Simone Lawson
The UK has witnessed a surge in the number of small and independent breweries in recent years, with the country's beer industry turning over close to £9bn. Microbreweries, which originated in the UK in the 1970s, are small breweries that produce limited quantities of beer, often with a focus on distinct flavours and creative branding. While the craft beer market is competitive, with high expectations from consumers, microbreweries can benefit from tax relief and a strong sense of community.
| Characteristics | Values |
|---|---|
| Definition | Small brewery that produces a limited quantity of beer, often independently owned |
| Beer production | Up to 15,000 barrels of beer per year |
| Market share | 10% of the UK beer market |
| Beer duty | Applicable for beer with strength above 1.2% ABV |
| Taxation | Eligible for tax relief through the Small Breweries' Relief scheme |
| Ownership | Often a sole proprietorship, but can also be a partnership or limited liability company |
| Business plan | Required, with a focus on understanding the market, financing, and marketing |
| Licenses and permits | Required for selling directly to the public, environmental permits, data processing, and CCTV installation |
| Online presence | Building a website and social media profile is important |
| Packaging | Demand for cans and bottles due to changing consumer behaviour |
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What You'll Learn
Microbrewery business structure
Microbreweries are small breweries that produce a limited amount of beer, often with a focus on speciality beers that have distinct flavours. They are usually independently owned and are known for their enthusiasm and passion for experimenting with different styles of beer, ingredient proportions, and fermentation processes.
Starting a microbrewery business requires a well-informed business plan and a clear understanding of the market trends and expectations of today's drinkers. It is important to note that it is not an industry for quick financial gains, but rather a time-consuming vocation that involves passion, persistence, and a strong sense of community.
When it comes to the business structure, most microbreweries are sole proprietorships, with ownership vested in a single person. However, there is also the option to start a partnership or a limited liability company. To register the business, you will need to choose a name and gather the necessary documents. If you decide to form a limited liability company, appointing a director and shareholder becomes necessary.
In terms of legal obligations and licenses, microbreweries need to register with HMRC as a brewer and obtain a certificate to brew if their beer strength exceeds 1.2% ABV. They can benefit from smaller rates and tax relief through the Small Breweries' Relief scheme. Additionally, a premises license is required if you plan to sell beer directly to the public, and staff serving alcohol need to hold personal licenses. Other permits to consider include registration as a beer packager, notifying the ICO for processing personal data, obtaining a CCTV license, and environmental permits.
Lastly, building an online presence through a website and social media platforms is crucial, especially in the current landscape where consumers are increasingly demanding packaged beers. Networking with bottle suppliers and understanding the shift towards online sales will be essential for success in the microbrewery business.
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Beer duty and tax relief
Beer Duty and the associated tax relief are important considerations for any prospective microbrewery owner in the UK. Beer Duty is a tax levied on all commercially produced beer with an alcohol strength of 1.2% or more. To sell beer in the UK, you must register as a brewer with HMRC and obtain a certificate.
Microbreweries, however, can benefit from reduced Beer Duty rates thanks to the Small Breweries' Relief scheme. This scheme was introduced in 2002 by then-chancellor Gordon Brown and has been instrumental in the growth of small breweries in the UK. The relief provides a 50% discount on beer duty for brewers producing less than 5,000 hectolitres (about 880,000 pints) annually. The discount tapers off for production above 5,000 hectolitres, with the full standard duty rate applied once production exceeds 60,000 hectolitres.
It is important to note that beer produced under licence is not eligible for the Small Breweries' Relief and is subject to the standard rate of duty. Additionally, the relief is linked to the alcohol content of the beer, with beers below 2.9% alcohol by volume (ABV) qualifying for the relief.
The Small Breweries' Relief scheme has undergone revisions over the years, with the UK government lowering the threshold for breweries to remain eligible for tax breaks. These changes have been driven in part by lobbying from mid-sized breweries and a desire to encourage growth in the industry. While some critics argue that the scheme discourages smaller brewers from expanding, others counter that it provides an essential boost for new entrants to the market.
To take advantage of the Small Breweries' Relief scheme, microbreweries must make accurate annual estimates of their beer production. Failure to do so can result in penalties from HMRC. It is also worth noting that the relief applies to each premises where beer is produced, requiring separate registrations.
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Market trends and consumer expectations
Craft Beer Popularity
The UK has witnessed a significant increase in the number of small and independent breweries, with a growing consumer preference for craft beers. Microbreweries are renowned for their speciality beers, emphasising unique flavours, quality, and innovative techniques. This shift towards craft beers reflects consumers' desire for tailored experiences and their support for local businesses. As a result, the UK beer industry has seen a turnover of approximately £9 billion.
Health-Conscious Choices
There is a growing trend among UK consumers towards health-conscious choices, with an increasing demand for lower-alcohol and alcohol-free beers. This trend presents opportunities for microbreweries to innovate and cater to consumers' changing preferences. It also aligns with the broader global shift towards quality and authenticity in beer consumption.
Sustainability and Local Support
The UK market is witnessing a growing awareness of sustainability and local business support. Consumers are increasingly attracted to local, sustainable products, and microbreweries that incorporate eco-friendly and sustainable manufacturing techniques into their processes. This trend is further enhanced by the dynamic nature of the UK beer market, which adapts to meet consumer expectations and embraces new development possibilities.
Online Presence and Home Delivery
The COVID-19 pandemic significantly impacted the beer industry, with brewers turning to social media and online platforms to reach their customers. Building an online presence through websites and social media profiles has become essential for microbreweries. Additionally, the rise of home delivery services and online shopping has changed the way consumers access alcohol, with an increased demand for canned and bottled beers, even for local sales.
Regulatory and Tax Considerations
Understanding the regulatory and tax landscape is crucial for microbreweries in the UK. While Beer Duty applies to commercially produced beer with a strength of 1.2% ABV or more, microbreweries can benefit from smaller rates through the Small Breweries' Relief scheme. Additionally, various licenses and permits, such as premises licenses and personal licenses for staff serving alcohol, are necessary for compliance.
Consumer Expectations
Today's drinkers have high expectations from craft beers, demanding quality, choice, innovation, and provenance. Consumers value authenticity in their beer choices, with a preference for honest branding and authentic recipes. As the market becomes more competitive, meeting and exceeding consumer expectations is vital for the success of microbreweries.
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Licences and permits
Next, you must obtain the relevant licences to ensure your microbrewery operates legally. These include:
- An alcohol premises licence from your local authority, which is required if you plan to sell alcohol on-site. This licence governs the sale and supply of alcohol and necessitates a meticulous application process, including demonstrating a commitment to responsible alcohol sales and providing detailed plans of the premises and comprehensive business information.
- A premises licence, which is necessary if selling directly to the public on the premises.
- A personal licence.
- Planning permission for the site, which must be obtained before commencing operations. This involves engaging with local planning authorities to ensure compliance with commercial brewery zoning regulations.
- Registration with HMRC as a brewer, which is required to receive a certificate to brew and sell alcohol. This involves adhering to complex taxation rules, including registering for alcohol duty and paying beer duty if the strength exceeds 1.2% ABV.
In addition to the above, there are other permits and considerations that may be relevant depending on the specific nature of your microbrewery operations:
- Environmental permits for waste discharge and pollution prevention, particularly if discharging trade effluent into inland freshwaters, estuaries, or coastal waters.
- Public space surveillance (CCTV) licence if installing CCTV cameras on your premises.
- Adherence to food hygiene standards if offering tours, tastings, or food service.
- Health and safety standards, including risk assessments and compliance with regulations such as fire safety and the Provision and Use of Work Equipment Regulations (PUWER).
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Marketing and networking
Understanding the Market
Before starting a microbrewery business, it's essential to understand the current market trends and local competition. Analyze other breweries' offerings, pricing, and market position to find your unique selling point. Identify any existing relationships with local businesses, events, and organizations that you can leverage or build upon. Set concrete and measurable goals for your marketing efforts, aligning with your broader business mission and values. For example, you may aim to increase taproom visits, boost direct-to-consumer sales, or become known for innovative seasonal releases.
Online Presence and Social Media
Building a website and an active social media presence are essential in today's digital age. Create a mobile-friendly website that showcases your current tap list, hours, and events. Keep your social media feeds engaging with behind-the-scenes content, new release announcements, and glimpses of your taproom atmosphere. Utilize strategic brewery social media marketing techniques to attract followers, connect with your target audience, and drive sales. Share photos and videos of your brewing process, introducing your brewers and staff and highlighting their expertise and passion.
Community Engagement
Create a welcoming and engaging taproom environment to attract customers and encourage return visits. Consider hosting themed events, live music performances, and tastings to draw in new customers and create a buzz around your brand. Participating in local events and festivals is another excellent way to engage with potential customers and showcase your brewery. Sponsoring local events can also increase brand awareness and show your support for the community.
Data-driven Decisions
Use your sales data, website analytics, and social media insights to refine your marketing strategy and make informed decisions. Identify which beers are the most popular, which events drive the highest sales, and when your customers engage most with your content. Focus on metrics that help you understand your customers better and grow your business, optimizing spending, improving customer engagement, and maximizing ROI.
Contract Brewing and Collaborations
Consider contract brewing arrangements with breweries in other countries to expand your geographic reach and gain access to new markets. This strategy can help reduce costs, guarantee freshness, and lower your environmental impact by brewing closer to your target market. Collaborations with other breweries or local businesses can also help increase your brand's visibility and tap into new customer bases.
Crowdfunding and Community Support
Crowdfunding can be a valuable tool to raise funds for your microbrewery venture while also creating excitement around your brand. Utilize social media platforms, email marketing lists, and loyal customers to promote your campaign and build momentum. Engage your community and showcase the passion and craftsmanship that goes into your unique craft beers.
While the microbrewery business has become increasingly competitive, a well-informed marketing strategy, combined with a strong understanding of your target market, can help your brand stand out and succeed in this dynamic industry.
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Frequently asked questions
A microbrewery is a small brewery that produces a limited amount of beer, often with a focus on speciality beers that have a distinct flavour. Microbreweries are often independently owned and tend to cater to the local market.
The term "microbrewery" originated in the UK in the 1970s to describe small breweries that focused on producing traditional cask ale. The first microbrewery was Selby Brewery, founded in 1972. The trend later spread to the US in the 1980s. In 2000, there were around 500 breweries in the UK, and by 2020, this number had increased to over 3,000.
You will need to register as a brewer with HMRC and get certified. Additionally, you will need to pay Beer Duty if your beer has an ABV of more than 1.2%. You may also need various licenses and permits, such as a premises license if you plan to sell beer directly to the public and an environmental permit if you discharge trade effluent into certain waters.
Starting a microbrewery requires a lot of time and energy, and it is not a quick way to make money. You will need a solid understanding of the market and a well-informed business plan. It is also important to build an online presence, including a website and social media profiles.
