The Craft beer market seems to be booming. All hail the entrepreneurs of the brewing industry, you are showing why smaller businesses are set to turn the corporate world upside down.
When Chris Anderson, the former editor in chief of Wired Magazine, said that business was being disrupted by what he called a long tail, the implications were not fully understood. The latest news on the craft beer industry illustrates how the long tail is beginning to wag faster than ever.
They used to put retail success down to the three Ps: position, position and position. When we buy our goods locally, we get less choice. The local market is simply not big enough to sustain a huge variety of products. When the internet came along, and with it online shopping, position was less important – although position on Google mattered. If you were to describe the curve that portrays the number of products available for a given level of demand, then before the internet it was short and fat, there was little choice and sales per product were high. After online shopping it became long, and thin, lots of choice, with different products catering for difference niches, hence the long tail.
The internet has led to the explosion in the number of products meeting consumer needs. In the longer term, this will limit the power of large companies, competition will lead to smaller profits, which will be transferred from what economists called abnormal profits and salaries paid out to the bosses of the big companies, into remuneration for entrepreneurs. And the more the number of entrepreneurial businesses, the more the money generated by any given industry will trickle down into the pockets of a growing entrepreneurial class.
Craft beer is an example. According to UHY Hacker Young, there was an 8% increase in the number of breweries in the UK in 2015 from the year before, with the total hitting 1,693, up 134.
James Simmonds, partner at the firm said: “Craft beer is leading the way in the surging popularity of artisan products and has pushed aside other brands in high-street bars.”
He added: “This increasing popularity has transformed many microbreweries into highly profitable businesses for entrepreneurs looking for a niche position in the food and drinks market.”
Although some craft beers are targeted at a local market, the internet is still charging this change, it has a ripple effect, it has changed customers’ expectations.
And while the big breweries are buying up smaller craft beer companies, the market is so dynamic that they are struggling to keep-up.
UHY Hacker Young said: “These products are made locally and unlikely to be affected by any increase in import charges. International breweries, however, may have to increase their prices to compensate for the extra costs that they may face.”