can find a way to fund them I'll make damn sure at least some of them happen.

Let's just say we have a bold plan. It's a plan that will be risky and will put everything we have on the line. We are quite probably mad. But what choice do we have? Lose Hardknott? Lose everything we have worked so hard to achieve over the last 11 years? Lose all that talent we have in the team, lose the inspiration that got us this far? Come on, that is worth fighting for surely?

We firmly believe we have a huge amount of potential. Our core beliefs, dreams and aspirations have not changed.

Besides, can we allow a few major craft pioneers to simply leave us for dust? With BrewDog becoming ever more corporate like, Meantime, Camden Town and Hawkshead selling out we feel there is a danger of the idea of craft beer becoming ever more threatened. With the likes of Marston's claiming part of the craft arena and many smaller traditional brewers taking up the cudgel, with some admirably good results,  we have a battle on our hands and make no mistake about it.

As this all unfolds over the next few months I hope to start sharing a bit more detail. I hope you will all watch and support us and our tiny team. We may well be asking for particular practical support, much is as yet uncertain, but we hope you will trust us to do the right thing when we do call for that help.


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1Many people have said to me... "don't!... DON'T sell your house to save your business!". I have a fairly simple reply; when the majority of the debt is either secured on the house anyway, or on personal credit cards, there are not many choices left. We simply do not have the financial headroom to close down the business neatly and safely without risking much more personally, losing our house and our business anyway and becoming personally bankrupt.

I am hopeful that suppliers, HMRC and our loyal fans will all see this as the right thing to do by everyone. Equally, a tidy solution to this will hopefully leave our credit rating in some sort of reasonable health.

Tuesday, 7 March 2017

SIBA AGM - Sheffield 16th March 2017

Well, the motions for SIBA AGM are out... I am presenting two motions.

Some time ago I turned from being a vocal critic of SIBA, shouting from the sidelines, to working inside to make democratic change. In many ways I have been enjoying the efforts I put in. However, being a small business owner it can be quite time consuming and spending time away from the brewery to attend regional meetings and the policy committee meetings that I am involved with is difficult.

This is a key point really in my considerations. A point that I will labour in my total of 10 minutes at the podium. The fact that the average SIBA member produces around 1000hl of beer a year. Representing perhaps £200,000 turnover. If you understand the margins on beer you will easily see that it is very difficult to make a decent living at this level.

Half of the SIBA membership is smaller than this.

It seems, at least when it comes to the brewery, I am about average in size. We brew perhaps slightly over 1000hl per year.

I find it difficult to engage with SIBA in a meaningful way, predominantly time and distance being the barrier, and I am possibly not as time constrained as brewing businesses smaller than me. It is my belief that SIBA fails to accurately represent the majority of it's membership, but changing that is not likely to be easy if the majority of the membership does not engage.

To that end, if you are a SIBA member and cannot attend the AGM please invoke your right to send a vote by proxy.

Let's be heard.

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My motion that is listed as motion 3 has raised one or two questions.... yes, I believe PBD should be defended as is, and will state so in my speech. However, in reality motion 3 is presented as a defence in case motion 4 is passed. If there is an independent review then changes to PBD must be considered alongside the fact that meaningful access to tied markets is still not improving, despite MRO.

I make no bones about it, motion 4 would be much better rejected and a clear message sent from the membership that PBD should stay unchanged.

Thursday, 2 February 2017

Jester


Meet Jester. He was born 18th July 2016. He's lived with us since he was 7 weeks old.

I'm sure you will be thinking "Dave, just bugger off to Facebook if you are going to post pictures of your pets, we thought this was a beer blog!"
Well, yes, but we named Jester after the fairly recently developed British hop variety.
 "Dave, you make beers with New World hops... using British hops will just make the beer taste of twigs and moss!"
You lot are so lacking in inspiration and experimentation ain't you? I mean, historically British hops have developed for boring major regional brewers and their twig tasting beers....... but things are changing.
Make no bones about it, there are efforts being made to develop new hop varieties and it is important for us brewers to explore what they can do for beers.
We've started a new series of beers; the neutron series. The first one was Neutron Centennial. We use quite a lot of Centennial hops in our beers so getting the chance to isolate the single hop was handy.
 Jester hop variety has got some English characteristics, but we thought it to be one of the more suitable hops to play with. We're not apologetic for trying and we think we brought out the best in it.








Jester the Azimutt is doing fine...As you can see he's grown up into a fine proud dog...all growed up and that.

Have English hop varieties grown up yet? Well, it's improving, but there is still work to do.. We'll keep trying new varieties until we find the top-notch ones that can replace those properly funky American varieties.