15/12/2014 - 11:12

Craft brewers fly the flag for WA - SPECIAL REPORT

15/12/2014 - 11:12

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Craft brewers are maintaining WA’s reputation as the premier beer-making state in Australia, but the challenges they face are as diverse as the breweries themselves.

Craft brewers fly the flag for WA - SPECIAL REPORT
WINNERS: Head brewer Charlie Hodgson (left) and brand sales manager Brad Moss toast Mash Brewing’s success.

Craft brewers are maintaining WA’s reputation as the premier beer-making state in Australia, but the challenges they face are as diverse as the breweries themselves.

When international beverages giant Lion announced in 2012 it was shutting down the Canning Vale Swan Brewery and moving production to South Australia, many across Western Australia bemoaned the loss of the state’s iconic beer brand.

The state lost ownership of another major beer brand later that year when it emerged Lion had made a $380 million takeover bid for Little World Beverages, the owner of Fremantle’s Little Creatures.

Whether WA’s remaining brewers can volumetrically fill the void remains to be seen, their success at the boutique end perpetuates many pundits’ belief that the nation’s best beers are still brewed out west.

WA has a rich craft brewing pedigree. Australia’s first brewpub was established at Fremantle’s Sail & Anchor in the early 1980s, while today’s varied brewing landscape has resulted in two Swan Valley-based brewers battling over the title of Australia’s best beer.

One of those breweries, the much-awarded Feral Brewing Company, held the coveted title of Australia’s best beer, awarded by Beer & Brewer Magazine, for three years for its Hop Hog, only being usurped from its throne this year by Mash Brewing and its Copycat IPA.

Feral Brewing owner and head brewer Brendan Varis said part of the reason for the success of WA-based beers was the longevity of the craft brewing industry in the state.

“People forget we had Matilda Bay Brewing Co for a long time, from day one when it was Phil Sexton, to when it was in the hands of CUB,” Mr Varis told Business News.

“We’ve had places like Bootleg Brewery, which turned 20 last week, we’re 12 years old, and Nail Brewing has been around for about 15 years as well, so relative to the breweries on the east coast, we’ve just been doing it longer.”

The chief executive of WA’s largest and the state’s only stock market-listed brewer, Gage Roads Brewing Company’s John Hoedemaker, also paid tribute to the early pioneers of boutique brews.

Mr Hoademaker said today’s craft brewing sector had grown into a highly competitive space, and the establishment of more breweries in the state would only be good for the industry.

“Competition is about consumers having more access and more exposure to great quality beers,” he said.

“The craft beer industry is growing at about 11 per cent per annum, and it’s really at an inflection point where it’s going to become much larger than it is at the moment.

“Each restaurant in Australia serves different food, so I don’t think it’s unrealistic for each venue in Australia to serve a different craft beer.”

Despite the loss of the state’s largest and highest profile beer producer in Swan, BNiQ research found there are still 39 breweries or brewpubs in WA.

The styles of beer being produced are as varied as the breweries themselves, and while American-style pale ales and IPAs are popular at the moment, WA brewers are also producing highly regarded European-style pilsners and wheat beers, as well as lagers and stouts, while some are even experimenting with flavours like lychee, mango, chilli and chocolate.

Packaging has also emerged as a way for WA’s brewers to establish a point of difference from their competitors.

Colonial Brewing Company starting canning its beers last month in the belief that aluminium cans are superior to glass in shielding the brews from the three main factors that can affect a beer – heat, oxygen and light.

Location, location …

The breweries are scattered around the state, from the metropolitan area and the Swan Valley to the South West and even as far north as Broome. And there is also a boutique brewery producing craft beer in the Goldfields, called Beaten Track Brewery,  an indication that consumer demand for craft beer is immune to the tyrannies of distance that have provided significant challenges for the industry.

Mash Brewing has come up with a novel strategy to get past the hurdle of trucking beer across the Nullarbor to break into east coast markets; it has bought another brewery in Victoria.

Mash Brewing head brewer Charlie Hodgson said the Victorian brewery, branded 3 Ravens, allowed Mash to set up a franchise in Melbourne and avoid the costs associated with ensuring their beer is kept cold as it was trucked across the country.

“For our beer, fresh is best,” Mr Hodgson said.

“It’s like fruit and veg; if you leave a carrot sitting on the bench for a week it’s not going to be so good.”

As diverse as the breweries’ locations are, their individual business strategies also differ immensely.

The vast majority of WA’s beer makers are standalone brewpubs, with little external distribution.

Mr Varis said he considered Feral, despite being founded in 2002, had only been in what he called the ‘beer business’ for three years.

“What we did three years ago was build our production brewery in Bassendean, and that’s when we changed from relying on the Swan Valley and people coming here and buying our beer over the bar and having food with it, which was actually hospitality,” Mr Varis said.

“For the first nine or 10 years until we built the new brewery, we were limited by what we could make out of our small brewpub.

“We would sell every drop we made, but that was it, we had a ceiling until then.

“When we built the production brewery, our mix of sales went from being more than 50 per cent hospitality, to around 10 per cent.”

Mash’s strategy includes its original Swan Valley venue, franchises in Rockingham and Bunbury, and the Melbourne pub.

Mash Brewing brand sales manager Brad Moss said the company was now focusing on growing its on-premise presence, with Perth’s small bar revolution having been a boon for brewers.

“There’s a fair bit of growth in the industry in that direction, especially with craft beer in those small channels, being small bars, trendy cafes and restaurants,” Mr Moss told Business News.

“Beer lists are being looked at like wine lists now, and there is healthy competition in terms of having points of difference.”

Mr Moss said getting Mash beers into bars was about building strong and lasting relationships with venue managers.

“You’re not just putting your beer into their venue, you’re becoming a part of their experience,” he said.

“These venues are offering more to their punters than just your general pub.”

Mr Hoedemaker said Gage Roads’ strategy was always based around being a wholesale brewery, and establishing a brewpub was never part of the company’s plan.

He said the founding partners of Gage Roads wanted to provide good quality, flavoursome beer to a wide audience at a competitive price.

“What we felt Australia needed was more access to craft beer,” Mr Hoademaker said.

“The core of our philosophy is we want to provide great quality craft beer to a real market, not just a select few, and at $90 a carton, that’s a fairly narrow market.

“So we invested in equipment that was larger than the average craft brewery, but still tiny compared to the large breweries in Australia.”

But the Gage Roads business model proved volatile until it formed a partnership with supermarket giant Woolworths, which not only provided a route to market but created a new revenue stream – contract brewing.

Today, Gage Roads produces not only its own branded beers, but also the Sail & Anchor range, Castaway Cider, and some of Matso’s Broome Brewery’s beer after it reached capacity at its north-west brewhouse.

“To produce craft beers you need multiple streams of malt, you need multiple streams or different types of hops, you need to be flexible in your process and you need small and large fermenters,” Mr Hoademaker said.

“All of that makes a flexible brewing business. Larger breweries don’t have that flexibility, and to get there, we had to invest a lot in specific equipment.

“Contract brewing was designed to get sales, revenue and volumes to support the equipment and people we need to ensure we have great quality beer.

“At the same time it allowed us to concentrate on growing our brand at an affordable price.”

Another wholesale-only brewer, albeit on a smaller scale, is Myaree’s Billabong Brewing, which has been making craft beer since 1993.

Billabong Brewing managing director Alan Proctor said wholesale brewers had a difficult time in getting top price for their beer without a venue to sell it.

 VETERAN: Billabong Brewing’s Alan Proctor has been brewing for more than 20 years.

“We’re competing against people in our industry that have a restaurant and bar, so they’re getting good return for their beer,” he said.

“We’re stuck on wholesale, which is a difficult end to be in.”

Burt Mr Proctor said the biggest challenge for smaller wholesale brewers was the availability of cheap imported beers.

“Some of the imported products are of good quality, the challenge I guess is we are trying to survive as well,” he said.

“Innovation is pretty important, and that’s what most craft brewers are doing.

“Everyone’s trying to come up with an innovative style of beer to get themselves out there.”

Mr Proctor said Billabong, which has a significant brew-on-premise side to its business (individual DIY brewing) as well as wholesale, had a significant point of difference over its competitors – the only gluten-free beer in WA.

“One of our customers came in and said he couldn’t drink normal beer anymore and asked us to make a celiac beer,” Mr Proctor said.

“I said ‘what’s that?’ He told us what it was and I thought it was probably a good idea.

“About 70 trials later we got a beer we could drink, and since then we’ve developed three gluten-free beers and we sell them locally and on the east coast as well.”

Mr Proctor said Billabong’s ginger beer, which is also gluten free, had also proven popular with its brew-on-premise and wholesale customers alike.

EXCLUSIVE: Billabong’s gluten free Ginger Beer is popular with punters.

“It’s sold in hotels like the Cottesloe Beach Hotel, Print Hall, even the Belgian Beer Café,” he said.

“That’s selling as a ginger beer and I don’t think half the people would know it’s also gluten free.”

WA’s smallest craft brewery, the 650-litre capacity Bush Shack Brewery in Yallingup, is going in the opposite direction to Billabong; owner Danial Wind said he had no intentions of becoming a wholesale brewer.

Mr Wind said Bush Shack had expanded its product range to include cider and flavoured alcoholic beverages, which had favourable taxation consequences for the business.

“We discovered it made good financial sense, because just like wine, the first million dollars wholesale value on cider is tax exempt,” Mr Wind told Business News.

“Unlike beer, where I have to pay excise tax every week on every drop that gets moved from the brew-shed to the bar, with cider I can charge exactly the same amount as I do for my beer and I get to keep all of it.

“The amount of tax we pay, last year when we totalled it up, versus our takings for the year, came to almost 45 per cent.

“You’ve then got to pay wages, electricity, all the other costs of running a business.

“If you’re a restaurant and your food costs are above 35 to 40 per cent you’re basically breaking even.”

Mr Wind said the other main challenge for a small brewery such as Bush Shack was the proliferation of larger venues in the South West of the state.

He said he believed the South West was just about at saturation point for microbreweries, with 13 brewpubs already established from Bunbury to Albany.

“We have noticed with the last one that opened there has been a change in the amount of growth, there hasn’t been as large a percentage as there has been in the past,” Mr Wind said.

“The only thing we can attribute that to is the number of breweries that are open now, and each one that opens tends to be bigger and have a higher capacity so they’re getting a bigger chunk of that available pie.”

 

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