It’s been over a year since Local Luva was launched by BWS and around twelve months since I assessed the craft beer fridge at my local store. Things don’t look that different – with one exception.

In November 2020 I wrote a piece looking at a BWS campaign to stock products from small, independently owned producers. Named Local Luvva, the promotion was a lifeline to businesses feeling the economic impact of the global pandemic. It raised questions about altruism and the application of the word ‘local’.

As background for the story, I took stock of the contents of the craft beer fridge at my local BWS. I presented a breakdown of indie and non-indie brands on the shelf, as well as a few other dimensions to the make-up of products therein.

Twelve months later, I went back to the same store to see what it looked like. The number of beers in the craft beer fridge from indie brewers and big breweries has fallen. The only growth I observed is the retailer’s own private-label brands.

Breweries. Big, small and in-between.

The beer marketplace is complex. It’s difficult to look at it through the binary lens of ‘big beer vs indie’ anymore. Lion Nathan (Lion) and Carlton United Breweries (CUB) still dominate much of the mainstream lager market and on-premise taps, but within craft beer, various business models and ownership structures exist.

Tribe, Mighty Craft, Good Drinks and Fermentum each have various brands or breweries under their banner. Their business models and ownership differ, as do the stakes in the breweries under them, but describing them as ‘craft beer families’ or ‘collectives’ is perhaps the simplest way to view them. All were considered independent until Lion acquired Fermentum in September 2021.

Then, of course, there’s the big multinational breweries. It’s not uncommon to differentiate between CUB-owned brands like Balter and Asahi owned Mountain Goat, mainly for structural and historical reasons, but it’s fair to say that since its acquisition by the Japanese brewer in 2019, all CUB brands are technically owned by Asahi. Likewise for Kirin-owned, Lion brands.

The Hydra

BWS has been around since 2001. It was a subsidiary of Woolworths Group up until 2021 when a demerger of Woolworths Group’s retail liquor arm concluded. The newly formed Endeavour Group, through its existing Woolworths retail drinks businesses, and a merger with the Australian Leisure and Hospitality Group (ALH), is now the largest retail drinks and hospitality business in Australia.

Dan Murphy’s, Jimmy Brings and Cellarmasters are just a few of the businesses in Endeavour Group’s portfolio. It also includes Pinnacle Drinks, a business that, through partnerships with various wineries, distilleries and breweries, contracts private-label beverages for Endeavour Group’s retail and hospitality outlets.

There’s been a rise in the number of private-label craft beer brands and it’s piqued the interest of industry and consumer media. These products are sometimes referred to as ‘Faux Craft’ because they seem to imitate the marketing, particularly branding, of already successful products. 

Dr Andre Sammartino is an Associate Professor in the Department of Management & Marketing at the University of Melbourne. He says ‘phantom brands’ are not new for big retailers and have multiple advantages other than just filling the shelves with the retailer’s own products.

He said, “The Pinnacle play is pretty consistent with what the two big supermarket chains are doing in groceries generally. They are squeezing out food brands and replacing them with their own private labels.”

“The logic is very sound. Less time is spent dealing with suppliers wanting shelf space. The phantom brands can be positioned across the price points, so the retailer also has a mechanism for pressuring suppliers to lower their prices.” 

In its submission to the Australian Competition and Consumer Commission (ACCC) regarding Lion’s acquisition of Fermentum, The Independent Brewers Association (IBA) identified Endeavour Group as a significant third player in the beer market behind CUB and Lion.

IBA CEO Kylie Lethbridge stated that Endeavor Group, “is now one of the largest beer producers behind the two Japanese owned beverage companies.” She went on to point out that Endeavour Group and Coles Group, “are rapidly expanding their own brands.”

The numbers

In the craft beer fridge of the BWS store I visited, Pinnacle Drinks beers (18) now account for 25.35% of the space and are split over eight seemingly different brands. It’s an increase of ten beers since 2020 when they took up only 12.5% of the craft beer fridge.

Overall, a total of 37 breweries or brands were represented, which is two more than last year. The number of independently owned breweries has dropped from 54.3% to 46%.

There were 71* individual beer products. An increase of eight since 2020. Indie beers account for 45% instead of 52.5% from the year before.

Of all the independently owned breweries, Coopers(4) and Colonial(5) have the most beers on the shelf. Since 2020, Coopers Mild Ale has gone, but Colonial have added XPA and both its sour beers.

Collectively, there’s little change in the number of beers from craft families, but their overall representation has dropped from 15.8%  to 12.6%. The number of Mighty Craft (3), Tribe (1) and Fermentum (3) brands hasn’t changed. Good Drinks(2) has an extra beer, in the form of one from their Atomic brand. 

Together, products from CUB(7) and Lion(10) take up 24% of the craft beer fridge. In 2020 the number was 22.5%. However, had it not been for Lion’s acquisition of Frementum, the share of beers from the big breweries would also have shrunk. 

If you consider it in terms of CUB and Lion’s parent companies, Asahi and Kirin are even with 10 each. Along with CCA, the international beverage producers take up 29.5% of all the beers in the craft beer fridge.

Significant growth

As we’ve seen recently with the zero-alcohol and seltzer market, retailers love to throw around numbers that are impressive out of context. If I were a cynical man and took the same approach here, I’d ignore the low base private-label beers started from and report 125% growth, according to my assessment.

As stated earlier, the rise of private-label craft beer hasn’t gone unnoticed by industry observers. My pointed growth figure is somewhat meaningless, but nonetheless, it’s still surprising just how much their share has grown in only 12 months.

Pinnacle Drinks’ brands have taken shelf space not only from small, indie brewers but also the two multinationals. 

Perhaps, it’s a case of reaping what you sow. Big beer has been criticised for imitating indie brands for years, with parochial labelling and tenuous connections to the regions from which they claim to hail from. Now the supermarket bottle shops are in the game too, and they’re playing in their own backyard.

In the days of Homebrand and Black & Gold product lines, consumers knew to some degree what they were buying. They may not have known who the producer was, but they at least knew it was a supermarket owned brand. 

Names like Sail & Anchor, Initial Brewing, Colossal Brewing and Culture House Brewing conjure up images of startup craft brewers working from small brewhouses. But in reality, these entities only exist on paper.

The connection between Pinnacle’s private-label brands is indistinguishable without looking at the fine print. Such that even a semi ownership conscious consumer could quite easily look past one, only to unknowingly pick up another. 

Even the liquid itself seems designed to take market share from other successful products. For example, Culture House Raspberry, a sour fruited Berliner Weisse, is arguably an attempt to lure fans of Boatrocker’s successful Miss Pinky. Even the placement, with one on the upper-middle shelf and a prominent special attached, compared to the indie at the bottom, partially obscured by fridge stickers, works to the advantage of the retailer’s own product.

The mimicry of successful products by private-label brands is echoed by Dr Sammartino.

He said, “The retailer also has more consumer knowledge than the suppliers (they know what is selling where and to whom), so they can use this to inform their own product designs. They can also run ‘experiments’ of sort by testing different prices, packaging, placement etc across their stores and over time.”

“There have been no shortage of examples of suppliers innovating a new offering and then quickly finding an extremely similar phantom version pop up. Often this sees the original product ‘de-listed’ soon thereafter.”

Clear cut?

Just below the surface, It’s a familiar story. The innovators take all of the initial risks, while those with deeper pockets capitalise on the burgeoning market and simultaneously nudge out the small operators. But as Shrek pointed out, there are layers.

Private-label beers are sometimes produced by breweries regarded as independently owned. Contract brewing, whether for small gypsy brewers, vanity brands or large retailers, is a valuable revenue stream.

Brick Lane Brewing Co was founded in 2018. It’s been reported that approximately two-thirds of the beer brewed at the state of the art facility is contracted brands. In mid-2021 it announced plans to raise capital for further expansion.

Some point to the disingenuous nature of the labelling. The IBA highlighted the issue as recently as the aforementioned submission to the ACCC on Fermentum. 

They said, “the IBA believes the ownership of beer brands should be clearly defined at the point of purchase so as consumers can make an informed purchasing decision.”

But since indie brewers themselves don’t always adhere to the guidance laid out by bodies like the ACCC, it’s difficult to take any moral high ground over the big breweries and retailers.

Craft beer is renowned for a diverse, innovative and seemingly always changing array of breweries and beer styles. Indie brewers also gain favour among anti ‘big beer’ consumers. According to Dr Sammartino, this also works to the advantage of private-label brands.

He says, “There are far too many brands and releases for anyone but the most dedicated beer geek to keep track of. And the indie brewers are doing a LOT of the experimentation the retailer would otherwise need to do”. 

“The ‘local’ angle could also be viewed as them ‘wedging’ the big guys as they know some consumers might be aggrieved by their foreign ownership, so Pinnacle might capture the “gateway” market with their non-threatening faux craft offerings.”

It’s in my nature

Just last week, Radio Brews News discussed a collaboration between independent brewery Moon Dog and Coles supermarket brand, Tinnies. It was a balanced discussion that explored the advantages for both brands and concluded with an analogy to the fable of The Scorpion and the Frog by Brews News editor Matt Kirkegaard.

The cold hard reality is that ASX listed companies like Coles Group and Endeavor Group are beholden to shareholders first and foremost. Collaborations and promotions have advantages for the small producers they work with, but the boost to their own credibility with craft consumers or broader positive sentiment generated by their socially responsible attitude, ultimately lead to dividends for investors.

Much of the rise in private-label brands at Coles and Woolworths more generally has been driven by the market disruption caused by Aldi. The duopoly are under threat from the global supermarket chain on multiple fronts, one of which is price. Aldi’s ability to leverage existing global suppliers greatly reduces the cost of its products.

This raises the very real question of whether we could see more private-label beers being brewed outside Australia. Aldi’s North of Nowhere Pale Ale, which was awarded Best Australian Style Pale Ale at the 2019 AIBAs, is brewed at DB Breweries in New Zealand, which itself is owned by Heineken Asia Pacific.

And on it goes

Local Luvva has helped indie brewers at a difficult time. But it’s beginning to look like a Trojan Horse. Endeavour Group has even more insight into the craft beer market and the figures to aid them in developing their own products to capitalise on it. 

I predict a further decline of not only indie brands, but all brands except those produced by the retailer. It will be interesting to watch how the rest of the industry responds to the incursion.

CUB and Lion have repeatedly proven they are unlikely to sit on their hands and relinquish their dominant positions, but how much clout do they have within the in-store and online retail marketplace?

Will indie brewers begin to look unfavourably on those within their ranks who produce private-label brands for the big retailers, effectively pushing everyone else out? In some ways, it almost seems a little short-sighted to produce brands for operators who’d like nothing more than to return us to the days where only a handful of bland pale lagers filled the shelves.

The battle is one indie brewers are used to. Their resilience and agility in the face of market pressures levered by powerful corporate players are admirable, as is the stoicism of their discerning supporters.

Nothing will stop these tried and true business practices of big retailers. What we can do is continue to educate and inform, so that those around us seeking to make a conscious choice are in a better position to do so.

*Like my 2020 analysis, Sierra Nevada and Blue Moon are not included.