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.

Sunday, 22 January 2017

Small Brewer's Duty Reform Coalition

I've oft raised concerns regarding SIBA, the trade organisation of independent brewers. Over the past two years or so I have moved towards a position of working closely inside SIBA to achieve change through engagement rather than shouting from the sidelines. Arguably this is a more responsible and constructive activity1.

I am a member of the Policy Committee, which is currently looking at various issue that are becoming more public, notably progressive beer duty(PBD)2, and access to market3. These two issues are extricably linked in many ways.

SIBA originally started out life as the Small Independent Brewers' Association. It was decided some time ago to change the name to Society of Independent Brewers, but for the sake of simplicity retain the original acronym. One can have a view on the appropriateness of the change, and the subsequent closer working relationship with the likes of BBPA, regional brewers and even major multinationals.

Things are coming a little bit to a head. There is the recent formation of a coalition of brewers named "Small Brewers Duty Reform Coalition" (SBDRC) who are now looking to change the duty scheme to favour what is called "The Squeezed Middle". See the details here. I believe this to be a threatening and aggressive move, especially as many of the protagonists are SIBA members. It does not help us to work sensibly to produce a fair and cohesive strategy for the future of PBD.

If you have been following this blog so far this year you will note that I am greatly concerned about overall saturation of the beer market; great for beer drinkers, but not so for brewers large and small. The whole market is being squeezed significantly. Indeed, we feel like we are the squeezed bottom4.

The basic premise for the perceived need to change PBD is that there is a barrier to growth and there may be some merit in looking at that. Without going into detail, it is difficult to grow beyond 5,000hl due to the structure of relief as the increase of duty at 5000hl is very sharp. There is another much less convincing argument that it is unfair that brewers over 60,000hl get no relief at all, as they still fail to have economies of scale. Frankly, it is complete nonsense to imagine a muti-muillion pound businesses see similar diseconomies of scale compared to micro-brewers and to conflate the two issues is dishonest.

SIBA have nicely and robustly countered the SBDRC announcement with its own press release.

I want to voice here my own Hardknott centric view on all of this. Micro-breweries are going out of business. I hear of one gone into receivership just this week. Other micro-brewers are either activating or considering significant retraction of activities. Much of the reason for this is because the "squeezed middle" are driving down prices, and significant to all of this is recent huge mandated  price drop for SIBA members into Enterprise Inns.

If we change the nature of PBD significantly we will see the "squeezed middle" using any duty benefit to further drive down the price in the market increasing damage to an already struggling micro-brewery industry. The only true benefactors will be PubCos and brewers with significant pub estates. There is already significant evidence to suggest that the vast majority of duty decreases of any sort are simply demanded by retail chains to improve their bottom line.

The work done behind the scenes to deal with these issues is complex, sensitive and contains significant alternative perspectives. I simply put my point of view across here, but it is one that I would expect most brewers of our size (1200hl/yr) to agree with. It is also worth noting that I represent around the average size for SIBA members, and therefore would expect SIBA to take as much notice of me as they would of any brewer bigger than me.

Further more, very few SIBA members are above 5000hl, over 90% of SIBA members are below 5000hl and benefit from full duty relief, essential for their very existence. The remaining 10% or so appear to be significantly more powerful in shaping SIBA policies and certainly carry more weight and have more resources to help influence policy.

One would expect SIBA to defend PBD completely and utterly. Up until recently this is exactly what has been happening, and I am hopeful that this will continue to be the case. I am significantly scared that this may change if we do not fight very strongly against SBDRC and some of the noises being made by larger organisations.

Part of the problem is that SIBA has grown now to include some fairly big brewers. Brewers can now be a member of SIBA even if they brew a colossal 200,000hl per year. This represents businesses that turn over tens of millions of pounds per year. They are huge. It is inconceivable that they can relate to the difficulties faced by 90% of SIBA members.

Now, SIBA is a democratic organisation, which in itself begs the question as to why we have allowed ourselves a position where we have such giants in our camp. I believe there is a core reason behind this, and my main reason for writing this post. Change is made via regional meetings, representation is sent via trusties to the board. Additionally, there is a route for major changes to be made via motions to the AGM. If I understand correctly, these motions have to first be approved at regional level for onward consideration by the board before finally being presented at national AGM (BeerX) for a vote.

I see there being some significant flaws in this process. Firstly, many of the brewers below 5000hl are working their butts off just to stay afloat and cannot afford the time or fuel to travel and engage with this process. I believe the direction SIBA would take would be significantly different if many more members engaged.

This is the key message behind this post. I am considering two motions to the AGM. One that ties any change to PBD to a significant, meaningful and proactive change to access to market for brewers below 5000hl. The second motion would question the rationale behind having membership over 60,000hl and the associate membership category, perhaps demanding a referendum on the policy to determine if the membership is happy with the status quo. My reason for this second motion is that I believe members over 60,000hl significantly compromise SIBAs ability to act for the majority of the membership.

For these, and other motions from other breweries to be successful we require as many sub 5000hl brewery representatives to attend both regional AGMs and the National AGM at BeerX in March.

If any micro-brewery cannot attend then there is an option for proxi-voting, which I would strongly urge members to activate.

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1Although sometimes frustrating from the point of view of this blog, as to write publicly regarding some issues would be unprofessional. Equally, there are comments I'd like to make from a Hardknott perspective that would be in disagreement with a broader view of SIBA in general. This part is hugely frustrating. Hardknott has a unique ethos towards beer and it is important to get that message out.

2Progressive beer duty is the scheme whereby small brewer's diseconomies of scale are partly helped by a reduction on the amount of tax we pay. Without this duty us small brewers would have an incredibly difficult time competing in the market and there would certainly be much less choice in the beer world. If we lose this relief many brewers will find it difficult to continue and we would see significant shrinkage in the micro-brewery market.

3A significant proportion of the pub market is tied to particular brewers. This might be through ownership of the freehold of the pub, or it might be through less obvious barriers through ownership of dispense equipment.

4With apologies, we know who to blame for this phrase, and suitable admonishment has already been administered.

Sunday, 8 January 2017

The emotional cost of social media

I've had numerous compliments for my previous post regarding my doubts about the future. It does seem to me that my best writing comes from an honest and open description of difficulties, even if risking wider damage to overall public's perception. Indeed, BBC Radio Cumbria was in the brewery on Friday to record an interview as a result of that post. I didn't want to do it live, normally I do, as I was certain I'd say something I'd later regret. Hopefully it will go out next week, if I get to know when I'll post on twitter.

So, with the bit between my teeth, and the potential risk associated with a runaway creature, I feel it is time for me to explore writing about a deep angst I now experience and has possibly taken me close to mental illness. Yes, 2016 was that tough, I hope this post will turn into therapy.

I've built a lot of my business through the internet. Back in 2008 I had been exploring various ways of making my business do better. I was advised, amongst other things, to write a blog. Engaging Facebook was also seen by various business mentors to be a thing, although I continue to have my doubts about how useful that is. Applying SEOto tempt Google to rank higher is a thing I studied courses on.

I started to write a blog about my business, and searched for other blogs to see what people were saying about pubs and beer. That was over 8 years ago. I became engrossed into the whole discussion about beer and pubs, cask and keg, sparklers and CAMRA and numerous subjects. I even won an award with the Guild of Beer Writers, which gave me immense pleasure and even briefly made me think that I could do it for a living.

In 2009 a thing called Twitter started to gather momentum and I joined in. It can be great fun and I've met a lot of people via that medium and reached customers I'd have never achieved to with any other form of communications. We pushed out our message and continued to work to promote Hardknott beers through our move away from a brewpub to stand alone brewery.

Broadly it has worked. I have very little doubt in my mind that I would not have progressed Hardknott anywhere near as far as we have without interactions on social media. I haven't always got it right, and certainly have made some mistakes. There have been good natured discussion on many occasions, and equally some flame-wars at other times. When it goes well the feeling of success, of acceptance by the wider community as a person of knowledge and wise words, it is an incredibly useful motivator by way of emotionally uplifting feelings. Money almost doesn't matter in the grand scheme of thingswhen it goes right.

When it doesn't go right, things can go very wrong indeed. After the euphoria of success of the early days there comes the realisation that staying on top becomes more difficult as more and more people enter the game. I am now realising the huge buzz of success can be replaced with a downer so large as to create withdrawal cravings similar to what I imagine a drug addict may experience. It does make me ponder the damage that might be done to emotions as a result of attempting to promote a business on the internet.

I do like a good discussion. I like to think I can consider a point of view that might differ to mine and put across an analysis of the situation in a calm and collected way, providing the other person is trying to do the same and not just being antagonistic. However, when I am arguing for my very existence, when I know that for several years I've been making fairly substantial losses and I am fighting through my blog, or twitter, or whatever to keep alive the passion in my heart it becomes very difficult to not see some commentators as just being deliberately disruptive. I like a sensible discussion, but not an all out argument, and definitely not anything that resembles being flamed, or where I feel the need to flame someone else because they appear to me to just poking a pointy stick for the sake of being nasty. I feel it is especially difficult when it seems to me to be for the sole purpose of undermining my own convictions.

I truly believe in what I am doing. I do have a passion to brew great beer, to make a difference in the beer world and try to realign the drinkers view of beer. I think to some extent over the last 11 years of brewing I have done that. But the passion can sometimes manifest itself as great hurt when I feel I care more than those that I interact with and when those people I feel ought to be my friends. Indeed moreover, when to me they would actually benefit by my attempts to improve the lot of the general micro-brewing scene should they allow me my point. It is difficult not to just see it as being malicious.

I don't know if it is me, struggling to make my own business work. Perhaps it is the desperation of others who feel the need to attack anything I do that is aiming to big up my own beers, or justify something I'm doing. Of course on some occasions it could be my own paranoia creating an imaginary enemy, which is an explanation I oft considered3. It is highly likely that it is a combination of all of these. However I have felt lately that in most forms of on-line interaction an incredible increase of tension and uncomfortable situations.

My main form of promotion for my brewery has been, and probably still is via the internet. I have felt an increasing sense of discomfort recently to the extent that I feel I have developed a level of depression, a form of adversity and reluctance to engage. Perhaps I am too needy, perhaps I am not as cut out for on-line engagement as I thought I was, perhaps I am just too sensitive and if that is so then perhaps this is another reason to consider more carefully my future.

There seems to be significant information suggesting that social media is creating mental illness in young people. I can't find a really great link that is not just sensationalist news items that say we should be watching out for our kids. Why just young people? Can old people like me not suffer too?

It has drawn me to consider the risks of promoting a business via social media. I notice one eminent brewery owner reduce his on-line activity stating it is due to feeling uncomfortable with some of the interactions. It also makes me consider that perhaps all writers who take themselves seriously find themselves needing to gain sufficient praise and acceptance and that perhaps only a small dose of cruel critique may send them into a spiral of unhappiness.

It is important for me to try and get the balance right. The purpose behind this blog has changed, to some extent. Moving from being a brewing pub-owner to being a brewer has certainly changed my perspective. It is essential for me to work at promoting my beers and the best way in my mind to do that is via my blog. It is obviously not helpful to my own state of mind or for the promotion of my beers if I continue to try to manage, with carefully constructed arguments, comments that appear to be trolling.

I know I haven't always engaged appropriately when dealing with comments on here, or discussions on twitter. Indeed, sometimes I have felt huge stress and even anger, which is incredibly unhelpful to everyone, and may in fact make me look a little like an internet troll myself. So, time to fully engage comment moderation and be selective about the comments I permit to be posted. I can normally tell when a thread is likely to drag me into a difficult situation. I also think it is important to try to avoid starting to respond, or even look at the comments elsewhere that are likely to create a situation.

Besides, I want to feel happy, and want to be able to write and engage. I can't do that if I'm scared to be here.

There might be a wider issue here; I know many brewers are struggling at the moment. Since our New Year post I've been contacted by several brewers saying their lot this last 12 months has gotten worse. This is in addition to the already strong indication that all is not well in the industry. Perhaps we are all feeling the pinch and taking it out on each other, I can't imagine that is a good thing. Let us focus on fighting those outside our own impassioned group of dedicated brewers, rather than appearing to tear each other apart.

Over 90% of the total beer brewed in the UK is made by less than 2% of the breweries. They are the true enemy.

Less than 1% of the total beer is made by over 90% of the breweries (those under under 5000hl), which includes me and many very great breweries. Will simply must stop pissing each other off.

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1SEO = Search Engine Optimisation

2If I were honest I don't care about money as such. I do like new toys, I like to live in a nice house and it would be nice to get way on holiday, but to me money is a way of measuring success, but only one of them.

3Although, when casual observers say to me "I thought <insert name> was your friend" I have to conclude it is not just paranoia and generally reply "So did I"

Wednesday, 4 January 2017

Looking forward

The start of 2017; how the hell did that number get so high? This is now the 54th year in which I have been alive (I was conceived at some point in 1964) and I have seen 53 New Years brought in, although admittedly for the first one the only thing I might have seen was vague pinky-red light through the walls of my dearly missed mother's abdomen1. I guess perhaps there might have been some contemporary music of the time that filtered through, which might explain a strange attraction I feel to much of the music originating around that time.

What do we have in store for us in 2017? Where am I going and where is Hardknott going? I have to say at this point I'm very unclear, other than knowing things really have to change drastically. 2016 might have seen a few bad things happen, like Brexit2 and Donald Trump, and what does seem to be an inordinate number of celebrities dying3. It has been a little bit of a contraction for Hardknott, if I be truthful. Our bar on Millom station just wasn't working, for so many reasons and it simply had to close after two years of operation, rather regrettably. We have shed several members of staff, for various reasons and to date have not replaced themTurnover has shrunk slightly, although what is nice is not in proportion to the shrinkage of staff.5  Early indications are that with reduced staff, reduced production and careful choice of sales we are perhaps not in loss so far this financial year.

It is highly possible that this represents a re-group. A chance for us to reconsider and contemplate where we are and where we should go. It gave me great pleasure this week to see that Cloudwater have posted about their future. It is impossible to ignore this mighty force in the craft beer scene and there is a lot to learn from their forward-looking vision. There has already been various questions raised about their plans to cease cask production and Boak and Bailey as ever thoughtfully consider this.

These things inevitably feed into my own considerations. We've been brewing at Millom now for just over 6 years. We have yet to make any significant profit. Indeed, although somehow we make ends meet, just, we have seen our wealth actually decrease as we fund this mad-capped idea, and lose out to various bad choices we've made.We've effectively been stuck since about 2013 due mainly to lack of funding to invest and the difficulty in up-scalling any further. We are plateaued and are somewhere between a rock and a fucking very, very hard place indeed.

This effectively means we've been paying to keep Hardknott alive. For the past 6 years Ann and I7 have been managing to keep it afloat. We had a dream, we believed we could make it work and we still believe that, but it has cost us dearly. This is set against the knowledge that many other brewers feel that there simply isn't the money in the job and several have either stopped brewing or even gone into administration.

The thing that really gets to me is that the one format our beer goes out in that loses me most is cask. I am majorly pleased to see Cloudwater effectively make the same point. We are literally paying for the privilege of putting our beer into cask, the price point in the market being so damn low. It costs us more to make, sell, distribute, get back the empties and fund the cash flow lag created. Then we have the fact that there is office staff time spent chasing all the bad payers out there I have no idea why we still do it.

I have continually made the point that we sell our beer way too cheap, and we are way too small to be viable as a craft brewery making really great beer. Beer that has more care, more time in tank, better ingredients and more wastage due to dry hopping etc. However it seems that in Cumbria there is a continual downward pressure on prices created by there being an oversupply of beer and far too many breweries.

Cloudwater rightly manage to command a premium. Good, they deserve it. Even so they have not yet made a profit even though they now turnover more than £1m. We manage around £230k on a really great year. We cannot achieve higher than that without upgrading the brew-house and potentially relocating8.

To make the next move we require around £100k investment, and probably more, just to get our brewery efficient enough to be competitive. Raising money when the accounts look so poor is no mean feat. Even if we secured funding from banks or other financial institutions I expect the interest rates alone would negate the cost-benefits of any investment right now. It seems to us the only thing that might help us to make a go of it would be to sell our home, downsize and in so doing release some capital. I'm going to be honest, this scares the living shit out of me, not least of which because although we will release capital our house is really efficient and low-cost, our bills are low, should we move into a draughty house we might see bigger bills, which we cannot afford on our none-existent earnings.

Our house is on the market, and I'm hopeful that we will find a buyer this year. Our plan requires that we move and so I can no longer hide the fact that a move out of Millom is essential. I understand it is possible to find some quite nice caravans and this sacrifice will be worth it to save Hardknott. What if even that doesn't get us on an even footing? We will have risked everything to secure a future for what we believe is Cumbria's very best craft brewery.

Apart from downward price pressures and upward coststhere are some very scary noises being made by the big boys in the beer industry. This week I find out about an FT article where it is claimed that there is a squeezed middle represented by brewers above the small brewers relief threshold. I have known about this for some time due to involvement with SIBA's policy committee.  The bigger breweries are claiming, the ones that say they are in the "squeezed middle", that they get no benefit of economies of scale. Clearly this cannot be true, but are in any case pissed off with us little guys for getting a duty discount.

It's a pity they are rocking the boat as I quite liked breweries similar to Moorhouses. I think it is time for a gloves off approach to these breweries myself, and to the larger breweries that no doubt are using these small pawns in their master plan to prevent great micro-brewed craft beer from becoming more the norm. The trouble for me is I know quite a lot about the threat created by the combination of oversupply and these big boy muscle flexing activities and worry about continuing viability and the sense in investment. They are threatening the small brewer's duty relief. If they take that we are doomed.

Of course it's not small brewer's duty relief that is the cause of their problem. It is the over supply and a decrease of value of beer in general. A crowded market where the product is largely seen as a commodity, when there is over supply, the price is bound to see downward pressure. If there are also upward pressures on costs eventually something has to give. From my perspective I have to look very carefully indeed at the situation.

"Looking forward" said the title. Indeed, and this is what I should do, but this post isn't doing that very well. So, let us formulate a plan. I think the options look a bit like this;

1. Look very carefully at our pricing and consider a significant increase.
2. Look very carefully at cask and either put up the price or stop producing it10.
3. Look very carefully at our operation and consider if we should just wind up what we are doing.
4. Do something very, very different.

What is very, very different? Is that not the same as giving up? No, definitely not.

I do not believe what we are doing here at Millom, the way we are doing it, has a long-term future. It might be possible to make it work in Millom, but only by achieving both significant inward investment and a significant increase of locally based sales. I do not believe either are possible in the short term11.

Investment is needed, and this cannot come from traditional sources. What I can promise is that if we do manage to sell our house and do manage a relocation plan we'll be approaching The Crowd, i.e. you, to help match what Ann and I are planning on risking.

More importantly any move will have to see a brewery that looks a lot different to not only what we are doing now, but different to anything anyone has ever seen in the UK before. It has to truly be audacious. It has to not only has to look different, and be different, it has to sell in a different way and  provide our drinkers with a different experience. Everything about it has to radically change the perception of brewing and make a change to the beer landscape of the UK.

Well, that's the plan anyway. I have many great ideas, some of them very exciting indeed. They will need to be honed, massaged, and beaten into shape. They need to be realistic and achievable, but only with blood sweat and probably a lot of tears. They will take a huge amount of effort, some conviction, support from many people and an understanding from some of my critics in the industry that we have big fish to fry. There will be some big personal risks to be taken and we will not be able to afford to take prisoners, big or small.

There are some big brewers out there after my skin, and yours. It doesn't matter if you are a local brewer, or a brewer further afield. Perhaps you are just a drinker, and don't see the danger. Perhaps you are a naive brewer who thinks that you are not part of the big beer market. Perhaps you are happy with us moving back to a beer industry with fewer players, which is what the FT article is really saying. Which ever way your motivation is, get on board, be part of what we want to achieve, and see a real change to the way micro-breweries can operate. Come along with us, if nothing else just for the giggles. But remember we represent the little guy fighting against those old established doctrines put out by many bigger and more powerful entities than us in the industry.

I think we represent the future. It might be a difficult one for sure, but if you want diversity in the beer industry and want a future that isn't the same old homogenous line of predictable beers lining every bar then come on board, support us and be part of it.

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1It's not specifically my mother's abdomen I miss, of course, but just the person in general. Conversely, there are an increasing number of days I feel a return to 1964 might well be a great idea. A reboot if you will. But this post is supposed to be about looking forward, so let us try that shall we?

2Yes, I am a remoaner. I feel strangely proud to be so, considering there was a time I was mildly Eurosceptic. I know, if you are a Brexiteer you'll be shouting "It was democracy" and all that. We should just shut up and accept the will of the people. However, if it had been 2% in the other direction I'm damn sure Nigel wouldn't have just fecked off and he would probably be shouting about how damn close it was. Hey ho.

3My kids don't seem to know who half of them are, and I remember my mother often saying things like "Gracie Fields has died" and me having no idea of who the hell she was talking about. There is an idea that as you get old you notice more people dying who you used to know, or know about. Cool, there is so much to look forward to in life.

4As a part of our New Year review I am pleased to say we are tentatively considering increasing our staff numbers, but will only do so if we feel we can afford to hire exactly the right people.

5For which I have huge thanks to extend to Scott who has worked incredibly hard to make sure the beer continues to get brewed and ensuring that actually this train didn't get derailed in that incredibly difficult year.

6The bad choice there was to agree to let a rogue have any credit what-so-ever. That man effectively stole £2000 from me. Actually, not just from me but from Hardknott, which I think is bigger than just me. It has left a huge dent in my enthusiasm and trust of people. It has left a huge dent in the motivation of the team here. He has effectively stolen from what I believe is the heart of what should be a strong driving force of great craft beer in Cumbria. He still owes it to us, just in case anyone is wondering. And no it is incredibly unlikely that I will let the subject drop until he pays me back plus interest.

At this point I am also going to mention the builder who's negligence wrote off our van. I'd also like to mention his insurer for failing to make appropriate payments. This is another event that has been rather crippling to me in more ways than one. Apart from it being perhaps the scariest moment of the year. Apart from the fact that every time I go out delivering myself in the van, which I have to do more often now due to staff shrinkage, I think about that big builders van apparently reversing towards me at great speed, and the subsequent impact into my side of our van. I fret about the insurance claim that is still not properly sorted, because the insurance company (NFU) refuses to acknowledge that there were significant issues brought about regarding our ability to deliver whilst the van was sorted, and that fact that my shoulder is still not really right, and hurts terribly at the end of a delivery run. The fact that they didn't offer me enough money to be able to replace the van so we fixed and made do (thanks Ryan for the door, you are a star in many ways) The fact that to replace the van, with its sign writing, would cost a lot more than the figure offered. The fact that every time I go out in the van now I hate it and strongly suspect I have some form of PTSD. This collision was in no way my fault and was the obvious negligence of the other driver failing to put the handbrake on in a fully laden 3.5 tonnes transit complete with driver's door buckling extra industrial tow hitch. I often think about the poor biker lady who's frantic arm waving attempts to warn me of impeding doom were to no avail. Added to this one troll on twitter questioned my sharing of the difficulties of delivering beer to sometimes extremely financially unviable locations. That particular idiot added significantly to my stress.

7I cannot understate Ann's incredibly hard work at keeping the ship together. Fighting off suppliers who almost never extend as much credit as some of our customers expect. The phone calls incessant from suppliers who want paid, rightly so, but who inevitably distract us from making beer. Or finding enough cash to pay suppliers because they rightly have us on stop. And yet if we dare to phone up some places for them to pay the bill they conveniently don't have the right people to talk to, or more often think we are being unreasonable despite the extent of the monies owed or time it has taken to pay. Oh, and the lies, them lies, why? Because they are making money out of the credit we extend to them, that's why.

Ann has absolutely been a bedrock of support to me. Even when I've had my worst days of wondering why the hell I'm trying to fight for this dream, she's been there through my foulest of moods. Knowing that there are days when she absolutely has to insulate me from some of the difficulties she has keeping the finances right. I do love her more than ever.

8We have identified that we rarely travel for the business without going through junction 36 on the M6, irrespective of the trip. Be it for deliveries, be it for sales calls, be it for meet the brewer events or for some trade event or other it is just about 95% of all our trade goes that way. Being in the south west corner of Cumbria puts 270 degrees of our immediate radius in the sea. The other 90 degrees consists mainly of mountains and the beautiful, but obstinate Black Combe standing defiantly in our path leaving only two narrow corridors from which to escape.

Of course there are ways of making a name for oneself from a far flung corner of the Universe and in doing so getting sufficient sales into more lucrative markets. Breweries have done it in the past, but generally it involves some sort of awesome, outspoken, audacious and game-changing noise making on the Internet. It can even help to bring along those friends who decide to ride with it. Unfortunately my own appetite for such things has been very severely dented by Internet trolls who I used to think of as my friends. This is a bigger problem for me than I expect they appreciate. 2017 will be different, it has to be. It is important whatever I do to get our message out and to ignore and perhaps even censor childish, irresponsible, distracting and mischievous noises off. They are the biggest reason I refrain more and more form blogging, and in turn sees my business suffer.

9Again, I have argued in the past that our costs are going up and as a result we need to put our prices up. This year in particular most of our suppliers are trying to put up prices, which of course we are resisting. It has been disappointing to me that some Internet trolls, that appear to me to be the sort of people that should be finding ways to help us all to increase the value of beer, have shot me down in a most un-useful and self-defeating way. Why are there people in the brewing industry that want to depress success and want to argue for a below cost supply of beer? These are people that are not doing very well themselves, so why drag everything down?

10I personally think that this amounts to the same thing. Cask has a price point. We can't make it for the price point demanded by the market. If we put up the price it won't sell in sufficient quantity to justify making it.

11We should note the phrase "I do not believe" - it might be possible should we invest significant amounts in both brewing equipment to increase efficiency and a major promotional push into the local environs. Perhaps some sort of crowd funded investment program could see the local fans we have both invest in the brewery and help us to push stubborn local licensees to stop buying shit, knock down priced beer. I have my doubts, but there is a little bit of me lives in hope, and I do know there are a significant number of fans out there who would like to see us stay.