The Norwegian Fairytale

From the recently retired chairman of the Norwegian Brewers’ Association, Petter Nome, we have received this highly enlightening overview of the impressive status of the Norwegian Brewing industry. Petter’s article clearly demonstrates not only his deep knowledge about all things beer in Norway, but also his very profound dedication to the brewing scene in his country. 

The Norwegian beer revolution is a fairytale, comprising heroes, nutheads, disasters, inventions – and quite a few princesses. In ten years, the market share for craft brewers has grown from zero to four per cent. There are breweries in all 20 counties plus the Arctic settlement of Spitsbergen. Craft brewers now employ 25 percent of the work force in Norwegian breweries.

15 years ago, the Norwegian Brewers Association (BROD) was about to vanish from the face of the earth after more than 100 years of operation. A fast decline in the number of breweries and implacable internal conflicts almost killed the association, which was down to four members in 2005. Today, BROD has 136 member companies, all due to the beer wave that has swept over the country and brought massive goodwill to breweries, beer and beer culture.

The modern craft revolution came late to Norway. In 2002, three passionate homebrewers in the southern fishing village of Grimstad, inspired by American craft brewers, decided to go professional and brew uncompromising beer, no matter if the market liked it or not. The Norwegian market did not. For the first years, Nøgne Ø (“Naked Island”, named after a Henrik Ibsen poem) survived on exporting to more mature beer markets in Europe and the US.

However, they were followed by other home brewers, and the number of breweries started growing. So did also the market share of craft brews, with and annual growth rate of 20 – 50 % between 2009 and 2017. Today, BROD has 126 craft brew member companies, brewing almost 2,000 different beers.

 

Modern American craft style beers still dominate the Norwegian craft scene, IPA being the flagship of most breweries. Some breweries, like Nøgne Ø, have brewed at least 30 unique editions of IPAs, DIPAs and NEIPAs. Despite the hoppy domination, many brewers are also deep into experimenting with new, local natural ingredients such as fruit, berries, herbs and even seaweed. This crave for stretching the boundaries is highly appreciated, both in the market and the media, further improving the image of beer culture.

One highly successful brewery is Lindheim Ølkompani in Telemark, exploiting a long tradition of fruit cultivation on their family farm. Rate Beer voted Lindheim the “fifth best new brewery in the world” some years ago for their combination of malt, water, hop and yeast with plums, apples and raspberries. Their fruit beers and sour beers are highly prized and sought after for the upscale beer market at home and abroad.

These days, Norway is about to give a major contribution to the world of brewing. Note the name: Kveik. Kveik is traditional Norwegian beer yeast, which has survived on Norwegian farms throughout hundreds of years. Kveik is not one single yeast strain, but several and many of them are now studied to be ennobled and preserved for future brewers worldwide. Kveik is really something different, adding new aromas to the brews. Some variants may resemble Belgian yeast, being quite fruity with a touch of sweetness. (Editors comment: See the article by Lars Marius Garshol specifically on Kveik in this issue of the SBR.)

I mentioned princesses. Yes, women have entered our beer scene with bravura. Many of them as brewers, others as entrepreneurs, sommeliers or general beer geeks. They have made a significant difference. Both because women are generally better sensory-equipped than men, giving them a potential to be magnificent brewers. Also, because they have changed the aesthetics of beer consumption. No more heavyweight tankards, but elegant stemmed glasses of different designs to fit different beer styles. That has also eased the introduction of beer to fine dining. And let’s not forget the market potential: If Chablis is replaced by wit or blonde, what will that mean to our industry?

A fairytale is expected to have a happy ending. Unfortunately, not all characters on the Norwegian beer scene have had that experience. Like other countries and businesses, driven by boom and hype, there will be losers, hitting the ground hard. Many of the new breweries have been far too optimistic when it comes to a steadily growing market. Their skills may also have been more sophisticated in the craft of brewing than in business, logistics, sales and marketing. At least forty of the new breweries have had to close in this Millennium.

And the tremendous growth could not last forever. In 2018, the market share for craft declined for the first time in “recorded history”. There may be multiple reasons, most of them to be found in the mainstream population, people who are not geeks, generally interested in beers, but not THAT interested:

Media hype is not an everlasting phenomenon. Some people tend to jump on trends for a short period, just to move on to another hype when media tell them to do so.

Many consumers may be confused by the enormous number of new beers. They don’t know what is what and where to start. Better to stay safe with Corona.

Some may have had bad experiences with an overpriced beer they did not enjoy. Maybe even a beer of bad or mediocre quality.

 

The same thing has happened in many other markets. Expansion, flattening, or even decline in the market – before the market starts growing again.

As a brewer at Brooklyn Brewery said to me: “It may go a little up and down, but as more and more people discover new beers which they like better than their old beer, they will never return completely to the old beer.” It is a matter of the market maturing, but maturing sometimes takes time. A growing number of people learn about beer, get more confident in their own taste and their ability to sort out quality. That will make the market grow again. Probably with a slower pace, but it will grow. Just look at the US!

The 2018 decline does not seem to scare off entrepreneurs. Since the early beginning in 2002, the number of craft breweries has grown every year. That is not good news for those who survived the first waves of bankruptcies, it is challenging for the whole industry, and it proves that stabilization of the market is still down the road. 

Norway is a small country (population 5.3 million), and the demand for beer is not infinite. The big issue facing craft brewers today is a steadily increasing competition, which also leads to price pressure. Most brewers agree that there are too many breweries operating today, but they all work hard to be some of the few last men standing.

A major challenge for all businesses dealing with alcohol is a complete advertising ban. Generally, this is accepted by the Norwegian breweries, as it gives some protection in the competition with global players. In 2015, BROD got a breakthrough when it came to product presentations and photos on the brewer’s websites. However, websites are not very relevant anymore and social media (SoMe) are taking over. And here the authorities clutch to the ban. Their argument: Posts in SoMe can be shared, small children risk getting beer news on Facebook.

But how to enforce a ban in SoMe? The authorities have no answer and no solution. Today, there are thousands of SoMe platforms run by commercial alcohol interests in Norway. The situation is complete anarchy and many players don´t play by the rules, thus getting a head start on those who obey.

And what about the thirty plus breweries on the export market? Should they be denied the same channels of communication as their international competitors? Government officials surely have made a mess for themselves, and nobody knows where this will end.

2019 started with bad news about the 2018 market development, but very good news about the tax situation for the small craft brewers. For the first time in Norwegian history, positive things happened to beer taxes, after five years of political pressure from BROD. Breweries with an annual production of up to 5,000 hl will get reduced excise tax on 4.7 % ABV beer (the limit for beer that can be sold in “normal” retail shops in Norway – stronger beer can only be sold through the state monopoly Vinmonopolet). That will mean a tax reduction of up to NOK 560,000 (61,000 Euro) per year.

The big questions are “Is it enough?” and “Did it come in time?”

The largest threat to the small-scale breweries is probably the big established companies, trying to grab the biggest possible shares of the craft market. A lot of hybrid “crafty” beers have been launched during the last years, as well as a growing number of high-quality craft beers, originating from big breweries. The biggest company, Ringnes (part of the Carlsberg Group), works in close cooperation with Brooklyn Brewery, and, together, they have turned the local Trondheim Brewery EC Dahls into a high-quality craft brewery. Our second biggest company, Hansa Borg, has acquired shares in two successful craft breweries, Nøgne Ø (yes, that one) and Austmann. The two next in line, Mack and Aass (both old family owned breweries), have both set up their own microbreweries to serve the local markets and develop new brands.

The Norwegian experience is probably very similar to what has happened in other markets that entered the new beer era at an earlier stage – consolidations, acquisitions and close-downs. At the end of the day, I have a firm belief that the consumers will be the winners. 

What really makes me optimistic is the fact that a huge number of consumers have discovered that the universe of beer is an extremely diverse one. As their knowledge develops and is transferred to new generations, the craft beer market will grow, even though there may be transient decline occasionally. 

This is my favorite metaphor: Imagine that you have gone through life, knowing only one fruit -bananas. Then, one lucky day, you discover oranges, apples, pears, grapes, mango, papaya and kiwi. You will probably not abandon your banana forever, but you will surely learn to appreciate the diversity.

My biggest hope is that the brave men and women who started the beer revolution, the genuine craft brewers, will keep the biggest possible share of the cake. They are the people who have made the difference and will guarantee for creativity, product development and high quality in the future. 

By: Petter Nome, former CEO of the Norwegian Brewers Association

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