Thursday, August 18, 2022

Grower opportunity as craft beer market expands

Growing export demand for New Zealand craft beer is creating a new opportunity for local cropping farmers.

Deep Creek Brewing co-founder Paul Brown says current production constraints have prevented the company from meeting global demand for its Kiwi craft beer.

Growing export demand for New Zealand craft beer is creating a new opportunity for local cropping farmers.

One of the country’s largest craft breweries, Deep Creek Brewing, is set to increase annual production by more than five million litres to meet surging export and local demand.

This is up 150% from just two million litres at the start of this year.

The move is also set to be a boost for NZ cropping farmers, with significantly more barley and hops needed for the new production volume.

Deep Creek Brewing co-founder Paul Brown says the company has more than doubled in size over the past year and increased the number of export markets to past 10, with international sales now accounting for 55% of the company’s multimillion-dollar revenue.

The growth in craft beer exports is also a boost for growers, requiring 1120 tonnes of locally sourced barley and 35t of hops, to produce the increased product volume.

“Kiwi craft beer is growing in popularity on the world stage, particularly in a number of key Asian markets,” Brown said.

“This is being driven, in part, by a halo effect from the success of NZ wines.”

Deep Creek Brewing now has a foothold presence in China, Thailand, Taiwan, Singapore and Malaysia, and entered the Japanese market last year. In the coming weeks it will send its first shipment to Hong Kong.

The Asian craft market is forecast to grow by 22% per annum and reach more than $65 billion in five years as discretionary income in the region increases.

“The feedback we have been getting is that our NZ-made range is well-positioned to take advantage of this surge in growth,” he said.

He says their new locally designed brewery will allow them to produce seven million litres of craft beer each year, an annual manufacturing volume they are forecasting to reach within the next three years.

The million-dollar state-of-the-art brewery is completing its final stages of fabrication and is expected to be online ahead of the coming summer, despite significant delays with shipping.

“While we have seen significant revenue growth over the past year, current production constraints have prevented us from meeting global demand for our product,” he said. 

“We’re currently scaling up our staff numbers to accommodate the increase in domestic and export order volumes and will also be able to expand our contract manufacturing as a result of the capital investment.”

The logistics delays caused by the pandemic have seen the cost of shipping the brewery to NZ balloon 200% to more than $100,000, however, it’s expected to have it fully operational ahead of the end of the peak Southern Hemisphere season in January.

Brown says the beer industry has changed significantly since they began operating 10 years ago.

“When we first started there were 60 breweries of varying sizes in NZ, now there are in excess of 200,” he said.

“This level of competition and the expectations of consumers is helping us produce better quality beer, which in turn is helping the industry succeed in international markets.”

As well as the increased capacity the new million-dollar brewery investment will offer, Brown says the company is already scouting new locations for a purpose-built facility to accommodate projected growth.

Federated Farmers arable chair Colin Hurst says growers are always open to new crop opportunities.

“With the right market signals, we are definitely up for it,” Hurst said.

But competition for land is currently hot.

“Contracts are coming out earlier and earlier and we are getting some good pricing offers already for next season, with both rye and turf grasses looking at a 25% increase,” he said.

Hurst says forward pricing on feed wheats are improved, with arable farmers also doing very well with livestock.

“Lamb finishing is another component in the competition mix now, with the good pricing this season looking to hold up for a bit yet,” he said.

Milling wheat is the downside, with its ongoing procurement issues.

“There’s 11,000 tonnes of milling wheat gone to the feed industry this season – that’s sad, that’s really sad,” he said.

While malting barley is a more complicated crop to grow, he says farmers will be keen to help the demand with more barley for more beer.

“It takes a bit more precision to get the proteins right as they don’t like cloudy beer but we have farmers already growing good malting barley and I expect there will be keen uptake for more,” he said.

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