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Is craft beer losing its fizz?

How Singapore's small-batch brewers are holding up in a market dominated by big brands

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IS CRAFT BEER LOSING ITS FIZZ? How Singapore's small-batch brewers are holding up in a market dominated by big brands.

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IS CRAFT BEER LOSING ITS FIZZ? How Singapore's small-batch brewers are holding up in a market dominated by big brands.

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Off Day Beer Company co-founders (from left) Casey Choo, Jasmin Wong, Daryl Yeap, Kasster Soh, and Kevin Ngan are no strangers to the craft beer scene – they have stakes in businesses ranging from bars to breweries. Off Day’s core range of beer targets the everyday beer drinker and aims to take one away from the daily grind.

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Off Day Beer.

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Pink Blossoms Brewing founder Teo Hong Han spent years crunching numbers as an accountant before giving it all up to pursue his love for beer. The beers celebrate the beauty in life through their big, bold flavours.

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Pink Blossoms Brewing.

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Rahul Immandira (left) and Heetesh Alwani, co-founders of Binjai Brew, first started brewing beer in their residential hall in Nanyang Technological University (NTU). Its core range of beer includes Sol Mate, a French saison.

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Binjai Brew.

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Co-owners of Brewerkz are brothers (from left) Tan Wee Tuck, Wee Lee and Wee Han, who started the business in 1997 – making it one of Singapore’s longest-running craft brewery. Brewerkz had produced limited edition craft beers for events such as Christmas Wonderland and the Singapore Airshow.

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Brewerkz.

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After several years of homebrewing, Brewlander founder John Wei (above) finally took the leap of faith, giving up his corporate job to carve a career out of brewing beer. Brewlander took a gamble by brewing with the less conventional wild yeast to produce one of its best-selling beers called Love – a wild India Pale Ale (IPA).

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Brewlander.

THINK Thai Mango Salad sour beer with a hint of spice and savoury notes. Or perhaps a rich, decadent black forest stout. The pursuit of exotic, flavourful beers has propelled the global craft beer market over the past two decades, pushing it past its "indie" niche to a saturated stage with big breweries moving in. In Singapore, independent small-batch brewers have risen to the challenge, and now produce over 20 local craft beer brands, up from around a dozen some five years ago, according to market players. While there is a growing appreciation for craft beer as people seek novel and more premium flavours, the market is vexed by stiff competition among craft brands and with the cheaper commercial beers that continue to dominate consumer buying.

According to projections by leading statistics portal Statista, revenue in Singapore's beer market will amount to US$1.7 billion in 2020, and it is expected to continue to grow annually by 3 per cent. Craft beer sales, however, account for only around 3 per cent of the beer market. And the nation's most popular beer by far, in terms of total volume sales, remains homegrown Tiger Beer, made by Heineken-owned Asia-Pacific Breweries (APB), one of South-east Asia's biggest brewers.

Despite supply outstripping demand, Singapore continues to see more local brewing aspirants enter the scene. Just in January this year, a new craft brand - Off Day Beer Company - made its debut, and the market can expect more buzz in the coming months as more new players make their entrance.

No small beer

Craft beer is loosely defined across the industry. Simply interpreted, it is beer that is not brewed by a mega-corporation, but rather, by small, independent operations that produce beer in limited quantities. Often, what sets it apart from commercial beer is its emphasis on flavour, quality and innovation.

The global industry has recorded steady growth over the past decade with markets in the United States and Europe gaining more than before in the past five years.

According to latest figures from the Brewer's Association, the US craft beer industry's market share inched up from 12.1 per cent in volume in 2016 to 13.2 per cent in 2018. Craft beer now accounts for around 24.1 per cent of market share in the US beer market in terms of dollar value.

Similarly, Singapore has seen an increase in the number of craft players in recent years. Between 2016 and 2019, close to 10 craft beer brands set up shop here on the back of the global boom in artisanal alcohol.

"Everywhere around the region and everywhere you go, you see craft beer growing, popping up. There's a lot of awareness in the space," says Tan Wee Tuck, executive director of The Brewerkz Company, one of Singapore's longest-running craft beer breweries, set up in 1997.

"So when the local industry has some scale and creates some noise, it suddenly becomes interesting to many," he adds.

Kasster Soh, co-founder of Off Day Beer Company, also attributes the proliferation of craft beer brands here to the influence of foreign markets. "Singaporeans travel a lot and that's when they get exposed to craft beer, so I think it was only a matter of time before craft beer became a thing here," he says.

There were also more craft beer bars surfacing in the last five years, according to industry players. And with new online distribution channels such as RedMart, craft beer started to gain more exposure.

While there has been an uptick in both demand and supply since Off Day co-founder Kevin Ngan first dabbled in the industry, he feels there is still room for improvement in the local market.

"Back then, you can hardly sell an IPA (India Pale Ale). These days everybody would walk into a bar and start to go for IPA and sour beer," says Mr Ngan, who also founded The General Brewing Co, Singapore's first incubation brewery.

"Education has improved quite significantly compared to when it first started but the movement for local craft is still lagging behind," he adds.

Is there a seat at the big boys' table?

Having to compete with commercial breweries is a major hurdle when it comes to capturing a bigger share of consumers.

The chase for flavour in craft beers often comes at a price, with more ingredients required to create flavourful beers that pack a punch.

That's why Teo Hong Han, who set up Pink Blossoms Brewing in 2018, never had the intent to compete with the big breweries in terms of price. As he says, they have the resources to edge out the smaller players if it comes down to a price war.

"A lot of the breweries are small players so they don't have economies of scale. To really drive down costs, you'll have to be of a certain size," he says.

For instance, as part of a Chinese New Year promotion in January, Tiger Beer was able to price its beer as low as S$38.90 per carton or S$1.65 a can - a price craft beer players here cannot match.

Typically, a can of Tiger costs around S$2.20 while a 633ml bottle costs S$5.55. In comparison, craft beers, on average, cost between S$7 and S$12 a can or a bottle in retail outlets.

Local craft beer is also more expensive than popular foreign beers like Asahi that cost S$19.95 for a pack of six in supermarkets, translating to around S$3.30 a can.

"There are already so many players out there putting out price-competitive products, the market does not need another one. There are people out there who can do it a lot more efficiently than we do," says Mr Teo.

Having said that, plans are underway to ramp up production in order to make his craft beer more wallet-friendly for consumers.

"Hopefully, when the capabilities are in place, we can actually produce a bit more and have some cost savings which we can pass on to our customers," he says.

Commercial breweries derive bigger cost savings from their much larger and more efficient production facilities. They brew up to millions of litres a year compared to craft breweries that only brew within the thousands. Smaller players like Binjai Brew produce some 400 litres a month. Meanwhile, Brewlander, one of the bigger craft beer players can brew over 10,000 litres a month. Brewerkz declined to disclose its production volume.

Getting out there

With the market focused on commercial brands, the fight for shelf space is another bugbear for craft players. Brewers point out that price is always a sticking point when it comes to getting their beers out in the market.

"We often get compared to commercial beer. It's difficult to try and explain to retailers that the production process for craft beer is different and we are not trying to get a bigger profit margin," says Rahul Immandira, co-founder of Binjai Brew.

A carton of commercial beer costs a distributor an average of S$48, according to a local beverage distributor. A carton of craft beer would, on average, set a distributor back around 2.5 times more than commercial beer.

Despite the challenges, Off Day's Mr Soh believes that the market has yet to hit a tipping point in terms of venues serving craft beers.

"A lot of retailers are not ready to pay more for craft beer. They have yet to understand that it's not always about the cheapest products. I think the moment it becomes more available and accessible, that's when you start converting more commercial beer drinkers," he adds.

Making things harder for craft brewers is a lack of Singapore representation in bars, according to seasoned brewer John Wei, who founded Brewlander. "The bigger beer companies are able to tie up with bars through exclusive contracts that prevent brands like us to go in," he says.

In such bars, beers like Heineken, Tiger and Guinness dominate the taps and are priced anywhere between S$8 and S$15 for a pint. Even though most craft beer players are able to match these prices, they are often cut off by the exclusive agreements and rebates bigger companies are able to offer bar owners.

Despite this, Mr Wei recognises the need to distribute his beers to the masses through mainstream bars and restaurants from the get-go.

As of 2019, Brewlander beers have made their way to 109 venues including hotels, restaurants, cafes and supermarkets.

The beer geeks

Of course, there exists a very niche group of people that willingly forks out good money for limited edition, small batch, quality brews. But these aficionados - referred to as the geek market - may not necessarily benefit craft players.

"The geeky craft beer market is actually a problem because they go to a craft beer bar to try out different beers," says Brewerkz's Mr Tan.

"It's very bad for producers because consumers only want to taste the beer once. After that, they move on and only come back a few months later," he says.

One of the ways the industry is coping with this is by ensuring that there is an element of novelty beyond their core range.

Pink Blossoms adopts such a strategy - to focus on a clientele that not only falls back on its main range of beers, but is also willing to try new beers they put out once every two weeks.

Beyond the appeal of limited edition beers, most breweries are relying on a loyal bunch to keep their business going. For one, Brewerkz, which has been in the industry for over 20 years, says that it was able to sustain their business because of its regulars.

Beyond a niche clientele

Craft players are also increasingly trying to capture new segments of the market, including converting commercial beer drinkers.

Off Day, for instance, is focusing on a "drinkable and friendly" core range of beers to convert the everyday beer drinkers rather than targeting a small percentage of the market.

Other players tap on events such as music festivals to reach a new audience. "We sold our beers at an indie music event even though we were not really in the music scene, and that really allowed us to reach a whole new group of people," says Binjai Brew's Mr Immandira.

Similarly, Brewerkz has focused on getting their beers out through events such as Christmas Wonderland as well as this year's Singapore Airshow, where it launched a limited edition pale ale brewed specially for the event. Brewerkz' business also benefits from its three full-fledged restaurants.

High cost of business

There is a cost to every business and craft beer players are feeling the squeeze amid high booze taxation, a tight labour market and the high cost of ingredients and rentals for retail spaces.

On top of an annual licence fee of S$8,400 for breweries that brew below 1.8 million litres annually, they are also subject to alcohol duties charged according to the alcohol content.

At S$60 per litre of alcohol, alcohol duty accounts for around S$1.55 for a regular pint of beer with a 5.5 per cent alcohol by volume (ABV).

But a bigger concern is high labour cost and fees from importing raw materials that Singapore does not have for brewing.

The cost of running a brewery here is more prohibitive than in other regions, says Off Day's Mr Ngan. Wages, for instance, cost around 10 times more than in regions such as Cambodia. "In Singapore, it's difficult to hire someone for anything less than S$2,000."

It is also challenging to find talents who are willing to sacrifice more cushy jobs for the beer business, he adds.

For the love of beer

But individuals like Pink Blossoms' Mr Teo, Brewlander's Mr Wei and the brothers who founded Brewerkz all made bold moves to leave the corporate world for the heavy-lifting and back-breaking hard work that goes behind brewing.

Looking ahead, local breweries say that the craft beer scene is still far from saturated and welcome more new entrants.

"So, hopefully we see more local guys taking that leap of faith to join the industry. If we simply wait for the demand, it'd be too late," says Mr Wei.

On the demand side, Brewerkz's Mr Tan says: "The overall market is growing so I think it's up to individual players to figure out how they want to capture the growth, plus how they want to capture a bigger share of the existing market."

With local breweries sparing no effort to develop the market, it looks like the fizz in the craft beer industry hasn't gone flat.