Why the rush to export?

By BeertownNZ Sat, 05 Sep 2015 National

The recent report into the craft beer industry published by ANZ showed 33% of craft brewers are exporting and another 50% are aspiring to.

Given the huge growth in domestic sales, I’m surprised it’s so many. I’m also sceptical that it’s always a smart business decision.

Taking beer across borders is always an expensive exercise. Heads of State have long seen alcohol as a taxable good, with more compliance costs, licencing and duties than other imports, as its prominence in duty-free stores proves.

Add the costs and complications of long distance shipping in small amounts, and the local market (42% annual growth in off-licence sales) looks big, close and simple.

ANZ described some of the difficulties exporters face: “Taking New Zealand craft beer to large offshore markets is not without its challenges. For those brewing in New Zealand and exporting there are notable freight costs relative to the value of the beer; if beer is going to Asia or beyond then there are high air temperatures that the beer will be exposed to; there is the time it spends in transit and many other costs such as tax and distributor margins. These challenges collectively chew into margin and potentially impact product quality.”

The report also looked at the alternative strategy of taking your favourite New Zealand ingredients and brewing overseas: “With lower costs and quicker distribution to the market, the strategy has potential. Some brewers say offshore brewing may have an impact on product marketability given it loses the 'brewed in New Zealand’ badge.”

New Zealand’s craft beer scene has been very innovative over the past eight years, developing uniquely indigenous styles. These styles emphasise the fresh and unique characteristics of New Zealand hops, rather than being designed to travel, and are quite sensitive to temperature fluctuations and any delays in transit. We love because they are big, hoppy, and because we taste them fresh. There are many beers I love that I would not spend money on if they were a year old.

The temptation to export is obviously big, and there is encouragement and support from Trade and Enterprise to do so. But to me it makes little sense to export, unless a brewery is producing 1 million L each year and honestly believes it cannot sell any more in New Zealand.

Far better to look at New Zealand cities outside your own and sell to them. The product will be fresh, there’s no new licences needed, you kinda understand the tax regime, and customer feedback will be swift and honest. For brewers outside Auckland, breaking into this community should be a prerequisite to any export plans.

The worst thing that can happen is that you have a practice run in distributing and promoting your beer to a new Beertown. The best thing – you find a Beertown full of folks who like your beer and want more of it. Perhaps at the expense of a local brewer who is busy overseas.

Don’t leave town till you’ve seen the country.

By BeertownNZ Sat, 05 Sep 2015 National