It has been two years since I last published a post offering some statistics for the South African craft beer scene. That piece has become the second most-viewed post ever published on the blog, not least – I suspect – because stats for South African craft beer are so hard to come by. There is an official market study on its way, but earlier this year I sent out a survey to the brewers with a view to getting a better idea of what’s happening in the industry.
The survey was conducted in October 2018, with the Google forms link sent out to 211 breweries and contract brewers across the nine provinces. The response rate was better than I expected at 54.5%. The respondents were an excellent representative sample both geographically and in terms of production volumes and I am confident that the results are a fairly accurate representation of the wider industry.
The Western Cape remains the hub when it comes to craft beer in South Africa with the majority of the country’s breweries – around half – found in the province. However, growth has seriously slowed down in the past year. Taking closures into account, brewery numbers almost stagnated in the Western Cape ths year, with the total number growing by just two (compared to 15 in 2017 and 25 in 2016). This was a trend across the country. In previous years we had seen brewery numbers rise year on year by up to 43%, which also accounted for closures. From 2016 to 2017 this figure dropped to 20%. In 2018, the growth rate was below 2%.
This year has indeed been a difficult one, with multiple closures as well as brands quietly disappearing from our shelves, seemingly gone forever. Contract brewers, who make up around 20% of all beer brands in South Africa, appear and disappear with alarming speed. Breweries that are surviving often report production figures that show they are operating at around 50% of their total capacity. So what is going wrong? When asked “What is your biggest challenge as a craft brewer?”, the most prominent problem reported was distribution and real estate, with almost a third of respondents citing these as the biggest challenge. Responses included “Getting more outlets to sell at”; “finding new revenue streams or fighting for tap space”; “Sales without a pub”; “Getting into the market”; “Finding tap space in bars, and being able to afford the cost of installations” and “Outlets not owning their own taps.”
These weren’t the only challenges of course. The lack of a cold chain was a recurrent theme, as was consumer education and growing the customer base (“Getting non craft beer drinkers to change over to craft and to accept the price difference”; “Converting people from conventional lagers”; “Converting middle age to drink craft”.) Licencing issues, red tape and excise were also recurrent themes as was the economic climate in South Africa, the weak rand and the problems that that brings, particularly with a high number of breweries importing ingredients. And a number of respondents cited the difficulty in competing on price with larger producers, whether that was AB InBev/Heineken or larger craft breweries.
So what sells?
But it’s not all bad news. One of the most surprising aspects of the survey was seeing which beers the South African drinker is buying. Of course it came as no shock that pale lagers remain the most popular style – 34.8% of respondents said that their biggest seller fell into this category. But pale ales – not blondes – came in second (20%), and most pleasing of all, 11% of respondents said that their biggest selling beer was an IPA. This shows a real maturation of the market, with drinkers moving to more flavourful, less familiar beers.
Unfortunately, I was unable to get a reliable figure on just how much craft beer is being produced in South Africa. This was largely my fault due to a badly worded question that saw some people giving the figure in litres and others in hectolitres; some giving data for the previous tax year and others for the tax year that is still in progress. After working with the data, the best I can come up with is that craft beer still accounts for less than 1% of the total beer production in South Africa.
Who is producing it?
Just over 12% of respondents said that they don’t have any employees at the brewery. These were split between contract brewers (eight of the 14 respondents) and very small, often family-run setups (six respondents). 10.4% employ only one person at the brewery while 24.3% employ two people and 13.9% employ three people. Only 7.1% of respondents employ 15 or more people, with the top employer having approximately 140 employees (including sales reps). It appears though that some breweries did not count staff attached to the brewery, such as those running the taproom or taking care of sales and marketing, so this has skewed the results somewhat. The majority of respondents employ one or fewer staff members from a previously disadvantaged background (22.6% said none; 24.3% said one). 83.5% of respondents employ five or fewer people from previously disadvantaged backgrounds and just 7.9% replied saying 10 or more. Perhaps most surprisingly of all, over 50% of respondents do not employ any women at the brewery with a further 33% employing just one or two women.
So where are we heading?
With the announcement this week that a large player in the South African beer industry is up for sale (Darling’s major shareholder is looking to sell, which puts the brewery’s future in a state of uncertainty) , it seems unlikely that our craft beer industry is going to have an easy time as we head into 2019. Expect to see further sales, closures and consolidations. Is craft beer dead in South Africa? Certainly not, but I think it’s fair to say that the honeymoon period is over. Fighting for shelf space, tap space and indeed, customers is going to be an ongoing battle. I hope you continue to support breweries that produce consistent, quality, innovative beer. I know I will.