Craft beer or bust

Have those in the craft beer industry who suggest the bubble is bursting sour grapes?

 

Consider the pointed response from Jos Ruffell when asked about his wealth as he points to his aged Mazda station wagon outside – a vehicle that drips in the rain and smells of canines.

A key figure of Garage Project, the flagship of the craft beer movement, Ruffell is a vocal advocate in a sphere becoming significantly more congested by the month.

Answering the inquiry “Are you rich yet?” with a resounding “nope,” Ruffell remains steadfast in his faith in the industry.

New Zealand currently boasts around 200 craft beer labels, with a nearly 300 percent surge in the number of beer producers over a decade, as per Figure.nz. The availability of high-alcohol content beverages (above 5 percent) has soared by 220 percent within the same period despite an overall decrease in beer production.

If the craft beer scene is indeed a bubble, it’s undeniably expanding. Yet, some argue that it’s on the cusp of collapse.

While Ruffell’s pockets may be light, his dedication to the craft remains unwavering.

Within a repurposed printer’s factory in central Wellington – their proclaimed “wild workshop”, Ruffell and co-founder Pete Gillespie experiment with indigenous yeasts, bacteria, and wild flora gathered from the nearby hills.

Their ethos of pursuing what captivates them may clash with traditional business concepts, but amassing quick wealth was never their objective.

They’ve diligently reinvested every earned dollar back into their brewery.

Interrupted by an incoming call from an American number, Ruffell glances at the device before dismissing the call, asserting, “It would be a lengthy discussion,” as he pivots back to the topic of beer.

THE CRAFT

Upon delving into homebrewing a decade ago within her Oamaru residence, Lee-Ann Scotti encountered a mishap that led to her relocating operations to her basement after her new stove malfunctioned.

Scotti and her partner Michael O’Brien persist in their endeavor, steering Craftwork, a boutique brewery specializing in robust Belgian-style beer.

Having transitioned from clandestine homebrewing transactions to commercial operations four years ago, they took the plunge believing their beer possessed a distinctive quality. Today, they supply limited volumes mainly to discerning beer establishments and the local New World outlet.

Scotti admits to hesitations about supplying supermarkets due to their demanding requirements, but when it’s local, it’s a different story.

According to O’Brien, producing beers they personally relish remains their priority.

Their repertoire includes an 8 percent Flemish Floozie strong ale, a 7.4 percent Flanders sour red ale, and a 10 percent quadrupel.

Commenting on their financial gains, O’Brien notes, “Although we haven’t seen any profits yet, our passion remains undiminished.”

Their range spans from six weeks to three months for the hastiest brews, with ongoing experiments extending up to four years.

When advising emerging brewers, Scotti shares, “While skepticism from industry peers may arise, suggesting one sticks to homebrewing, I believe that brewing the beers you enjoy…” Pausing for a moment, she adds, “…though who are we to opine? We’re not exactly thriving.”

“Creating beers you have a profound connection with matters,” she concludes.

A CROWDED WAR

Stepping into any supermarket, one is met with a dazzling array of beers vying for attention, offering a myriad of styles as part of an intensifying struggle for relevance.

Tiamana brewer Annika Naschitzki attests to the challenges of securing shelf space and tap placements, especially with escalating competition.

Inaugurating Tiamana five years ago in Wellington, the brewery named after the Māori term for Germany due to its utilization of German hops saw Naschitzki laboring alongside fermenters named Helga and a carbonation apparatus christened Brunhilda.

Reflecting on her journey, Naschitzki muses, “Looking back, I didn’t fully comprehend the privilege of being part of a burgeoning industry.”

There was a time when everything new was considered interesting by my business partner, Llew, and me when we started. Now, even if you’re Garage Project, your beer doesn’t sell itself. It’s not as simple as opening your doors and having people lining up outside to drink from your kegs.”

Consistently sending emails and samples, visiting sellers, or asking them to come to her is what she does.

“Take New World as an example, where you have to sell your beer to every single shop because it orders individually. So you have to spend time developing and maintaining relationships with owners and managers.”

Then comes the struggle to get your beer on tap at bars and restaurants.

“I’ve heard a lot of stories recently from people in the industry, some being close friends of mine, that their mental health is suffering. You spend 80 hours working tirelessly, selling what feels like a big part of you, and you’re only barely getting by.”

According to her, no job is worth risking your health.

“I don’t want mental health to be an elephant in the room. Many people would be just as happy brewing beer at home – why does commercializing it make it better?”

Her advice to those just starting out is, “I would honestly just not.”

“How can you get attention and find a reason why you are different from everyone else?” she questions. “I’m not sure there is a way to achieve success.”

She maintains caution towards wannabes.

“Just because you won some homebrew medals and have a great idea for a name doesn’t mean you should pool together $50,000 with some buddies and start a craft brewery.

“Man, you are going to lose every penny.”

THE END OF RENAISSANCE

Around the time Naschitzki was establishing her small operation in Wellington, Andy Deuchars and his business partner, Brian Thiel, were being toasted as pioneers.

Renaissance Brewing, a craft brewer in Blenheim, had become the first New Zealand company to receive equity crowdfunding. They raised $700,000 in a week and a half.

Their porter and scotch ale were hailed as two of the country’s finest beers. By late 2014, Renaissance was making $1.5million per year.

Yet with so many people owning a piece of his action, Andy never became rich. It took the San Diegan four years to give himself a salary.

Late last year, Renaissance went bust.

The boutique brewer was sold and creditors were left with a shortfall of more than $600,000.

In hindsight, Deuchars mentions problems with their distribution agent and as sales plummeted, the board pushed to export the beer overseas.

“Beer is more delicate than wine. If it’s shipped around the world, it arrives tired and at a higher cost than what you can get fresh and local,” he explains.

“I told my board it would be more cost-efficient to send actual lumps of coal to Newcastle than what we were doing.”

Additionally, the competition proved to be another challenge.

“Compared to when we started, it’s terrifying.”

He foresees dark days ahead, similar to Naschitzki, “I don’t think sour beer is going to take over the world.”

He categorizes craft beer drinkers into two groups – the ultra-passionate who love sours, reds, and hoppy IPAs, and the majority who simply ask for the pale ale on tap.

“Everyone seems to be making craft beer nowadays. Even though the market has expanded, everyone’s competing fiercely,” he adds in concern.

“You spend money like a fire hose and get back barely enough to fill an eyedropper. I’m very apprehensive about the industry and predict a significant shakeup that may leave only a few winners and everyone else destitute.”

Currently, Deuchars serves as an operations manager for Wigram Brewery.

“It may sound like an esteemed position, but I’m still cleaning tanks.”

THE GARAGE

The talk of the craft beer bubble has spanned at least a decade. Despite warnings that starting another brewery was unwise due to saturation with brands like Three Boys, Epic, Yeastie Boys, and 8 Wired, Jos Ruffell and Pete Gillespie remained undeterred as they launched Garage Project a decade ago.

“Even back then, New Zealand was held in quite high regard internationally for making good beer, although there were concerns about what we could contribute,” reflects Ruffell.

“We felt the industry was steady and secure, with few seasonal beers and only a couple of new releases each year from breweries.”

In 2008, Wellington saw the opening of Hashigo Zake, one of its flagship craft beer bars. Alongside The Malthouse bar, a vibrant scene blossomed.

Despite the increasing consumption, Wellington lacked local brewers at the time – Mac’s Brewbar being the closest.

Ruffell and Gillespie embarked on their venture, choosing a dark corner of Hashigo Zake to plot their entrepreneurial journey.

They acquired a small, upscale homebrew kit and began experimenting, producing 24 different beers in as many weeks. Many of those creations, in various forms, remain on shelves today, including the Hapi Daze pale ale, Pernicious Weed IPA, and Aro Noir stout.

Garage Project has encountered few failures along the way.

“We don’t just throw things at the wall,” Ruffell asserts.

“While the end product may differ from our initial vision, once an idea is conceived, it becomes an obsession for us, making it impossible not to pursue.”

Garage Project engages diverse artists to design their labels, successfully balancing the marketing and beer aspects, evident by the numerous accolades and medals adorned in their office.

“From the start, we aimed to be a brand house, giving each beer its unique personality, allowing them to shine as individuals,” Ruffell explains.

Despite the saturated market, Ruffell remains optimistic about Garage Project’s position in the industry, especially after being named New Zealand’s best brewery at the previous year’s Brewers Guild Awards – akin to the Oscars in local craft beer.

As mainstream names took notice of craft breweries long ago, last year saw acquisitions like Heineken-owned DB Breweries purchasing Tuatara, Lion acquiring Emerson’s and Panhead, while Garage Project declined multiple offers.

Ruffell, comfortable with the current demand surpassing supply, highlighted a larger supply than ever before.

With a staff of almost 50, a large number for a local brewery, Garage Project’s self-distribution allows control over beer placement and presentation.

Ruffell noted the expanding reach of their beer, even in smaller towns dominated by Lion Red or DB Draught.

Acknowledging the inevitable entry and exit of new players in the market, Ruffell observed shifts in consumer preferences towards higher quality craft beer.

Emphasizing the importance of a unique brand voice for success in the industry, Ruffell expressed optimism for Garage Project’s continued growth.

MAKING OTHER PLANS

Driven by customer awareness, Garage Project no longer needs aggressive marketing tactics to sustain growth.

Having joined bStudio, a large brewery in Napier, Ruffell and Gillespie can focus on creativity while leveraging bStudio’s production capabilities by sharing recipes.

Concerns exist about contract breweries like bStudio undercutting smaller players in the market.

For some, like Tiamana’s Annika Naschitzki, shifting to contract brewing has provided financial stability while allowing focus on brewing quality lagers.

With a small home brewing kit, she finds solace in brewing once again.

Reflecting on his experience with Renaissance Brewing, Andy Deuchars believes the brewpub model holds promise for the future despite operational challenges of running a restaurant.

Highlighting the drawbacks of traditional brewery distribution models, Deuchars foresees potential in brewpubs offering direct sales of their own beer alongside simple food menus.

In his view, the complex supply chain structure in the industry leaves little room for substantial profit margins.