The Croatian brewing sector
According to the latest available issue of “Croatian Economic Outlook”, published by the Institute of Economics, Zagreb, in 2018 the country’s economy saw a continuation of steady growth that had started back at the end of 2014. These developments were supported by the persistence of recovery in all three domestic components of GDP, while net exports, despite some positive effect in the second quarter, contributed negatively to the overall GDP growth in the first half of 2018.
Within Croatia’s manufacturing sector, the food and beverage industry makes the largest contribution to GDP and total employment. Data from the Institute of Economics shows that in 2015 the food and beverage industry generated 27% of total value in manufacturing in Croatia (of which 6% came from the beverage industry. And 21% of all manufacturing jobs in 2015 were in the food and beverage industry (of which 2% came from the beverage industry). One of the strongest segments of the beverage industry is that of beer producers.
Beer market statistics
According to a paper on beer production in Croatia, published by Flanders Investment & Trade, the country’s market is dominated by three major breweries owned by global companies, and additionally features a dozen medium-sized, small and microbreweries. Six of the total number of breweries have an annual production capacity in excess of one hundred thousand hectolitres. In 2014 total beer consumption in Croatia amounted to 3,41 million hectolitres. With consumption of 580 litres per capita per year, Croatia ranks among the top ten countries in Europe. The country’s beer market, similarly to other neighbouring countries, is still developing. Among the leading manufacturers are Zagrebacka pivovara (Ozujsko, Becks, Loewenbreu, Staropramen, Stella Artois, Tomislav), Heineken Hrvatska (Karlovacko, Heineken) and Carlsberg (Pan, Holsten, Tuborg). Smaller manufacturers are Osijecka pivovara, Pivovara Daruvar and Pivovara Licanka.
Between 2014 and 2018 domestic consumption of beer reached and surpassed domestic production, which lead to an increased reliance on beer imports to satisfy consumer demand, much of which has been sourced from elsewhere in the EU. The exports of Croatian beer peaked in 2016 with over 800 000 hectolitres, before falling to below 700 000 hectolitres in 2018.
Data from The Brewers of Europe shows that total production of beer in Croatia has been relatively stable in the period 2015-2018, at around 3 million hectolitres. A jump in the number of breweries reported in 2018 results from the inclusion of information from a beer association which groups smaller brewers. Experts believe that there are, however, positive signs that smaller brewers are contributors to total production.
The Brewers of Europe’s report on the contribution made by beer to the European economy states that total consumption in Croatia increased from 332 million litres to 361 million, whilst the proportion of this consumed in the retail and hospitality sectors remained stable. Therefore, consumer spending on beer increased, reflecting a rise in the consumption of beer per capita.
According to the report, both the hospitality and retail sectors in Croatia can lay claim to contribution to the overall growth in the country’s beer market. The hospitality sector, with its rising prices and significant share (albeit lower than retail) of overall consumption, reached a value of over EUR 600 million in 2018.
Additionally, Croatian brewers support a wide range of businesses in other sectors of the domestic economy. Over EUR 180 million worth of agricultural produce, utilities, equipment, transportation and storage, and media and marketing services is purchased annually. Brewers also purchase inputs from other European countries, the value of which has been increasing constantly over the period.
The report by The Brewers of Europe, published in March 2020, states that in terms of employment, the hospitality sector is the leading provider of jobs in the Croatian beer market. The total number of jobs reached 29 250 in 2018. Value added rose healthily over the period between 2015 and 2018, from EUR 364 million to over EUR 410 million, and it shows no sign of slowing down. The employment in the supply sector can be categorised using the estimates from the responses to a survey to brewers, performed by the association. These imply a job breakdown of: 1729 jobs in agriculture, 436 jobs in packaging, 732 jobs in transport, 1328 jobs in media and marketing (the remaining corresponding to utilities, equipment, other).
In 2018 VAT receipts in the hospitality and retail sectors accounted for over half the total tax revenue collected from the whole production chain of beer. This is not surprising with a Croatian VAT rate of 25%. Over the studied period, the tax contribution of all sectors increased steadily (brewing companies reduced only slightly their contribution in comparison to the first year). Because of that total revenues rose from EUR 312 million in 2015 to EUR 367 in 2018. With further growth in the beer market overall, and the hospitality sector in particular, tax receipts from the beer industry will be an increasingly important source of government revenue.
According to a survey by The Brewers of Europe, 88% of the respondents drink beer in bars/restaurants, and 12% at home. Among the respondents who had previously stated that they consume beer at home, 60% of them buy beer from the supermarket. What the authors of the survey find interesting is that none of the respondents buys beer from a specialized beer store. Also, among those who consume beer at home, 45% of them buy beer along with food and groceries. The survey also shows that 45% of respondents buy beer in returnable packaging, 24% of respondents drink beer from cans, while 18% of respondents consume beer from PET packaging. Only 4% of respondents drink beer from the barrel while the remaining 9% of respondents drink beer from non-returnable packaging.
Around 64% of the respondents prefer domestic producers of beer and when asked about the beer they usually consume, the vast majority of respondents pointed out several brands as their favourites. Few respondents said they prefer one brand of beer (Heineken, Golden Brau, Ozujsko,Karlovacko, Staropramen).
Zagrebacka pivovara was established in 1892 and was the first industrial brewery in Croatia. Today, the company holds nearly 44% of the market. Since June 2012, Zagrebacka pivovara has been a part of the Molson Coors group within the Molson Coors Europe business unit.
Heineken Hrvatska is the second largest beer producer in Croatia. The history of the company started 165 years ago with a brewery in Dubovac, a historic part of Karlovac. Some 40 years later, it was bought by Aschenbrenner, who refurbished and modernized the facility. After the independence of Croatia, it became a joint-stock company owned by its employees. In 2003 Heineken took over the ownership.
Carlsberg Croatia holds the third largest share of the market with the company reporting a revenue of nearly HRK 295 thousand in 2014. Carlsberg Croatia’s plant, located in Koprivnica, is among the most modern and best equipped breweries in the region.
Although craft brewing is not new to Europe, over the last couple of decades there is a significant upward trend of microbrewing, starting in the USA and the UK and spreading around the world. In the last couple of years Croatia has also witnessed a rise in the microbrewing sector, which now offers a wide range of ales, stouts, porters and other types of beer.
Data shows that beers produced by craft- and microbreweries are gaining increasing popularity in Croatia. Nearly 80 breweries of this kind are aspiring to expand their market share from the current 2-3% to 10% in the coming years.
According to the Croatian association of craft and microbreweries, the brewing and consumption of craft beer in the total production and consumption in the country are between 2 and 3%. Since 2013 when the first craft- and microbreweries were established, at least 400 jobs have been created in that segment. Market analysers claim that craft brewing enhances the reputation of the whole beer sector, and this made some of the major breweries start producing types of craft beers as well.
According to estimates, the craft beer industry annually contributes just over HRK 4,2 billion in gross added value directly and indirectly into the state treasury. During the pandemic however Croatian craft breweries are facing major challenges because of the closure of hotels and restaurants, as the HoReCa sector reportedly accounts for about 90% of their business. One of the craft breweries reported a 30% drop in March given that the bars were still open for part the month. In April however the drop reached 80%.
Some of the breweries decided to tackle the crisis by turning to the internet instead of the previous way of making sales in bars. One of the companies introduced online sales through its distributors and partners and that partially compensated for the losses. Another brewery even reports an unexpected increase of sales. Analysers explain this with the fact that people are no longer wary of buying online, but despite the positive results, this type of sale cannot replace traditional sales channels.
Despite all, the entrepreneurs working in the Croatian craft beer industry decided to keep hold of all of their employees. That was possible thanks to the support measures adopted by the government, which greatly eased the situation for the craft breweries. The owner of one of the breweries explained that in addition to measures to preserve jobs, the company requested a moratorium on the main loan by which it launched a new plant. As it is impossible to plan ahead though, the future of the sector is uncertain. Other breweries are hoping for a recovery with the re-opening of restaurants and bars, but with great caution as it can’t be predicted how long those in the hospitality and catering business will manage to operate properly with all the rigorous measures still in place.
LATEST issue 4/2020