Pandemic brewed big trouble for Irish beer but has not killed hope

The Porterhouse Brewing Company, part of the eponymous pub group, used to pump out about 2.5 million pints per year at its production facility near Glasnevin on Dublin’s north side. Then along came the pandemic, which caused volumes to “plummet”, says its managing director Peter Mosely.

People cannot sink pints if no pubs are open in which to drink them, so Porterhouse ramped up activity for retailers instead.

The brewery lies tucked away in a drab industrial estate in the Tolka Valley. It isn’t the prettiest part of Dublin. But on a gorgeous Wednesday morning this week, it may as well have been Tuscany. As the sunlight bathed its beer tanks in a verdant glow and the birds chorused their approval, it seemed to underline, at least for a day, that the pall of this pandemic will not cloud us forever.

Inside, however, coronavirus was still making its presence felt. Mosely, who is also the chairman of the brewers lobby group Drinks Ireland Beer, a division of Ibec, explains that about 80 per cent of the Porterhouse output used to be in draught kegs. Now, that is more like 40 per cent, he says, and much of that is contract production for other brands for export to foreign markets such as the United States.

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“We are producing almost no draught for the domestic market. The more beer we have flowing through the tanks, the more efficient we are and the more profitable. So we adapted to produce more for retail and also took on the contract work. You do what you must, and the last few months have been much better.”

The closure of the hospitality sector has caused chaos upstream in the brewing industry, which employs about 1,100 people. Irish beer sales rocketed in supermarkets last year, but overall revenues were down 17.3 per cent. Stout, whose drinkers especially favour the pub, was hardest hit. Production, which is dominated here by big multinational players such as Diageo and Heineken, fell 14 per cent.

Monumental hangover

Irish beer exports fell 17 per cent in 2020 to €254 million. They were down 42 per cent to the US, 20 per cent to Europe, 7 per cent to the UK and 13 per cent to Africa. The hangover from the pandemic will be monumental until bars everywhere are allowed to reopen.

The virus has upended much of what we thought we knew about the world, but here’s something many Irish people might never have expected to see in print: lakes of beer have been going to waste in this country. Last year, the pubs shut on March 12th, just as the sector had ramped up production to quench a multitude of thirsts at home and abroad over the St Patrick’s Day period.

Most of that beer had to be destroyed. One industry source estimates that about 600,000 kegs of draught beer were returned to Irish brewers in 2020. Some brands differ in keg size, but most standard pub kegs hold about 90 pints each. That’s 54 million pints wasted, or more than 20 times the entire pre-pandemic output of a brewer the size of Porterhouse.

This week, Drinks Ireland called for a medium-term package of financial supports for the sector, including compensation for its wasted beer, which had to be rounded up and the kegs tagged in every pub cellar, before being collected and shipped back to brewers for proper disposal.

Larger brewers, such as Diageo, turned some of it into fertiliser for fir tree growers. In a wry act of corporate humour, it even sold hundreds of Guinness Christmas trees at its Storehouse in Dublin last December.

“Some other larger brewers turned their wasted beer into animal feeds or biofuels, as their volumes are so large that they have to be disposed of really carefully,” says Mosely. “But for smaller producers such as ourselves, you’re literally talking about putting it down the drain.”

Other supports sought by the sector include adjustments to the State taxation of drink lost to bad debts, a macabre nod to the assumption in the industry that a wave of pub closures is now inevitable. Currently, brewers can reclaim the VAT on bad debts, but not the duty, which amounts to about €5.40 on every crate of 12 half-litre bottles. The industry has also reiterated a long-standing request that taxes on alcohol be reduced, as they are among the highest in Europe.

For smaller brewers such as Porterhouse, some fiscal relief could make all the difference. But direct State financial support for multinationals such as Diageo and Heineken, which hold billions of euro in cash on their balance sheets, may be a hard sell to Ministers, especially while their listed parent groups continue to pay dividends to shareholders.

Most of all, however, the brewing sector just wants the pubs to reopen. “It’s not down to us to say when this should happen,” says Mosely. “But we need some advance notice or an idea of when it might happen so that we can brew the beer – it takes about two weeks to make a stout – package it, and deliver it. We need a conversation with the Government about this.”

Ministers, wary of public criticism for being seen to mollify Big Drink, sometimes have a cool welcome for the sector’s lobbyists.

One industry source contrasted the Irish Government’s hands-off approach with brewers with the willingness of governments elsewhere to talk to alcohol producers: “Here, they sup with the industry using a long spoon. Other countries have been far better at engaging.”

Mosely says the debate around the alcohol industry “frustrates” him.

“They think we’re like the guys on The Wire trying to push our drugs on people. It is such an unfair representation. There is a very vociferous sector in Ireland that is, quite successfully, working against the industry and reining in alcohol’s activity in society. What frustrates the alcohol industry is that consumption per head is declining anyway and has been for decades. By any measure, Ireland’s relationship with alcohol has been improving.”

‘Irrational idea’

The industry’s critics, meanwhile, give no quarter in their argument that the State should provide no further financial assistance to the alcohol industry.

“The notion that two or three major multinational alcohol producers, who dominate the market, and who hold billions of free cashflow on their balance sheets, should be assisted by the State is an irrational idea that turns the idea of solidarity on its head,” says Eunan McKinney, the head of communications and advocacy for Alcohol Action Ireland, a lobby group that is critical of the sector on health grounds.

McKinney concedes, however, that there are also many SMEs in the Irish brewing industry that do not have the resources of the big-name producers. Some of those businesses have been hit hard by the pandemic. Others, meanwhile, have benefitted from the 20 per cent uplift in overall grocery retail sales.

Some have doubled or even tripled their supermarket sales, and those that had strong supply lines into retailing before the pandemic fared best.

It is estimated that the craft brewing sector has between 3 per cent and 3.5 per cent of the Irish market. Many of those businesses are members of the Independent Craft Brewers of Ireland (ICBI). In addition to his Drinks Ireland role with Ibec, Mosely also chairs the ICBI.

“I like to think of myself in boxing terms as the unified holder of all the belts,” he joked.

Elisabeth Ryan is the the co-ordinator of ICBI, which has about 72 members. She says the pandemic has affected craft brewers in different ways, putting them broadly into four different categories.

“The first category is the very rare one or two that already had good supply lines into the supermarkets, and they have done well. But about 90 per cent of the sector was largely kegs focused,” she says.

“So the second category is craft brewers that were only about 10 per cent or 20 per cent down last year, and they’re happy with that performance. Their hospitality sales were maybe down 50 per cent, while they may have doubled or even tripled their retail sales from a smaller base.

The third category are brewers barely keeping their heads above water, maybe ones that might be in tourist areas, for example. And the fourth category are brewers that were almost exclusively focused on kegs and draught supply to pubs. They’ve fared worst of all.”

For example, Priory, a brewery in Tallaght in west Dublin, has not brewed at all since the pandemic hit.

“We took the decision that brewing may put our staff in too close contact in very hot, humid conditions. We hope to be back brewing very soon though.” the company recently said on Twitter.

Meanwhile, other craft brewers have pivoted to meet the pandemic-era market conditions.

Hope Beer in Howth in north Dublin, whose brews include Handsome Jack, told news agency PA that 72 per cent of its business went “overnight” when the pandemic hit. It installed a new canning line at Christmas that has allowed it to further increase capacity for retailers, it revealed on social media. The company, owned by Dutch and Irish investors, managed to limit its fall in sales last year to between 20 and 30 per cent and it appears set for a much better year this year.

Exports

Rye River Brewing Company in Kildare, which makes McGargles, was previously heavily focused on the on-trade and on exports. It is one of the larger Irish craft brewers, with upwards of 60 staff. Since the pandemic hit, it has targeted more sales with independent retailers. It also has an exclusive range in Lidl, branded as The Crafty Brewing Company.

“All of this helped us to grow our retail sales by over 50 per cent last year, a level of growth that compensated somewhat for the fall-off in exports and in our on-trade business. We grew overall volume in our brewery by 11 per cent,” the company recently told grocery trade publication, Checkout Magazine.

Craft brewers are stepping up their promotional activity, especially with retailers. Aldi launched a marketing campaign around St Patrick’s Day this year, focused on three craft operators – Black Donkey in Roscommon, Rascals Brewing Company in Dublin, and Dundalk Bay Brewery in Louth. Meanwhile, the ICBI will run its Indie Beer Week campaign in the third week of May.

Back at the Porterhouse, Mosely is sanguine about the year ahead, despite the enormous challenges facing the sector.

“If you’d come here yesterday, I’d have been brewing the beer myself. That’s what we have to do, but I quite like that. It’s not a chore at all. The pandemic has sped some things up. It has forced us to look at doing more take-home beer, for example, and maybe we should have been doing that before. It has forced us to get in to new markets.”

Outside, the sun is still shining, the birds still in full song. The pandemic has exhausted many sectors of the economy, especially those dependent on hospitality and tourism. But the nation’s vaccination campaign, stuttering as it is, brings some hope of a brighter future

Businesses big and small, including brewers, will keep striving to survive, ready for when the economy can fully reopen and the damage of the past 14 months can be repaired. That is an aspiration for which it is worth raising a glass.