The past, present and prospects of the global and domestic craft beer market

In an earlier article on a similar topic, we presented the most important large-scale players in the Hungarian beer industry, their sales indicators and their activities in foreign markets. The present analysis, however, focuses on an aspect of brewing that we have only touched on previously in a tangential way: the world of small-scale breweries, both international and domestic. Among other things, we will find out which countries are home to the largest number of craft breweries and how the global beer market has been transformed by the small-scale products’ ‘revolution’. Finally, a nationally renowned player in the craft brewing industry will talk about the circumstances surrounding the founding of his company and the future of the Hungarian craft brewing scene.

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Characteristics of craft brewing

What exactly the term craft beer means is quite difficult to define. In their study (2017), Christian Garavaglia and Johan Swinnen describe it in terms of the simultaneous existence of three sets of characteristics, based on the American Brewers Association’s definition. According to this definition, a small-scale brewery produces up to 6 million barrels (one US barrel has a capacity of roughly 117 litres, so 702 million litres) of beer per year, using predominantly traditional ingredients. In addition, the ownership share of an outside alcohol industry operator that doesn’t participate in the production cannot exceed 25%. Craft beer is therefore beverage made by a small, independent brewery, produced in much smaller quantities and generally sold at a higher price than its large-scale counterparts. Lacking the generous marketing budget of larger market players, the products of smaller breweries are mostly popular at the local level and often remain completely unknown in the global competitive arena. It should be added that in the case of nations with a rich beer culture, such as Germany, the Czech Republic or Belgium, it is particularly difficult to identify which breweries are craft brewers. In Germany, brewing goes back more than a thousand years, and in the past it was closely linked to the church: between the ninth and thirteenth centuries, it was mainly monks who produced beverages with high alcohol content to prevent premature spoilage. Today, although the provisions of the aforementioned purity law are much more permissive, many still adhere to the original regulations. Thus, of the many breweries in the country, a good number can be called small-scale.

Global small business panorama

It’s safe to say that craft beers are enjoying a renaissance, but their explosive growth was preceded by a rather long period of so-called “homogenisation”. Throughout the 20th century and up to the 1980s, smaller breweries usually went out of business, ceased operation, or were simply bought up by competitors with larger capital. As Garavaglia and Swinnen point out, the number of breweries in Belgium, for example, fell from 3,000 in 1900 to 143 in 1980. Furthermore, in Czechoslovakia, as a result of socialist nationalisation efforts, by 1989 only one small-scale brewery remained. The main reasons behind this worldwide phenomenon, according to the authors, are as follows:

1) technological advances over the last century have automated part of the production process, and

2) the improvement in the quality of road networks has made transport and distribution of goods easier and more efficient.

3) All these factors were combined with economies of scale, so it became profitable to produce large quantities of commodities, including beer.

4) Obviously, market players with more capital could devote more resources to their marketing activities, while smaller producers could not afford similar promotional activities and were gradually squeezed out of the competition.

As a result, the beer market has become rather standardised and homogeneous.

The aim of the large-scale breweries was clearly to appeal to as wide a range of consumers as possible, with as little financial outlay as possible. Prominent producers therefore adapted their product ranges to public taste, resulting in product gaps and unmet consumer needs. As Antonietta Balano points out in her study (2020), American consumer preferences have gradually shifted from the products of large-scale manufacturers to those of smaller players since the 1950s. In the United States, by the way, all non-commercial brewing activities were banned until 1978. Subsequently, US President Jimmy Carter authorised the tax-free distillation of 200 gallons (1 gallon = 3.79 litres, so roughly 758 litres) of beer for households with two or more adults over the legal drinking age living together. From the early 1980s to the early 2000s, the number of home breweries multiplied, paving the way for a craft revolution that quickly spread across the Atlantic. The then booming trends finally reached an unprecedented peak in 2016.

The figure can be referenced here:

Zenith Advisory reports that in 2016 there were more than 19,000 breweries worldwide, of which approximately 17,700 were considered craft. In terms of geographic distribution, 4,750 of these were in the US, 1,655 in the UK and 1,295 in Germany. By 2019, the US population spent $116 billion on beer, with approximately a quarter of that amount spent on craft products. Meanwhile in Europe, the number of craft breweries almost doubled between 2015 and 2020. By the way, research interest in craft beer has visibly increased in parallel with the proliferation of craft breweries, with 94 publications on the topic in 2017 alone, mainly in North America and the UK.

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To summarise, the global craft beer market was worth $103.2 billion in 2022, a figure that could reach $282.6 billion by 2032, growing at 10.6% per year.

Domestic trends

Having reviewed the state of the global craft beer market, let’s now look at how the emergence of craft beer has reshaped beer consumption trends in Hungary. In Hungary, commercial breweries were first opened in the 19th century, and their success was based on the work of German and Czech brewing masters. Until the outbreak of the Second World War, the Hungarian ‘beer scene’ enjoyed considerable international recognition, but after 1945 the focus shifted from diversity to mass production. The most popular types of beer in Hungary were, almost without exception, pale lagers. It was not until much later, after the regime change, that a remarkable number of small family breweries appeared, most of which went bankrupt within a few years. The most important milestone in the resurgence of craft brewing in Hungary was the ‘Főzdefeszt’ in May 2011, which was not preceded by any major promotional activity but was nevertheless a huge success. Over three days, around 10 000 visitors came to the event, with most vendors running out of stock on the first evening. Following the event, many of the producers who played a key role in the second wave of the domestic beer revolution, such as Monyo and Mad Scientist, have become nationally known. In response to the new types of beer flooding the market, the large-scale players have rapidly expanded their offerings: the innovations of the larger domestic brewers have been largely driven by the re-emergence and remarkable popularity of small-scale brewers in recent years.

While for many, the craft beer revolution means a proliferation of previously unavailable or rarely available beers, there are still those who swear by the traditional, classic types. Pilisvörösvár (the author’s hometown) is a town with a significant German minority population in the heart of the Pilis basin in Hungary. One of the town’s attractions is the Rotburger brewery, founded in 1993, which has been serving its own speciality beers for thirty years. We spoke to András Jáki, owner and master brewer of Rotburger, about the circumstances surrounding the establishment of this nationally renowned and successful business and the future prospects of small-scale brewing in Hungary. For ease of reading, some elements of the interview have been rearranged and modified by the author.

Bálint Fetter: How and when was the idea of the family brewery born?

András Jáki: The idea came to my father’s mind around the time of the regime change, who wanted to start a business to establish his family’s future. He had been active in the food industry all his life, building and setting up various factory units abroad, including in Iraq and Algeria. Initially, there was a question mark over whether the family business should be a bakery or a brewery. In the end we decided on the latter, even though we had no experience in brewing. Thus we first had to do a year and a half or two years of ‘pre-study’ in Bavaria, visiting Munich frequently in the early 1990s, getting inspiration from the activities of local breweries. Eventually, we met a sympathetic brewmaster in the Allgäu region who was willing to support us in the beginning. After purchasing various tanks and machines, the picture was put together, and in August 1993 we were able to open a brewery in Pilisvörösvár.

BF: How was the opening of the new brewery received by the local population? Who is the clientele?

AJ: It’s a rather sensitive issue, and to this day I continue to monitor the opinions of people in the area. Some people have been regulars for over 30 years, and there are others who live nearby but have never visited us. Of course, this can be seen as a form of feedback, and negative opinions can also be used to your advantage. As to the second question, I can say that the number of foreign visitors has been increasing recently, and transit traffic is also on the rise. This is due to the fact that Rotburger is now nationally known, thanks to radio and other media coverage and visits to beer festivals.

BF: Do you continue to make trips abroad to gain experience?

AJ: Yes, but they’re less compulsory now, more for my own entertainment. The Bavarian landscape, the people, the traditions and of course football have a special place in my heart, which is why I visit once or twice a year. The spirit of the region embodies everything that we ourselves would like to represent within the borders of Hungary, including the style of the building and the décor, and of course the beers and food. I notice that our guests appreciate our efforts and that we manage to evoke the Bavarian spirit: several German-speaking guests have commented that they feel quite at home in Rotburger.

AJ: Unfortunately, I cannot give you a precise answer to this question, as I always adjust it to the current turnover. I have the possibility to brew 1000 litres of beer per type at the same time, after which the current brew “rests” for almost a month. After three, but preferably four weeks, the beer is filtered and tapped. Only when the available quantity is nearing the end do I start the next brew. It is basically a chain reaction, it is impossible to calculate and predict the exact quantity. Beer consumption in Hungary is seasonal, so in summer a much larger quantity is sold, while in winter wine or pálinka is usually more popular. In Germany, for example, there is no such thing, and beer houses are always full. Unfortunately, our situation is not helped by the transformation of community life: more and more interaction is taking place exclusively online, while traditional meeting places (such as a pub or any other kind of catering establishment) are being pushed out.

BF: The 1990s saw a surge in the number of small-scale breweries in Hungary, and then the initial momentum died down. Do you think it is possible that in the near future, similar trends to the years following the regime change will take place and craft, family breweries will proliferate again?

AJ: I consider myself an optimist, but to be realistic, the current situation can be considered normal. The presence of nearly 400 small breweries, which were established in the 90s, is unjustified in the long term, as there isn’t such a demand for their products in Hungary. The four large-scale breweries roughly cover the country’s beer consumption, as they satisfy the vast majority of demand. In addition, there is also a kind of split within the craft brewing sector, with the emergence of craft beers, i.e. various flavoured beverages such as fruit beers, in addition to traditional products. Producers of craft beers tend to appeal to young people who are more receptive to new ideas, rather than to older beer drinkers who prefer traditional types. They may be right in the end, but I am a stickler for tradition, and I believe there’s nothing to modernise in my own Bavarian line. The traditions we follow are centuries old: we offer pale ales in half-litre pints, traditional cellar beer, brown beer, wheat beer. I think that anyone who can make 4-5 good beers can stay in the market with a narrower range of products and doesn’t need to experiment. Coming back to the question, I think that the 80 or so craft breweries currently operating in Hungary are more than enough.

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