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First Irish Micro Brewery Economic Impact Report

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First Irish Micro Brewery Economic Impact Report

First Irish Micro Brewery Economic Impact Report
November 27
10:02 2014

The first official development and economic impact report on microbreweries in Ireland has been launched. The report was commissioned by the Independent Craft Brewers of Ireland (ICBI), an association set up earlier this year in response to the dramatic growth within the micro brewing market in Ireland.

Although significant growth and development within this market was noted in recent years, there was no numerical or growth research carried out prior to this to quantify the market growth and the resultant economic impact of such.

Seamus O’Hara, spokesperson for the ICBI and of Carlow Brewing Company, comments: “Having witnessed the extraordinary growth and development within this industry over the past few years, it is vital step for us, as Irish craft brewers, to set up an official association. A natural first step of an association is to establish an official piece of research on what impact its industry is having on both the national economy and on its operational market.”

The report was researched and written by Bernard Feeney, a respected Economic Consultant. Some of the key findings within the report include:

* A significant increase in the number microbreweries occurred in the last two years. It is estimated that there are 33 microbreweries operating in Ireland, the majority of which are microbreweries engaged in own production. At least 17 other microbreweries are at development stage, with the majority expected to be in operation by end 2014, when the total number could rise to some 50 microbreweries.

* The output of craft beer by microbreweries amounted to some 49,000 hl in 2013. Based on trends to date, this will rise to 71,000hl in 2014. This contrasts with an equivalent figure of 26,000 in 2011 and 37,000 hl in 2012.These figures indicate that production of beer by microbreweries grew by 32% by volume in 2013 and is set to grow by at least 45% in 2014.

* The microbrewery production of 37,000 hl in 2012 represents 0.45% of the market. Given the strong growth in microbrewery production, this is likely to have increased to approximately 0.9% in 2014. Of the 37,000 hl produced by microbreweries in 2012, some 28,000 hl were sold in the domestic Irish market, indicating a microbrewery share of 0.6%. Again, this share is likely to have risen to approximately 1.2% by 2014.

* In 2013, craft brewers reached 7.8 percent volume of the total US beer market, while the craft dollar share of the total US beer market reached 14.3 percent in 2013. This points to the potential for Irish microbreweries to achieve a five-fold increase in market share in the longer term.

* It is estimated that at current (2014) production levels, microbreweries that are in operation are employing 153 persons in all: 93 persons on a full time regular basis, 38 on a part-time regular basis, and 22 persons on an occasional or seasonal basis. This is 116 persons on a full time equivalent (FTE) basis.

* Employment in craft brewing has almost doubled since 2011. At current rates of growth, a five-fold increase in production could be achieved in about six years. Even allowing for a decline in employment intensity, as firm size increases, the total direct workforce in micro-brewing could reach 500 within that time frame.

* The micro-brewing industry sources over half of its brewing ingredients by value domestically. Distribution is another source of local spin-off activity. Thus, there are significant downstream benefits for the agricultural and other sectors in Ireland. Indirect employment was arising from micro-brewing is estimated at 119 persons. This means that every person employed in micro-brewing is matched by another in the wider economy that supplies the industry.

* Employment in the micro-brewing industry is very widely dispersed throughout the country. By end of 2014, there will be microbreweries in operation in 21 of the 26 counties.

* The micro brewing industry is expected to generate over €1m in income tax and PRSI receipts for the Exchequer in 2014. This rises to €2.8m when indirect and induced tax revenues are taken into account.

* The micro-brewing sector is very export focused. Irish craft beer is currently exported to 25 countries. Some 38% of microbreweries are already exporting, albeit many of them on a small scale as yet. Of the total production of 49,000 hl in 2013, an estimated 11,300 hl was exported, representing almost 23 % of the total.

* Domestic craft beer production supplies only a fraction of the demand for craft beer in Ireland. Importation of craft beers dominates. Although, this picture is changing as more and more Irish micro-breweries come on stream and focus initially on the domestic market, the scope for further import substitution is very large.

* The Irish pub is an important element in the tourist experience and the increasing retailing of craft beer in pubs is serving to enhance the tourism offer. Food festivals are also an important vehicle through which tourists gain access to Irish food and drink culture and steps need to be taken to ensure that craft beers producers can full participate in these events.

* As the craft beer offer in Ireland develops, the potential for specific “craft beer tourism” will increase. The evidence is that the development of a micro-brewery cluster is important for the success of such tourism. With the current rate of expansion of microbreweries, it is evident that brewery numbers will soon become sufficient for such clusters to be identified: Dublin, Cork, and Galway are already on this path.

* The output of the micro brewing industry is currently doubling every two years, so it has the potential to become a major element in the Irish drinks industry, with huge benefits to the economy.

* The industry is showing a healthy growth in start-up activity. The key challenge in this respect is to ensure that the failure rate is kept low and that these start-ups can achieve full utilisation of their plant capacities.

* The excise tax rebate is an essential support to micro-brewery start-ups. It would be made more effective if it were put on a non-rebate basis to improve the cash flow of new entrants.

* Changes in the regulatory environment to permit sales from brewery premises and at festivals would not only help the breweries, but also are a requirement if craft beers are to help the development of a specific food and drink culture in Ireland that is attractive to tourists.

* The current tax rebate is withdrawn in full once the brewery reaches 30,000 hl in annual production. This forms a very substantial barrier to the expansion of independent breweries in Ireland. It is also at odds with the best practice in other systems that involve a tapered withdrawal of the relief up to the EU mandated limit of 200,000hl. This tapered withdrawal not only affords firms the opportunity to grow to an economically effective size, but also involves a process whereby the support is withdrawn in a manner that is least disruptive to the firm’s operations.

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