The Global Impact of Craft Beer - Australia Edition

The United States is undoubtedly the leading beer market in the world when it comes to creativity and entrepreneurial drive, and it's all because of craft beer.  But other countries are following our lead. Australia is one of them. In January of this year, just as the first winter storms were approaching my home town of New York City, I made an escape to Melbourne and Sydney - which house 40% of Australia's 23MM people between them – to find out for myself how far along Australia has come. I’ll admit the idea of 90°F temperatures on the famous Aussie beaches was a little tempting too.

I found a dynamic beer market that was quickly embracing a modern definition of a crafted beer.  Ostensibly, there are plenty of parallels to draw between the Australian and US beer markets, along with some major differences.  In some ways, this 4.8MM-square-mile island that sits in between South East Asia and Antarctica is way behind the States, and in others...it points to the future.

Australians despise being seen as boomerang-throwing, crocodile-wrestling simpletons. This country adopts what’s happening in the rest of the world very quickly.

The Similarities

While the beer industry in the US is static (down about 0.5% in volume for 2015, according to various on and off premise sources), the Australian beer industry is in steep decline, losing about 4% of its volume sales annually for the past six years.  As in the States, craft beer, as defined by the Craft Beer Industry Association, is in growth (+20% for the past five years), although it only makes up 5% of the market.

Also like America, there are two big companies dominating beer supply – SABMiller-owned Carlton United Brewing and Kirin-owned Lion Nathan Co. – but these guys don’t just have most of the market share, they have not far off 90% of it.  They not only make most of the “macro” Australian beer brands – like Victoria Bitter, Carlton Draught, Castlemaine XXXX, Tooheys, Swan and Hahn – they also distribute and often contract-brew the big imports as well.

Adelaide-based brewery Coopers is the only major brewery independent of these two, with roughly 4% of the market.  All other breweries are tiny by comparison. 

Lastly, as in the States, the number of craft breweries is proliferating.  From a low in 1988 of just 25 (including a couple of brewpubs), the number has grown to 336 operating breweries today.  And the rate is accelerating: there were only 98 new breweries in 2015. 

So “craft beer” is clearly the driving force of beer in Australia.  Here’s my analysis of why this is, and how it potentially points to the future for beer in the states.

Australian craft beer comes from a global craft culture

It’s funny, when I lived in London, I thought that hipsters were a home-grown phenomenon: skinny jeans, pointy shoes, music blogs and vintage blouses seemed so British to me.  But then I moved to New York and found that Americans believed they had created and owned the world of side-partings with thick beards, sailor tattoos and chunky brogues worn without socks...even in winter. Truth be told, craft beer is not a European thing, or an American thing – it’s a completely global movement, and it does not respect national borders or distance. And it’s huge in Australia.

I’m stereotyping for comic effect, but my point is that there is a powerful global craft culture that drives significant trends.  This culture, however you might choose to define it, loves things that are local, loves things with a story and loves, just loves, tasty beer. When I was in Sydney, I walked past a guy wearing a tee shirt with the slogan “Beards, Tattoos, Coffee and Craft Beer” as an example.

Luke Robertson

Luke Robertson

“Australians consider themselves global citizens,” commented beer blogger and consultant, Luke Robertson, when I met him for a beer in Melbourne. “And they’re very wary of stereotyping.  Cultural cringe is a big thing here; Australians despise being seen as boomerang-throwing, crocodile-wrestling simpletons.  This country adopts what’s happening in the rest of the world very quickly.”

You may have noticed that Australians travel to the States pretty often, so it makes sense that Australia would follow in its footsteps in the beer world.  From Australian visits to American shores came the first few craft brands in Australia: Matilda Bay in 1984 and Little Creatures in 2000, both founded in Western Australia by an entrepreneurial group including winemaker-turned-brewer Phil Sexton (who’s like the combined Jim Koch and Ken Grossman of Australia); and in 1998 the Malt Shovel Brewery was started by Lion Nathan in Sydney, to produce the James Squire brand.

And America is still by far the biggest influence on the Aussie scene and its styles.  Luke Robertson often begins his fast-growing podcast Ale Of A Time with a segment of US beer news, and brewers are open about the fact they look to the US for inspiration. 

“Beers from the States are definitely my biggest influence,”  leading craft brewery Two Birds Brewing Co.’s co-founder and head brewer Jayne Lewis told me when I met her at her brewery in Melbourne’s western suburbs.  Lewis travels to the Craft Brewers Conference most years, and cities like San Diego in particular as a source of inspiration.  Two Birds’s wonderful lime-and-coriander-infused wheat beer, Taco Beer, is designed to mimic the deliciousness of a fish taco eaten there.

But while America is the North Star for many Australian brewers, they’re also experimenting with the latest styles and trends from around the world.  For example, I saw a lot of Berliner Weisses on tap in Aussie craft bars – which makes sense, given how their refreshing tartness can cut through the driest Australian summer afternoon.

Two Birds portfolio would definitely contain some more diverse, experimental beers if making beer above 5% ABV weren’t so difficult business-wise

There are two things holding brewers back in Australia

While plenty of Aussie brewers are straining at the leash to make ground-breaking beers, two market forces are holding the tension.

The first is a rigid and near-punitive tax on alcohol, which is particularly felt in beer.  Beer is taxed on its alcoholic strength, and the incremental tax on every percentage point in alcohol by volume above 4% is high.  Jayne Lewis told me, very matter-of-factly, that she would brew very different beers were it not for the taxation consequences.

“I have to work hard to make interesting flavorful beers that don’t pack an alcoholic punch,” she said.  “I’m not into extreme beers as such, but the Two Birds portfolio would definitely contain some more diverse, experimental beers if making beer above 5% ABV weren’t so difficult business-wise.”

Chris Sheehan, head brewer at the Malt Shovel Brewery, commented similarly when I met him at the Sydney-based brewery. “Pale Ale is the dominant style in Australian craft beer - there would probably be a lot more IPAs if it wasn’t so hard to make a beer profitable at 6% or 7% ABV.”

But Chris quickly explained that there’s another big constraint on the Australian brewer’s experimentalism, which is the lack of consumer demand for more flavorful, exotic beers. 

“Put simply, very few Australians will drink a beer that’s darker than amber or has the word wheat on it,” explained Sheehan, who is in charge of the brewing process for the nine James Squire variants.  “James Squire [the brand Malt Shovel brews] is very much a gateway beer, but it’s hard for even experimental breweries much smaller than us to make anything too crazy here yet.”

Of the breweries I visited, every one told me stories of visitors staring in bewilderment at the beer menu before requesting the lightest, most drinkable beer. 

“By American standards, none of the beers we make is very out there,” commented Paul Rogasch, manager of the Little Creatures brewery in Geelong, near Melbourne.  “But several of them are still too much for most of our visitors.  A good number of people will try our IPA or Pale Ale, then ask for a pint of something a lot lighter instead.”

I visited the Local Taphouse in St Kilda, Melbourne, and was impressed by the diversity, and potency, of the beers they had on draft.  Aromatic saisons, double and Imperial IPAs and Belgian-inspired sours filled the list, though they were priced heftily to accommodate the tax burden their ABV provokes.  Up-and-coming breweries such as BoatRocker, La Sirene and Moon Dog in Melbourne, or Pirate Life in Adelaide, appear unafraid to challenge the limits of the Australian palate, even if it limits their sales potential.

“I do think things are moving along, and fast” observed Luke Robertson, who is as close to the cutting edge of the scene as anyone.  “It’s funny, because a lot of brewers and beer geeks will drink imports from Stone, Jester King and Dogfish Head, so they know what’s going on in America.  And a growing number of people want beers like those made fresh here in Australia.  So while most of Australia is at least years behind the US in its appreciation of beer, we also have breweries giving their take on the latest American styles.  I think we’ll swimming in IPAs before you know it.”

Big beer makes craft.  And people are cool with it.

Given the way the American market is consolidating, there is one portent in Australia that could point to the future of the US industry.  The two big brewers here make a lot of craft, and people seem pretty okay about it.

It’s not surprising that the big brewers are heavily involved: remember that craft is +20% while total beer is -4%.  It’s craft-or-die for the big players. 

Lion Nathan in particular has invested a lot in growing some big craft brands.  It created the James Squire brand – inspired by a remarkable “convict brewer” who was among the first immigrants to Australia – in 1998, and built it to a whopping 32% of the craft sector.  It also invested in then bought out Little Creatures, from Freemantle, WA, and recently acquired the White Rabbit brewery from Healesville in the Yarra Valley near Melbourne.  Between these three brands, Lion Nathan has just shy of 45% of the craft beer market by volume.

“A tiny minority have an issue with the corporate ownership of Little Creatures,” the Little Creatures and White Rabbit brewery ambassador, Matt Burns, told me at the brewery in Geelong.  “But it’s a very small number.  I spend my life at beer festivals and running events with other craft breweries, and there’s no tension or bad blood.  We’re spreading the word for craft beer just as strongly as anyone else.  And we always do what we can to give other breweries a helping hand.”

A comment like that from someone who is a Lion Nathan employee is not shocking, but it’s echoed by people outside the company.  Jayne Lewis at Two Birds began her brewing career with Little Creatures, so she has an interesting perspective.

“I have praise for Little Creatures and James Squire.  They make really good beers, and they are doing a lot to grow craft beer in Australia.  So many smaller breweries are just getting off the ground, and frankly we benefit from having two flag-waving brands that have a lot of resources behind them.”

Luke Robertson agrees.  “James Squire, Little Creatures and Stone & Wood don’t make extreme beers that will knock anyone’s socks off, but they know that’s not what they’re there for.  They make high quality, interesting beers that will be accessible and acceptable to the curious mass lager drinker.  The more people they bring into craft, the more sustainable the growth of the craft sector will be.”

Is this kind of balanced view of “big beer” the way of the future for America too?  Time will tell, but it seems pretty logical and sensible to me.

Australia has the wherewithal to make world-beating beer

My final observation was inspired by a visit to Napoleone, an embryonic brewery and cider-maker based in the picturesque surroundings of the Yarra Valley, just north east of Melbourne.  The area is famous for its agriculture, especially the many wineries that have grown up there since the 1980s.

Napoleone was started by wine-makers who wanted to diversify, and in particular to make use of the excellent conditions on their property to grow apples and stone fruit as well as grapes.  Make no mistake, this is no struggling start-up: from the amazing construction and layout of the tasting room to the bustling restaurant and café attached to the brewery, it’s clear a lot of money has been pumped into this place.

The results are excellent: an array of wonderfully made ciders and perries, and an incredibly flavorful selection of malt-forward beers.  (“We’re not into the overuse of hops!” I was told on my visit.)  Napoleone is wonderful place to get a drink.  And it felt unique: utterly representative of the special blend of old-world tradition and new world optimism that Australia embodies.

Which got me thinking...does Australia need to keep following America’s lead in beer?  It has the native ingredients (including an increasingly robust hop-growing industry), the passion, the talent, the drive and the space to create its own agenda. 

The path has already been paved by the Australian wine industry.  From the early 1960s to the 1990s, Australia went on a journey in wine, taking the time to plant a copious number of vines, develop the expertise to ferment and blend their output, and finally find a uniquely Australian way to express their flavors.  (Perhaps worth noting that the tax regime for wine is markedly different, and less punishing, than that for beer.)

My jaunt across the south eastern corner of this sunburnt country left me with a very bright view of things to come.  While Australia isn’t yet famous for its beer, in a few years’ time it could become as much of a destination for the American beer tourist as Britain or Belgium is now. 

And who knows what impact that could have on brewing in America?

Cheers to that. Mate.

Published April 2016

 

Jon UrchUrch