Funding in the Microbrewery Sector

Funding in the Microbrewery Sector Gary Bosworth & Victoria Ellis 4th Beeronomics Conference York, September18th - 21st, 2013

Focus for Research What has been the impact of increasing funding for microbreweries? How has funding contributed to local economic development objectives? How has funding impacted upon the business approach of microbrewery owners.

Methodology Analysis of market data to assess the economic context Interviews with a sample of 15 microbrewery owners - both funded and non-funded Thematic analysis – attitudes and behaviours, wider socio-economic impact Inform a future survey of microbrewers to better understand future challenges and opportunities in the sector

Microbreweries – facts and figures Source: British Beer and Pub Association and H.M Revenues and Customs

Microbreweries – facts and figures Source: British Beer and Pub Association

Routes To Market – Traditional Public Houses free of tie Public House tied to Microbrewery for ‘showcase’ Inter-brewery swaps

Routes To Market – Public Houses Source: British Beer and Pub Association

Routes To Market – Public Houses Source: British Beer and Pub Association • In 2012, 49,537 public houses in the UK • Brewery and Pub Company tied public houses account for 31,500 pubs in the UK • Potentially 63.58% of the total pub trade is unavailable for ale sales.

Routes To Market - Entrepreneurial Beer Festivals Supermarkets Farmers Markets Farm Shops Onsite Shops English Heritage/National Trust shops Online

Infrastructure • High start up costs • Physical size of equipment is large • Size of premises • House Equipment • Storage of full casks, empty casks, ingredients • Risk of exceeding business footprint for small business rate relief • Beer Miles • Vehicles • Fuel • Beer Duty • Duty relief as outlined in HMRC Notice 226 Beer Duty

Micro-enterprise support Lower population and business densities in rural areas make it more expensive to deliver business and training support than to comparable urban firms (Bennett and Errington, 1995; Smallbone et al, 2003). However, if the aims of intervention take into account non-economic outcomes, approaches such as LEADER become more potent. What is the goal of funding – to support a microbrewery or to support a farm or pub to diversify? “There are very little incentives from the government to do anything unless you are in an area like Wales or if you are a farmer. If you are farmer you can get grants to do anything. There are quite a lot of farmers that have started up breweries and got a huge grant from DEFRA to do it”

Rural Entrepreneurship characteristics • Risk taking – financial, social, “uninsurable” • Innovation – including creativity and technology adoption • Perceptiveness – alertness to opportunities and the vision to make them happen • Personal motivation – independence, drive, profit orientation, social motive?

Grant funding and business outlook • Allows microbrewers to: “gain independence and autonomy in a business that is completely governed and run by big players” • “it meant that I could buy higher spec kit...it is semi-automated and can even be operated remotely” • “the grant enabled us to spend money on things that we weren’t really going to budget for before…for example, the grant will enable us to get a much better website...a much better vehicle, where without the grant, these would not have been in the frame”

Grant funding and business outlook 2 • Trade off between independence or accepting funding with consequent administrative burden • Application process sharpens up business planning • Environmentally friendly approaches • Increasing innovative thinking • Expanding horizons in terms of routes to market • Increased competition is also forcing unfunded businesses to review their strategies

Job creation and training • It is estimated that: ‘1 job in brewing supports 21 others in supply and distribution: 1 in agriculture, 1 in the supply chain, 1 in retail and 18 in pubs’ (SIBA, 2013: 17). • ‘If I went to a 30 barrel brewery tomorrow I wouldn’t have to increase my staff at all, I could maintain the amount of staff, but I could triple the amount of beer I’m brewing.’ • One doubled in size without public funding and recruited a new marketing specialist, another with funding was expecting to need to recruit someone in the near future • Little requirement for training but still providing skills for employees: ‘We’re constantly bringing people through, we’re training them up and we’re getting nothing for this.’

Spill-over effects • The brewery provides an alternative route to sustain a village pub when local people do not support it enough – ‘they want it here to keep the house prices up’ • Impact for tourism and working with other local producers • Use local business services but many raw materials and equipment suppliers are national businesses

Concluding thoughts • Awareness and eligibility for funding is variable • Funding distorts the market • Competition is already tough • Any interventions need to be assessed against clear objectives • There are opportunities for innovation and business development and these should be supported • Networks and collaboration can add value • More detailed research comparing funded and non-funded businesses can yield new evidence

Thank you…any questions? Gary Bosworth & Victoria Ellis gbosworth@lincoln.ac.uk vellis@lincoln.ac.uk Lincoln Business School Brayford Wharf East University of Lincoln Lincoln, LN5 7AT UK

Funding in the Microbrewery Sector