Real ale growth creates tricky brew

Independent breweries are one of Scotland's greatest manufacturing success stories of the last decade and the sector is currently enjoying double digit sales growth despite the price of products rising and a squeeze on household budgets.

New production sites are opening almost every month and there are now more than four times as many of them in Scotland than in 1970.

But with new micro breweries opening on a regular basis, and several more understood to be in the pipeline, there are concerns that the market is fast reaching saturation point as the number of outlets that sell real ale are in limited supply.

Fergus Clark, managing director of Perth's Inveralmond brewery and representative of the Society of Independent Brewers in Scotland, warned that while the sector was relatively healthy at the moment he did not believe that it could sustain many more market entrants in the short term.

"We've just had a couple more breweries apply for membership of the association and that is taking us close to 60. But although the market for real ale is growing it is still relatively small in Scotland and the number of free trade outlets able to sell whatever beer they want is limited," he pointed out.

Angus MacRuary of the Isle of Skye Brewery agrees the current growth rates can't be sustained.

"A few years ago it was relatively easy to find new outlets to sell real ale to but the market has become much more competitive and there are only so many ways you can cut the cake even if it is an expanding one," he said.

While the net number of breweries has risen in Scotland, a number have fallen by the wayside in recent years, and MacRuary said there was speculation in the industry that "one or two are struggling right now".

For some of the remote brewers in particular, increases in fuel have meant transport costs in getting their products to the market have risen significantly and margins are under pressure.

Norman Sinclair, managing director of one of Scotland's oldest micro-brewers, Orkney, admitted that competition is getting tougher but is hopeful that more customers will switch to locally brewed ales.

"Yes, It is starting to get very competitive out there," he said. "But everyone is still buzzing about real ale at the moment and new customers are switching to it all the time which can only be good for the industry."

Although the growth of real ale is a trend that has been seen throughout the UK, it has been most dramatic in Scotland where it previously struggled against the dominance of lager and spirits.

The Campaign for Real Ale's latest annual Cask Report identified what it described as of "incredible growth north of the Border" in sales of cask ale last year.

The report said: "Although it's growing from a small base, and is still proportionally smaller than any other region, 31 per cent growth in a year is an undeniable testament to Scotland's burgeoning craft brewing industry."

The boom has been fuelled in part by tax changes known as the Small Breweries' Relief introduced by Gordon Brown when he was still Chancellor in 2002.

Breweries that produce fewer than 60,000 hectolitres of beer a year, about ten million pints, qualify for a discount on the amount of duty they pay. Those producing fewer than 880,000 pints qualify for a further discount. But while the tax changes have prompted a wave of investment in new breweries, there has also been a sea-change in perception of real ale with drinkers increasingly turning away from mass-produced brands and looking for locally produced offerings.