From our point of view as retailers and distributors of local and imported beer, there have been significant changes this year in what the people that we sell to have been buying.
A lot of this has to do with the rise of Liberty and Panhead. It’s convenient to bracket them because the ties and similarities between the two are strong. Mike Neilson and Joe Wood are long-standing friends and there’s no doubt that they've talked a lot as they've simultaneously developed brewing companies that are quickly becoming giants. And while they took very different approaches to getting into business, they've made a lot of similar moves in the last year or so. Specifically that means producing a lot of beer in styles that are popular right now and putting them out in six packs at very competitive prices. It has worked for them for a few reasons – obviously their packaging and pricing have made them popular – but first and foremost their quality has been consistently very good.
Of course it would be ridiculous to suggest that no-one has achieved this before, and a lot of these comments also apply to ParrotDog and others, but the rate that they've grown (Panhead in particular) and won over customers may well be unprecedented in New Zealand. (Plus we sell their beer and have watched it close up.)
So we have literally had wholesale customers say to us that they now sell less of everything except Liberty and Panhead. Without getting too empirical, there seem to be a lot more people taking home six packs of Oh Brother Pale Ale or Quickchange XPA where they might have taken a mixed bag of different beers a year ago. It’s as if the early adopters of the last five years are settling down with a few staples and experimenting less.
Another trend – not unrelated to this rise of Panhead and Liberty – is that when it comes to certain styles, particularly US style hop bombs, local brewers have all but eliminated the gap between local and imported product. There are still reasons for buying some of the imports. For instance there is still no local answer to Sculpin. Plus there are plenty of styles where the gap is still fairly wide between the local and imported product. There are still styles that are barely made or consumed here. And even though there have been some very good local sours available for several years, they’re only just catching on here and there is lots of ground to make up.
The greatest challenge confronting up and coming local brewers remains access to market and it’s as bad as ever. The number of untied taps in bars that are available for small and independent brewers to sell into is barely growing. Although there have been a few new bars open up or become free of their big brewery contracts, there simply aren't enough of them and many of the benefits are undone with their taps being individually contracted to the “if you can’t beat them join” breweries. (I.e. breweries that make a payment - or bribe - to bars in exchange for them never putting anyone else’s beer on one or two particular taps.)
This lack of progress is alarming. It seems that the lure of becoming a destination bar and winning the admiration (and cash) of a city’s beer geeks aren’t enough to convince operators that they should walk away from the embrace of DB/Tiger/Heineken, Lion/Kirin or Woodstock/Asahi. There are a few possible explanations, starting with the unavoidable fact that, in general, the hospitality industry is terminally petty, conservative and visionless. Another is that Lion Nathan’s strategy of buying up the competition (i.e. Emersons) to patch the gaping holes in its portfolio is working.
What it means is that, in New Zealand, the ratio of free taps to independent breweries is probably lower than ever.
With so few taps available (and with many of those being dominated by certain fast-growing juggernauts) new brewers quickly resort to bottling. Now it has long been the case that when a New Zealand consumer tries a new beer or brewery, they’re probably drinking at home, from a bottle. This in itself is absurd and tragic and a staggering indictment of our hospitality industry. But the fact is that certain supermarkets and specialist bottle stores have been the saviour of many new local breweries. But as mentioned above, a number of consumers have recently been settling for six packs of some well priced, reliable, hoppy pale ale over experimentation. So if you’re a new brewer and you've made a lot of good beer, but it isn't in a six pack with “Liberty” or “Panhead” on it and it isn’t selling for around $22 a six pack, then you’re probably finding it surprisingly difficult to sell.
In other words, 2014 has seen more breweries competing in a market that is a lot less open than we believed. A correction is coming. Making some good beer isn't enough any more. A new brewery either needs a killer beer or exceptional branding. (Or both. Or very deep pockets.)
Returning to that issue of tied taps… (and at the risk of boring people who've heard it all before) it looked as though New Zealand’s small and independent brewers were given an early Christmas present a few weeks ago with news that the Commerce Commission are investigating the practice of tap contracts. This was unexpected news. It follows a similar announcement from Australia’s equivalent body a few months ago.
Now speaking as a legal lay person, it strikes me that the merits of this investigation pivot on one point. New Zealand’s competition law says that companies can’t engage in practices that limit competition. A single tap contract doesn't quite do that. But hundreds or thousands of them do exactly that. So I wonder how far the Commerce Commission wants to get into a debate over the net effect of multiple commercial actions.
Also, the practice of tap contracts has dozens of equivalents throughout our economy. I'm thinking, for instance, of mobile phone contracts. A finding against tap contracts could call into question the legality of practices employed all over our economy. The consequences could be mind-boggling. I also suspect that, once companies got over their shock and adapted, there could be a magnificent boost to competitiveness, efficiency and transparency.
(I guess there’s also the issue of whether the need for competition is satisfied by a duopoly. I think the experience of beer consumers tells us that the answer is emphatically no.)
But back to tap contracts. Will the Commerce Commission be bothered really getting into this can of worms? Let’s imagine how their investigation might work. They’ll take into account statements such as the one in the DominionPost article from Tuatara, who, apparently, deplore the practice. Then they might talk to outlets who have tap contracts. They might ask who the tap contracts are with. Often the answer will be “Tuatara”. At this point I wouldn't be surprised if they decide there are better uses for their time.
So yes, I'm touching on the vexed issue of the distinction between what might be called “single tap” contracts and “whole bar” contracts. When big breweries sign “whole bar” contracts, they would say that all they’re doing is entering into an arrangement with a single bar and that there are other bars and consumers aren't affected. Likewise I’m sure that the smaller breweries who sign single tap contracts would say that it’s just one tap (or two or three) and there are other taps and consumers still have choice. The fact is that stitching up any kind of exclusivity has an effect. And those effects quickly compound. I see it when I go into a bar that has auctioned off most or all of its taps one at a time. I get less choice as a consumer and I see other brewers seething with frustration because they’re struggling to sell their beer.
So there is only one outcome that I want with respect to tap contracts, but I’m not holding my breath for it. And that is that pretty much that any donation of product or cash from a supplier to an outlet that leads to the outlet preferring that supplier’s product should be considered anti-competitive and illegal.
As for other trends this year (forgive me if trotting these out feels a bit tedious)…
Cans…. Yes they have lots of benefits, some of which are vastly overstated. And don’t mention the bauxite mines. We’ve only had a few canned beers on our books and they haven’t set the world alight. Having said that we’re about to launch Modern Times which we expect to do well, although that has more to do with the beer than the packaging.
“Session” beer… consumers and brewers have all been saying these are a great idea for years, and the long awaited pale hoppy ones finally seem to have gained momentum in the last twelve months. This probably has a lot less to do with the new blood alcohol level for drivers than is claimed and more to do with a long-standing wish for hop-lovers to be able to indulge themselves without getting smashed. Personally I think that hops taste nicer in a boozy beer and that saisons, sours and stouts are better bets for sessionability.
Rant over. Have a great 2015.