Challenges faced by independent brewers: a call to action
As we navigate the post-pandemic landscape, it is crucial that we address the concerns surrounding the future of independent brewers. The brewing industry, like many others, has been significantly impacted by a multitude of factors, ranging from higher interest rates on loans to the high cost of living. These challenges have been further compounded by the lingering effects of the Covid-19 pandemic.
The latest example - Love Lane Brewery – highlights the issues very clearly with the Liverpool-based brewery announcing that it has collapsed into administration again almost 18 months after being rescued by former Iceland boss, Nick Canning.
As Paul Stanley, regional managing partner of Begbies Traynor, the firm that have been appointed to oversee the administration, said: "This is a difficult time for the leisure and hospitality sector in general. Many small breweries have launched during the past decade and the craft beer industry was going strong until economic conditions dramatically changed.”
As national head of Irwin Mitchell's restructuring and insolvency team, I’d like to shed light on these concerns, while also offering guidance to businesses in the sector to help them avoid the risk of insolvency in the coming year.
One of the primary challenges facing independent brewers is the burden of higher interest rates on loans. With the economic recovery still in progress, financial institutions are understandably cautious. As a result, breweries are finding it increasingly difficult to secure affordable credit, hindering their growth and ability to invest in their businesses. Moreover, the high cost of living has led to consumers tightening their purse strings, spending less on non-essential items, such as socialising, which directly impacts the demand for craft beers.
The Covid-19 pandemic has had far-reaching consequences for businesses across the globe. The brewing industry, which heavily relies on the hospitality sector, was hit particularly hard. Even as restrictions ease, businesses are still grappling with the aftermath, including reduced footfall, changing consumer behaviours, and increased operational costs. For many independent brewers, the road to recovery is proving to be longer and more arduous than anticipated.
During the lockdown period, many small businesses, including independent brewers, turned to business recovery loans for financial support. While these loans were a lifeline at the time, they have now become an additional burden as they need to be repaid. As businesses strive to regain stability, the repayment of these loans adds to the financial strain, potentially pushing some towards insolvency.
In recent times, independent brewers have also faced the mounting cost of utilities, particularly gas and electricity. These essential services have witnessed significant price hikes, eroding profit margins and placing further pressure on already strained finances.
At Irwin Mitchell, we understand the challenges faced by independent brewers all too well. We have worked closely with several breweries undergoing financial difficulties, including a recent case involving True North Brew Co. This brewery was facing administration, putting over 300 jobs at risk. However, through our expertise in restructuring and insolvency, we worked with the administrators at Interpath Advisory, to facilitate a successful pre-pack deal, saving the company and preserving those jobs.
To avoid the scenario of independent brewers facing insolvency in the future, it is imperative that proactive steps are taken. Early action is key when it comes to addressing any financial difficulties. Burying one's head in the sand will only exacerbate the challenges. Here are key recommendations to address the issues:
- Financial Planning and Prudent Spending: Careful financial planning and prudent spending are paramount. Assessing and reducing unnecessary expenses can help alleviate financial strain and allow for better management of resources.
- Diversification and Innovation: Exploring avenues for diversification and innovation can help independent brewers adapt to changing consumer preferences. This may involve developing new product lines, exploring alternative distribution channels, or engaging with the growing demand for low or no-alcohol beverages.
- Building Resilient Supply Chains: Strengthening supply chains and forging strategic partnerships can mitigate the risk of disruptions. Collaborating with local suppliers, investing in contingency plans, and embracing sustainable practices can enhance resilience and streamline operations.
- Engaging with Local Communities: Cultivating strong relationships with local communities can foster loyalty and advocacy. Engaging with consumers through social media, hosting events, and supporting local initiatives can help create a loyal customer base and drive growth.
The challenges facing independent brewers are undeniably significant, but with proactive and strategic measures, these businesses can navigate the road ahead. Irwin Mitchell's experience in working with breweries undergoing financial difficulties, such as the successful case of North Brew Co., exemplifies our commitment to supporting businesses in the sector. By embracing innovation, prudent financial management, and building resilient relationships, independent brewers can overcome these challenges and thrive in the face of adversity.
