Journal of Food and Nutrition Research (ISSN 1336-8672) Vol. 58, 2019, No. 1, pp. 63–74
Development of beer industry and craft beer expansion
Ján Pokrivčák – Soňa Chovanová Supeková – Drahoslav Lančarič – Radovan Savov – Marián Tóth – Radoslav Vašina
Summary The objective of this paper is to evaluate how globalization of Slovak economy and its economic growth affected not only the structure of the traditional beer market in Slovakia but also the rise and expansion of craft breweries. The theory is focused on examining an interplay between the standardized and globalized traditional beer industry, develop- ment and dissemination of craft brewing technologies and changing of life styles. Results and main outcomes are based on a survey where 20 owners of craft breweries in Slovakia were interviewed using a focus group approach. We identi- fied main factors affecting expansion of craft breweries as well as barriers to craft breweries expansion. The expansion is positively affected by increasing demand for diversified beer, different beer styles and the increase of income. The main barriers are the increasing consumption of substitutes, lack of qualified brewers and taxation policy. Main motivation factors to start a craft brewery are lack of diversified beer and good business opportunity.
Keywords craft beer; globalization; product diversity; demand; quality; Slovakia
Global trends in brewing Industry country, China (489.9 million hectolitres) is the The beer industry in Europe and in the world largest beer-consuming country in the world, has been going through significant changes recent- followed by USA (241.7 million hectolitres), Brazil ly. On the one hand, the process of consolidation (131.5 million hectolitres), Russia (100.1 million is going on, which has been reflected in a series hectolitres) and Germany (84.4 million hectoli- of mergers and acquisitions of large commercial tres). Overall consumption in European Union breweries. This process is driven by economy of (EU) countries was 359 million hectolitres in 2016. scale and is reflected in growing market share of Beer consumption in Slovakia was 3.97 million top breweries. On the other hand, there is a trend hectolitres in the same year, which accounts for of formation and expansion of craft breweries that 1.1 % of total EU consumption [1]. The highest started in the 1970s in the USA. Western Europe beer consumption per capita in Europe is in the joined the trend in 1980s while in Eastern Europe, Czech Republic (144 l), followed by Germany Slovakia including, the craft beer revolution start- (107 l), Austria (104 l), Poland (98 l) and Lithua- ed after year 2000. nia (95 l), while per capita beer consumption in The growth of total beer consumption in the Slovakia reached 73 l. [2]. 21st century is caused by increased consumption Craft beer represents 3–5 % of total beer con- in developing regions. Consumption in developed sumption in Western Europe and USA, while in regions is either stagnating or even declining. By Eastern Europe it is only about 1 %. Beer con-
Ján Pokrivčák, Department of Economic Policy, Faculty of Economics and Management, Slovak University of Agriculture in Nitra, Trieda Andreja Hlinku 2, 94976 Nitra, Slovakia; Department of Economics and Quantitative Methods, Faculty of Economics, University of West Bohemia, Univerzitní 8, 30614 Pilsen, Czech Republic. Drahoslav Lančarič, Radovan Savov, Department of Management, Faculty of Economics and Management, Slovak University of Agriculture in Nitra, Trieda Andreja Hlinku 2, 94976 Nitra, Slovakia. Marián Tóth, Department of Finance, Faculty of Economics and Management, Slovak University of Agriculture in Nitra, Trieda Andreja Hlinku 2, 94976 Nitra, Slovakia. Soňa Chovanová Supeková, Radoslav Vašina, Department of Management and Marketing, Faculty of Economics and Entrepreneurship, Pan-European University, Tematínska 10, 85105 Bratislava, Slovakia. Correspondence author: Drahoslav Lančarič, e-mail: [email protected]
© 2018 National Agricultural and Food Centre (Slovakia) 63 Pokrivčák, J. et al. J. Food Nutr. Res., Vol. 58, 2019, pp. 63–74
Tab. 1. Overview of Anheuser-Busch InBev acquisitions and mergers [3, 5–7]. Year Acquired or merged companies Bought by 1988 Brewery Artois (Leuven, Belgium) + Piedboeuf Brewery Interbrew (Leuven, Belgium) (Jupille-sur-Meuse, Belgium) 1995 Labatt Brewing Compnay (Ontario, Canada) Interbrew (Leuven, Belgium) 1999 Brahma (Sao Paolo, Brazil) + Antarctica (Sao Paolo, Brazil) AmBev (Sao Paolo, Brazil) 2002 SAB (Johannesburg, South Africa) + Miller Brewing (Milwaukee, SABMiller (Johannesburg, South Africa) Wisconsin, USA) 2004 Interbrew (Leuven, Belgium) + AmBev (Sao Paolo, Brazil) InBev (Leuven, Belgium) Harbin Brewery (Harbin, China) Anheuser-Busch (St. Louis, Missouri, USA) 2005 Bavaria Brewery (Lieshout, the Netherlands) SABMiller (Johannesburg, South Africa) 2006 Cerveza Quilmes (Quilmes, Argentina) InBev (Leuven, Belgium) 2007 Lakeport Brewing Company (Hamilton, Ontario Canada) InBev (Leuven, Belgium) 2008 InBev (Leuven, Belgium) + Anheuser-Busch (St. Louis, Missouri, USA) Anheuser-Busch InBev 2011 Foster’s Group (Melbourne, Australia) SABMiller (Johannesburg, South Africa) 2012 Cerveceria Nacional Dominicana (Santo Domingo, Dominican Republic) Anheuser-Busch InBev Grupo Modelo (Mexico City, Mexico) Anheuser-Busch InBev 2015 Meantime Brewing (London, United Kingdom) SABMiller (Johannesburg, South Africa) 2016 Anheuser-Busch InBev (Leuven, Belgium) + SABMiller (Johannesburg, Anheuser-Busch InBev (AB InBev) South Africa) – including Pilsner Urquell Brewery (Pilsen, Czech Republic), Radegast Nošovice Brewery (Nošovice, Czech Republic), Šariš Brewery (Veľký Šariš, Slovakia)
sumption is changing over time because of various production is under control of “Big Three”: factors. The most important are governmental Anheuser–Busch InBev (AB InBev, Leuven, Bel- regulation and production as well as trade condi- gium) including SAB Miller (London, United tions for beer and its substitutes [3]. Consumption Kingdom), Heineken (Amsterdam, the Nether- pattern has changed among countries over the lands) and Carlsberg (Copenhagen, Denmark). past 25 years. In traditional beer-drinking coun- These companies account for around 65–70 % tries in Europe and the United States, per capita of global beer production. Transaction between consumption of beer decreased. For example, in AB InBev and SAB Miller in 2016 created a new Germany, Belgium, USA and United Kingdom the brewing giant and changed the world of beer. beer consumption has declined by 14 % to 30 % Due to the EU regulations, AB InBev had to get since 1980. Similarly, in Slovakia the consumption rid of companies in Eastern and Central Europe, of beer declined by 19 % from 2003 to 2016 [1]. which were sold to Asahi Group (Tokyo, Japan). The acquisitions of central and Eastern European Global brewing industry consolidation (1960–2017) breweries occurred earlier in 1990s or 2000s. In the second half of the 20th century, there The process of mergers and acquisitions were two key trends in brewery industry: expansion had started earlier, however. In 1988, two Bel- of biggest breweries into new regions and industry gian breweries Artois (Leuven, Belgium) and consolidation – acquisition, mergers and entering Piedboeuf (Jupiler, Belgium) merged and cre- the capital market. Due to these trends, brewery ated Interbrew (Leuven, Belgium) (Tab. 1). Next industry became global. Until that time, beer was important company was AmBev (Sao Paolo, Bra- only a local product. Changes in the market struc- zil). It was founded in 1999 as a result of merger ture during last decades have led to a large con- of two Brazilian breweries – Brahma (Sao Paolo, solidation, which resulted in a smaller number of Brazil) and Antarctica (Sao Paolo, Brazil) [5]. active breweries around the world [3]. The trend In 2004, Interbrew and AmBev merged, creat- of globalization is significant. In 1998, the cumula- ing a new entity called InBev (Leuven, Belgium). tive market share of four biggest beer companies Another big transaction took place in 2008 when was 22 %. The situation was completely different InBev merged with a US brewery Anheuser- in 2010 when four biggest breweries represented Busch (St. Louis, Missouri, USA; established in almost 50 % of the global beer market [4]. 1852), which previously (in 2004) acquired Harbin Due to globalization, the current world beer Brewery (Harbin, China). SABMiller was created
64 Development of beer industry and craft beer expansion as a result of the merger between SAB (Johannes- increased lately. Based on this fact, large breweries burg, South Africa) and Miller Brewing (Milwau- started to adapt by including special types of beer kee, Wisconsin, USA) in 2002 [6] (Tab. 1). into their portfolio. Even though these beers were Heineken started acquisition activities in 1968 tasty and their taste was hard to recognize com- when it bought Amstel Brewery (Amsterdam, pared to beers from microbreweries, consumers the Netherlands). This step aimed to improve the did not show much interest. The reason was that home market share and eliminate a threat from consumers still considered these types of beer as foreign competitors. From 1992 to 1995, Heineken an industrially produced beer. Therefore, some focused on Eastern European countries to become large breweries began to establish subsidiaries the market leader in Hungary, Poland, Slovakia [11]. and Bulgaria [7] (Tab. 2). Carlsberg started to brew beer in Denmark in 1847 and, due to many mergers and acquisitions, Tab. 2. Overview of Heineken the company became an important player on acquisitions and mergers [3, 5, 7]. the global beer market with brewing activities in 140 countries around the world. Carlsberg started Year Acquired or merged companies internationalization in 1966 by brewing beer in 1968 Amstel Brewery (Amsterdam, Netherlands) Cyprus through Leon Brewery (Nicosia, Cyprus). 1970 James J. Murphy Brewery (Cork, Ireland) First important acquisitions were in Denmark and 1972 l’Espérance, French ALBRA group (Strasbourg, Finland where Carlsberg bought Tuborg Breweries France) (Fredericia, Denmark) in 1970 and Sinebrychoff 1979 Dreher Group (Trieste, Italy) (Helsinki, Finland) in 1972 [7] (Tab. 3). 1982 Brouwerij de Ridder B.V. (Maastricht, Netherlands) 1991 Van Munching & Company (Darien, Connecticut, Craft beer revolution (1980–2017) USA) “Craft beer revolution” has been a pheno 1992 Komáromi Sörgyár RT. (Komárom, Hungary) menon in recent decades. USA is considered to be 1994 Żywiec Brewery (Zywiec, Poland) a cradle of modern microbrewing. A breakthrough Zagorka Brewery (Stara Zagora, Bulgaria) year was 1976 when the first microbrewery was 1995 Zlatý Bažant (Hurbanovo, Slovakia) created in California (The New Albion Brewery; 1996 Fischer Group (Strasbourg, France) Sonoma, California, USA). During the late 70s Birra Moretti (Udine, Italy) of the 20th century, consumer dissatisfaction with 2000 Grupo Cruzcampo S.A. (Sevilla, Spain) uniformity of beer was rising and, at the same 2003 Brau-Beteiligungs A.G. (Linz, Austria) time, pressure to legalize activities of so-called Karlovac Brewery (Karlovac, Croatia) home brewers was increasing. In 1979, US Con- 2006 Quang Nam Brewery (Quang Nam, Vietnam) gress adopted a law, which left a decision on the Société de Production et de Distribution possibility of home brewing in national compe- des Boissons (Tunis, Tunisia) tences [8]. 2007 Krušovice Brewery (Krušovice, Czech Republic) Craft brewer is usually defined as a small, in- Rodic Brewery (Novi Sad, Serbia) dependent and traditional brewery. In this defi- Syabar Brewing Company (Bobruisk, Belarus) nition “small” is defined as “annual production 2008 Scottish and Newcastle (Edinburgh, United of 9 539 238 hl of beer or less”, “independent” is Kingdom)* defined as “less than 25 % of the craft brewery is Tango Brewery (Rouiba, Algeria) owned or controlled by an alcohol industry mem- Bere Mures (Ungheni, Romania) ber” and “traditional” is defined as “a brewery Drinks Union (Ústí nad Labem, Czech Republic) that has a majority of its total beverage alcohol Rechitsa Brewery (Rechitsa, Belarus) volume in beers whose flavour derives from tradi- Eichhof Brewery (Lucerne, Switzerland) tional or innovative brewing ingredients and their 2009 United Breweries Limited and Asia Pacific fermentation” [9, 10]. Breweries (Mumbai, India) There are three main categories of brewers 2010 FEMSA (Monterrey, Mexico) producing craft beer – brewpub, microbrewery 2011 Bedele and Harar (Harar, Ethiopia) and regional craft brewery [9, 10]. Generally, craft 2015 Lasko Brewery (Lasko, Croatia) brewers differentiate themselves as small, inde- Lagunitas Brewing Company (Petaluma, pendent brands and focus on the use of traditional California, USA) or innovative brewing techniques and ingredients 2017 Brasil Kirin Company (Sao Paolo, Brazil) [2]. Company bought by Heineken together with Carlsberg The popularity of craft beer has significantly (Copenhagen, Denmark).
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Tab. 3. Overview of Carlsberg One possibility is that craft brands offer a variety acquisitions and mergers [3, 5, 6]. on the market, which was trending towards Year Acquired or merged companies commoditization. Major advantages in costs of 1966 Leon Brewery (Photiades Breweries, Nicosia, production held by large producers have reduced Cyprus) the number of firms in the industry, as well as the 1970 Tuborg Breweries (Hellerup, Denmark) number of offerings available to consumers. Brew- 1972 Sinebrychoff (Helsinki, Finland) ing industry is a very interesting example of an in- 1988 Hannen Brewery (Krefeld, Germany) dustry in which a decades-long trend towards con- 1996 Falcon Brewery (Falkenberg, Sweden) solidation of production held in hands of a small 1998 Tetley Brewery (Leeds, United Kingdom) number of producers of uniform and undifferen- 1999 Svyturys-Utenos Alus (Vilnius, Lithuania) tiated products was in place, and then reversed [13]. Until the late mid- to late-nineteenth centu- 2000 Feldschlösschen (Rheinfelden, Switzerland) ry, most brewers were locally based and privately 2001 Carlsberg (Copenhagen, Denmark) + Orkla (Orkla, Norway) + Pripps (Gothenburg, Sweden) owned. National, let alone global brands, barely + Falcon (Falkenberg, Sweden) existed. The evolution of the industry into the glo- 2002 Shumensko Brewery (Shumen, Bulgaria) bal behemoth it is today attracted considerable Irbis brewery (Almaty, Kazakhstan) attention, first amongst business and economic Industrie Poretti (Milan, Italy) historians and, subsequently, by scholars interest- 2003 Ak-Nar Brewery (Almaty Kazakhstan) ed in industrial economics and strategic manage- Celarevo Brewery (Bačka Palanka, Serbia) ment [14]. Beer brewed by these large compa- nies is very homogenous. The homogenization of 2004 Pirinsko Brewery (Pirin, Bulgaria) macro-beer is one of the reasons for the success of Panonska Brewery (Koprivnica, Croatia) craft (and imported) beer [5]. Holsten Brewery (Hamburg Germany) People’s interests in food and drink are Ringnes (Oslo, Norway) changing. Craft beer consumers do not drink the Okocim (Brzesko, Poland) + Bosman (Szczecin, product for its functional attributes. They spend Poland) + Kasztelan (Warszawa, Poland) + Piast Brewery (Wrocław, Poland) more money than traditional beer drinkers. The 2005 Olivaria Brewery (Minsk, Belarus) main motivation for drinking craft beer seems to 2006 South Asia Breweries (Paonta Sahib, India) be the quest for authenticity. Motivations to drink 2008 Baltika Breweries (St. Petersburg, Russia) craft beer are generated by three important fac- tors: desire for more knowledge, new taste expe- Aldaris Brewery (Riga, Latvia) rience, and move away from the mainstream beer Saku Brewery (Saku, Estonia) consumption [12]. Another reason for increas- Kronenbourg (Strasbourg, France) ing craft beer consumption is a variety of special Scottish and Newcastle (Edinburgh, United flavours, which increase the probability of perceiv- Kingdom)* ing craft beer with higher quality than industrial 2013 Chongqing Beer Group (Chongqing, China) beer [15]. Craft beer is perceived as a high-quali- 2014 Olympic Brewery (Thessaloniki, Greece) ty product, especially for men [12]. According to Company bought by Carlsberg together with Heineken Tremblay, Iwasaki and Tremblay [16], factors (Amsterdam, the Netherlands). such as changes in local demand conditions and a more favourable regulatory environment have created profitable niches in many local markets for craft beer. Another reason is a continuous growth Craft beer customers are usually men with of personal income. A 2009 survey of beer drinkers a high income level [12]. The significant growth found that high-income consumers are more like- in this segment was recorded especially in North ly to buy craft beer [17]. For these consumers, America (12 %) and Western Europe (14 %). a growing personal income increases demand There were more than 10 000 craft breweries in for craft beer. In addition, growth in personal in- 2015 in the world with 86 % of them located in come increases consumer demand for variety [18]. North America and Europe. Craft beer became Gruenewald et al. [19] also showed that greater the key driver of a new product development in income is associated with more purchases of al- Western Europe showing a double-digit expansion cohol at on-premise places (e.g. brewpubs) and in the number of craft breweries since 2011. at higher prices. The increase in consumption Analysis of current scientific literature regard- of craft beer is primarily driven by younger con ing the beer industry gives a possible explanation sumers [20]. As more youngsters are reaching le- for the recent growth of the craft beer segment. gal drinking age, it can be expected that the craft
66 Development of beer industry and craft beer expansion beer segment will grow. Craft beer producers are stable number of breweries (United Kingdom), challenging large beer producers and changing the – L shape – characterized by stabilization of beer industry and market structure with higher the number of breweries after its decreasing diversity of beer. Question of the quality of craft (Japan). beer is usually connected with inputs and the tech- nology used in the brewing process. Craft brewer- ies often use the latest technologies comparable to Materials and methods those used by big brewing companies. The research team conducted structured inter- Economic drivers of craft beer revolution views, using focus groups approach, to gather in- Brewing industry is characterized by monopo- formation about opinions of craft brewery owners listic competition as a market structure with large on the development of the brewing industry in number of competitors, specific product differen- Slovakia, as well as about their perspectives and tiation, and with free entry and exit. Product dif- new ideas for further diversification. The research ferentiation reduces the intensity of competition was focused on collecting information that would between firms and therefore firms can acquire be used for description and analysis of the current some market share. Specific and differentiated state of affairs in the brewing industry with focus consumer preferences in the brewing sector lead on the craft beer segment. to differentiation. The interviewed respondents were 20 owners Monopolistically competitive firms try to maxi- of craft breweries in Slovakia, out of the total mize profit or minimize losses by producing quan- number of 66 that existed at that time. The survey tity of production where marginal revenues equal particularly covered the following topics: marginal costs. Economic profit in the industry is – factors affecting demand for craft beer, an attractive motive for other firms outside the in- – the impact of traditional beer market charac- dustry to get involved in the same industry and mo- terized by homogenous products on demand tivating them to enter. This fact reduces the profit for differentiated craft beer in Slovakia, of the incumbent firms inside the industry, which – types of beer produced by craft breweries, results in economic pressure causing inefficient – motivation behind starting a craft brewery, firms to leave [21]. The remaining firms earn nor- – factors influencing the supply of craft beer, mal profit. Therefore, the marginal revenues are – availability of inputs, know-how for craft beer equal to marginal costs in the point where market production, price equates to average total costs and long-run – regulation of craft beer production, zero-profit equilibrium is established. If firms in – governmental support for craft beer produc- the brewing industry want to maximize profit, they tion, should cut average total costs and operate with excess capacity to the point where average total costs are equal to marginal costs [21]. On the demand side, a growing number of Tab. 4. Characteristics of the craft breweries owners craft breweries parallels with the rising consumer which were interviewed. demand for diversity. Consumers are becoming more interested in brands that are offering an al- Production per year ternative to macroproducers with international Less than 100 hl 15.8 % presence and widespread distribution. Many attri 101–500 hl 26.3 % bute this change to the increased buying power 501–1 000 hl 21.5 % of millennials, individuals born between 1981 and Over 1 000 hl 36.8 % 1997, who are more conscious of what they are Type of beer produced consuming and the brands they are supporting compared to previous generations [22]. Only lagers 10.5 % Development of breweries following craft beer Only ales 15.8 % revolution can be characterized by three main Both 73.7 % patterns [23]: Share of lager production – U shape – characterized by a steep decrease of Less than 25 % 42.1 % number of breweries followed by its steep in- crease (can be observed in Belgium and Ger- 25–50 % 15.8 % many), 51–75 % 26.3 % – J shape – characterized by increase of the Over 75 % 15.8 %
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– vertical and horizontal co-operation in micro- – Question 5: Are there enough professionals in brewing. Slovakia to produce craft beer? Do you per sonally (or relevant person in your brewery) Characteristics of the craft breweries, owners have previous experience in beer production? of which were interviewed, are presented in Tab. 4. – Question 6: Why did you decide to set up a mi- The advantage of our approach was the possi- crobrewery? bility to understand ideas shaping the development – Question 7: What is your opinion on the rela- of craft beer industry, getting to know the expecta- tion of the government and microbreweries? tions of major actors, their opinions, interests and – Question 8: Do you co-operate with other mi- previous experience [24]. This approach is suitable crobreweries? for examining the behaviour of the focus group as – Question 9: Do you think that there is still mar- a whole, for ascertaining the differences in per- ket space for more microbreweries? ceptions between different categories in the focus group and for searching the ways how to overcome various discrepancies. The method used consisted Results and discussion in the following three stages [25]: – planning the study by means of the Focus Brewing industry in Slovakia: structural changes, Group research method, consumption and trade – implementing the interview itself, At the beginning of twentieth century, there – analysing the results and creating the research were over 40 breweries in Slovakia. Stein brewery report. (Bratislava, Slovakia) and Bavernebel (Košice, Slovakia) were the largest, however, their com- It is a useful method for understanding the be- bined production was less than 20 % of the produc- haviour, needs and interests. During the discus- tion of Pilsner Urquell (Plzeň, Czech Republic) sion and from the reactions of the group members, at that time. After the World War II, 12 existing we could find out preferences, experience and breweries were nationalized and re-organized into opinions. The interpretation can also facilitate un- 3 state-owned companies. In 1953, the number of derstanding the reasons behind actions and deci- breweries reached 8. Later, because of steadily sions. increasing beer consumption, new breweries were The key questions in our focus group research launched. Some of them were established after re- were: construction and rebuilding of the formerly active – Question 1: Does the situation in the beer mar- breweries in Bratislava, Nitra, Poprad, Bytča, Mi- ket influence the type of beer you produce? chalovce, Martin and Košice. Some breweries were – Question 2: Which factors determine the de- built in cities where there was no brewery in the mand for craft beer? past (Topolčany in 1964, Rimavská Sobota in 1966, – Question 3: Do customers react sensitive to the Veľký Šariš in 1967, Hurbanovo in 1969, Banská change in the price of your beer? Bystrica in 1971 and Trnava in 1974). Data on the – Question 4: Are the ingredients for brewing development of numbers of breweries in Czecho- craft beer available? Which ingredients are im- slovakia or Slovakia are presented in Fig. 1. ported and from where? Beer production in Slovakia was centrally
80 70 e s i 60 56 e r 50 e w
b r 44 40 o f 40 38
b e r 30
u m 25 N 19 20 15 13 14 14 13 15 10 11 12 12 12 12 10 10 8 9 9 9 8 7 3 0 1910 1920 1950 1953 1965 1966 1967 1969 1971 1974 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year Fig. 1. Total number of breweries in Czechoslovakia or Slovakia [24].
68 Development of beer industry and craft beer expansion
5500
5000 4860 4450 ] 4320 4357 h l 4500 4280 4670 4178
3 4141 4050 3997 3959 3970 1 0 [ 4000 4218 3874
e 3609 3720 3963 u m 3794 o l 3500 3683 V 3553 3264 3000 3112 3123 3206 2883 Beer consumption 2500 2648 Beer production 2434 2000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Year Fig. 2. Development of beer production and consumption in Slovakia in 2003–2016 [1].
planned during the „socialist” period (1948–1989). Slovak breweries led to an increase in efficiency of Local breweries were supplying beer to their sur- the sector because of the inflow of international rounding areas, beer was therefore a regional know-how and technology, improving vertical product. Some brands (e.g. Pilsner Urquell) were coordination in the supply chain as well as utiliza- distributed in the whole territory of Czechoslo- tion of the economy of scale [27]. Internationa vakia and internationally. However, there was no lization of the Slovakian beer market affected the or weak competition between the beer brands or quality of beer, too. Traditional local beer was re- breweries and, therefore, consumers did consume placed by homogeneous beer produced by large mainly beer produced in their region. The num- corporations. The technology of beer production ber of breweries and their location was decided by was adjusted in order to achieve shorter produc- central planners and so was the quantity of beer tion cycles (the processes of fermentation and as well as export and import of beer. During this after fermentation were joined). This lead to stan- period, almost no beer was imported to Czecho- dardization of quality that, on one hand, caused slovakia. Concerning the beer types, the only elimination of the beer of inferior quality but, on produced and consumed beer in that period were the other hand, the product differentiation was lagers. However, lagers produced during that pe- also reduced. riod were more differentiated in taste and quality Privatization by multinationals Heineken and than nowadays. SAB Miller consolidated the brewing industry Transition from socialism to democracy and in Slovakia. Production of local beer brands pro- market economy had a strong impact on the beer duced during the „socialist” era in different towns market in Slovakia. Breweries were privatized like Bratislava, Nitra, Trnava, Poprad, Topoľčany and later on taken over by multinational corpo- and Martin was transferred to only two locations rations Heineken and SABMiller (later merged in Hurbanovo and Veľký Šariš. with AB InBev), which nowadays dominate the Beer production in Slovakia has been decreas- beer industry [26]. Heineken bought the biggest ing recently (Fig. 2) [1]. In 2003, 4 670 thousand Slovak brewery Zlatý Bažant (Hurbanovo, Slo- hectolitres of beer were produced, while the pro- vakia) in 1995, followed by Corgoň (Nitra, Slova- duction in 2016 reached 2 312 thousand hectolitres kia) in 1997, Martiner (Martin, Slovakia) in 2003 (reduction by 49 %). Consumption of beer de- and Gemer (Rimavská Sobota, Slovakia) in 2006. clined over the same period by 18 % [1]. SABMiller bought brewery Topvar (Topoľčany, The increasing price of beer is one of the main Slovakia) in 2005 and Šariš (Veľký Šariš, Slovakia) reasons for the decrease in overall beer consump- in 2007. Due to the biggest merger in the history tion. The price is heavily influenced by increasing (when AB InBev took over SABMiller in 2016), excise duties. Craft breweries consider taxation AB InBev had to sell some Central and Eastern of their products unfair and, according to them, European assets to Japan’s Asahi Group. In Slo- this is due to the influence of large breweries on vakia, this led to the change of name of Topvar policy makers. There are only two excise duty Breweries, which included Topvar and Šariš, to rates: lower rate for the production level below Pilsner Urquell Slovakia. 200 000 hl (basic rate 2.65 EUR per hectolitre and Privatization and foreign direct investment into per volume percent of the actual alcohol content)
69 Pokrivčák, J. et al. J. Food Nutr. Res., Vol. 58, 2019, pp. 63–74
100 ] l [
a t i 90.0 p a
c 90
r e p 82.4 n
o 80.7
i 80.0 t 79.3 80 77.4 m p 76.0 u 75.0 s 74.0 n 72.0 72.0 73.0 73.0 o c
70.0 r e
e 70 B
60 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Year Fig. 3. Development of beer consumption per capita in Slovakia in 2003–2016 [1].
per year, and higher rate (3.59 EUR per hectoli- Slovakia is a beer importing country. The beer tre and per volume percent of actual alcohol con- consumption is higher than beer production. Beer tent) for production above that threshold [28]. imports have been increasing from 350 thousand However, many craft breweries produce less than hectolitres in 2003 to 1 509 thousand hectolitres 1 000 hl per year only. Furthermore, excise duty in 2016 [1]. The majority of the imported beer is for wine is zero, which discriminates beer indus- from Czech Republic, followed by the Nether try vis-à-vis wine industry. Opposition of large lands, Ireland, Germany and Belgium. However, breweries blocks an agreement between Associa- imports from Czech Republic cover 90 % of tion of Craft Breweries (Banská Bystrica, Slova- overall beer imports to Slovakia [1]. Beer export kia) and the government that would lead to lower rates decreased from 132 thousand hectolitres excise tax rates for craft beers. in 2003 to 127 thousand hectolitres in 2016 [1]. Slovaks are changing their drinking habits. In However, there was a period (2006–2009) when 2003 they consumed a half of total beer consump- there was virtually no export at all [1]. tion in pubs and restaurants and half at home. Almost all beer consumed in Slovakia, and all Nowadays they prefer beer consumption at home beer produced, is of lager type. There is no tradi- (66 %) compared to beer consumption in pubs and tion in the consumption and production of other restaurants (34 %) [1]. Main reason is the differ- types of beer like ales or stouts. With rising in- ent price of draught and bottled beer due to rising comes and the globalization of the Slovakian labour costs. economy, differentiated beer started to be import- Other reasons for decreasing beer consumption ed but the share of non-lager beers on total con- include healthier life styles of many Slovaks, who sumption remains negligible. tend to prefer non-alcoholic drinks to alcoholic beverages, and changing preferences of alcohol Reasons behind the craft beer revolution consumers, who started to substitute wine for beer. in Slovakia However, Slovakia still belongs to beer-drinking Driven by economy of scale, beer in Slovakia nations. Between 2000–2006, Slovakia was in the became more uniform and homogenous despite top 15 countries with the highest beer consump- maintaining of different historical beer brands. tion per capita in the world [1]. Consumption of The consumption of beer, similar to consumption beer per capita reached 90 l in 2003. Recently, the of food and drinks, generally is connected with consumption decreased to 73 l per capita in 2016 emotions and patriotism [27, 29]. People like to (Fig. 3) [1]. Wine consumption was prompted by taste local food and drinks. When local beer disap- liberalization of the market that occurred with the peared with the consolidation of the beer market, economic reforms in the 1990s and especially with the market niche was identified by entrepreneurs the EU accession in 2004, which allowed imports who launched the craft beer revolution. As a sub- of various wines from EU and other parts of the stitute of former local beer, new craft breweries, world. This led to changes in the structure of al- craft beer and brewpubs grew up. Nowadays cohol consumption in Slovakia in last years. Beer (2017), out of the total number of 70 breweries, consumption has fallen while consumption of wine there are 66 craft breweries and/or brewpubs in and spirits increased in recent years [1]. Slovakia. The majority of the craft breweries is lo-
70 Development of beer industry and craft beer expansion cated in Bratislava district (16), followed by Žilina imported beers were of a lager type, too. More district (11), Banská Bystrica district (9), Prešov affluent consumers demand different varieties of district (8), Trnava district (8), Košice district (7), beer (IPA, APA, stouts, bitters). Trenčín district (6) and Nitra district (5). There Diversity of craft beer is a result of the differ- are several flying breweries which brew beer in ences in production technologies and variations the premises of other breweries, too. In Slovakia, in inputs. Apart from pale ales, Slovakian craft there is still room for new craft breweries, accord- breweries are brewing stouts and porters, as well ing to the surveyed owners and managers of craft as bitters. Inputs vary depending on the type of breweries. It is expected that the number of craft beer. There are four main inputs needed for beer breweries will further expand. About 6 new craft production: water, malt, hops and yeast. Based breweries are opened each year. Since 2009, there on the survey, the vast majority of inputs is im- have been 56 new craft breweries established. ported except for water. Only some of the craft According to current craft brewers, launching breweries are using domestic malt from national a craft brewery is still considered as a good invest- malting companies. However, a lot of hops is im- ment opportunity [30, 31]. The owners of Slovak ported from Czech Republic, Germany and other craft breweries expect that the demand for craft countries. Hops for production of ales are mostly beer will rise in the future prompted by increas- imported from United Kingdom, Australia, USA, ing income of consumers and the rising demand the Netherlands and Belgium. Yeasts are import- for differentiated high quality products. In the ed, as well. Generally, even if 80 % of the inputs is regions with higher unemployment and lower in- imported, the availability is not an issue and none come (mainly in Eastern Slovakia), the growth of of the interviewed brewers reported problems. craft breweries is currently slow as the demand for The brewery equipment is another source higher quality products is weaker there [32]. of craft beer diversity. There is a traditional Lower prices are decreasing the earnings of Slovakian producer of brewery equipment estab- craft breweries in relatively poor regions. Regional lished in 1972. The former state-owned company income is the most important factor influencing was privatized and nowadays exports 90 % of its the demand for craft beer. There are significant production. The company was historically focused differences in prices and quantity of sold craft beer on equipment for large breweries but with the between the high-income region (Western part of rising number of craft breweries it started to pro- Slovakia close to the capital, Bratislava) and low- duce craft brewery equipment as well. However, income regions (Eastern and Northern Slovakia). the majority of the craft breweries involved in this Out of 51 craft breweries in Slovakia, 14 are lo- study imported their brewery equipment. Initially, cated in the city of Bratislava. Craft beer prices craft breweries imported “second hand” equip- are higher in Bratislava and craft breweries in ment from Czech Republic, Germany and other Bratislava focus on a higher quality and more ex- countries. Nowadays, they purchase specialized pensive types of craft beer as India Pale Ale (IPA), high-quality equipment. American Pale Ale (APA) or stouts in contrast to There are three options to finance the pur- craft breweries in Eastern Slovakia, which focus chase of brewery equipment: own capital, bank on lagers. loans and investment grants. EU investment Each craft brewery in Slovakia has to employ grants were provided within Slovak Rural De- a qualified brewer who must have accomplished velopment Programme 2007–2013 in measure a certified training in brewing completed with an 3.1.1, and Slovak Rural Development Programme examination. Taking training course is costly and 2014–2020 in measure 6.1.4. The grants covered time-consuming, which hinders the development up to 50 % of the investment. However, majority of craft breweries in Slovakia. On the other hand, of craft breweries is financed in form of own capi- this certification process ensures that all health tal and bank loans. Some of the craft brewers are and sanitation requirements to protect the public managers and owners of businesses. Their par- are fulfilled. Most craft breweries complain that tial objective was also to diversify their portfolio. the certification process is unnecessarily long and These people financed their investment in craft bureaucratic, however. brewing with their own capital, while others had to All interviewed owners and managers of craft use a combination of own capital and bank loans. breweries also confirmed our assumption that Majority of owners of craft breweries had their decision to start a craft brewery was strong- not previously worked in a large brewery. Many ly and positively affected by the lack of diver- of current owners of craft breweries in Slovakia sity on the supply side in the beer market. Large were homebrewers. However, there are some ex- breweries produce only lagers and most of the ceptions. The former owner of the third biggest
71 Pokrivčák, J. et al. J. Food Nutr. Res., Vol. 58, 2019, pp. 63–74 brewery in Slovakia opened his own craft brewery, spirits, as well. – bureaucracy, The demand for craft beer is driven by the lack – lack of qualified brewers, of diversity in beer produced by large breweries. – taxation policy (zero excise duty on wine in Slo- Historically, in Slovakia in 1989 the production of vakia discriminates the whole beer industry). beer was much more regional. Although all beer produced was lager, it was more differentiated with Interviewed owners and managers of craft respect to taste. The globalization led to mergers breweries confirmed that their decision to launch and acquisitions in the brewing industry and to ho- a craft brewery was strongly supported by a lack mogenization of the product. Craft breweries offer of beer diversity offered on the market. Different the diversity consumers are looking for. Demand styles of beer require different production tech for diversity is reflected in the cooperation of craft nologies and variations in inputs. The vast major- breweries in joint marketing of their products and ity of inputs in Slovakia are imported. Hops are selling each other’s products. Craft breweries in usually imported from Czech Republic, Germany, Slovakia also developed cooperation in transfer of United Kingdom, Australia, USA, Netherlands, knowledge and know-how, as well as joint public New Zealand or Belgium. The yeast is import- relations activities. ed according to beer type from USA, Belgium, Changing drinking patterns and life styles of Czech Republic, Germany or United Kingdom. Slovak consumers had a significant impact on Malt is obtained from a domestic malt producer craft breweries. Slovak consumers drink less beer apart from the special malt needed for production but demand higher quality. The homogenous beer of special beer styles like stouts or porters. produced by large breweries is substituted by wine The launch of majority of craft breweries is fi- and craft beer. This change in life styles is reflect- nanced by a combination of own capital and bank ed in the national media, where craft beer receives loans. significant attention relative to its share on total Considering brewing industry consolidation, alcohol consumption in Slovakia. the expansion of craft breweries in Slovakia seems The results are in line with earlier studies [33], to be a logical consequence similarly as earlier ex- which identified and described similar factors in- pansions of craft beer in many countries in Europe fluencing the craft beer expansion in different and North America. Nowadays, there are more countries but there are differences due to differ- than 70 craft breweries operating in brewing in- ent history of the country, income levels, regional dustry and several new are under construction. differences, beer drinking tradition and product There is still a market for new craft breweries substitutes. and it is expected that there will be over 100 craft breweries active by 2020. There are some limitations to our research. Conclusions Even if the number of interviewed craft brewery owners or managers is representative, the margin To the best of our knowledge, there is no study of error should be further decreased by the in- dealing with the drivers of expansion of craft creased number of respondents. Furthermore, the breweries in Slovakia. Using structured inter- majority of craft breweries that took part in the view, we were able to identify some of the reasons survey are operating in the western and central affecting craft beer expansion in Slovakia, which parts of Slovakia. Therefore, we allow for some re- are: gional specific phenomena, which should be close- – rising demand for diversified beer and differ- ly examined in the future, as craft breweries in the ent beer styles, eastern part of Slovakia are characterized by more – increase in income, which has a positive effect lager-oriented production when compared to craft on the demand for differentiated and high- breweries operating in Bratislava region. quality products, – craft brewery business is considered to be a good investment, Acknowledgements This work was supported by the Slovak Research and – availability of support schemes (Slovak Rural Development Agency under the contract APVV-15-0552. Development Programme). It was also supported by the Science and Fund Agency of Ministry of Education, Science, Research and Sports On the other hand, there are also some barriers under the contract VEGA-1/0930/15. The authors further for expansion: acknowledge the financial support from the Czech – rising consumption of substitutes like wine and Science Foundation (GACR) (Grant No. 16-02760S).
72 Development of beer industry and craft beer expansion
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