IN FOCUS: Brewing craft beer and spirits in Singapore - a toast to business success?
With more small breweries and distilleries setting up shop to supply the market with locally-made beer and gin, CNA explores why they are doing so and what it takes for them to succeed.
SINGAPORE: Beer that tasted like vinegar was not what home brewer Mark Chen had in mind.
But that was what he often ended up with when he first picked up home brewing as a hobby four years ago. “It doesn’t always turn out well,” he recalled with a laugh.
But in a corner of his home in Hougang he persevered. With a second-hand brewing kit from a friend, Mr Chen would spend hours every Saturday hoping to perfect a pint with different grains, hop varieties and yeast strains.
He soon improved and began moving away from following recipes in home-brewing magazines to experimenting on his own.
“My wife loves to cook and she experiments a lot, which inspires me,” said Mr Chen. “We always go to the market together and at the spices and dry herbs section, I started asking myself why all these ingredients are found in local food, but not beer. That’s when I started experimenting.”
Now, some of these home experimentations are available in the market after the 36-year-old left his architect job to start craft beer brand Niang Brewery last year.
“Architecture has been quite a long journey for me and I was scared to jump into something new… but I realised I don’t want to regret not doing this.”
Among the first to roll off the production lines was a concoction inspired by one of these visits to the wet market. Called the “Warming Spirit”, it is a take on a saison – a historical beer style brewed in Belgian farmhouses – that comes with hints of black pepper, ginger, coriander seeds and orange peel.
Another – a West Coast Indian pale ale (IPA) with notes of pine and tropical fruits – aims to recreate a childhood memory.
“My grandmother used to have a fruit garden at the back of her house in Simpang Bedok but we were never allowed there when we were young. I wanted to recreate this elusive, mystical experience of a forbidden garden through a beer,” said Mr Chen.
The new entrepreneur is hoping that this “story-telling around local flavours” can set him apart from the competition. Even with the COVID-19 pandemic depressing most industries, the local craft beer scene has remained abuzz with a stream of newcomers.
Including Niang Brewery, there were five new brands last year, Mr Chen told CNA. “There is a demand for craft beer – I won’t say it’s huge – but that’s enough to keep new players coming."
It is not just in the world of craft beer that the fizz continues. The craft spirits market also saw a new local micro-distiller entering the market.
Singapore Distillery debuted with a suite of six gins last July, including unique variants like coconut pandan, Japanese cucumbers and a rose blend inspired by the local bandung drink.
The youngest player also has the biggest distillery among existing entities, with a 500-litre, custom-built copper still.
“We’ve been preparing for a long time,” said head distiller Ashwin Sekaran who first had the idea of starting his own distillery in 2017.
Then on a family holiday to the United Kingdom, experiences of being given extensive gin menus at local bars, as well as subsequent visits to a craft distilling trade show and gin distilleries opened his eyes.
To make sure he knew “how to make gin properly”, Mr Sekaran spent the following year taking up apprenticeships and courses in the Institute of Brewing & Distilling in London, Brewlab in Sunderland and the University of Adelaide in Australia.
Product development, alongside a “long” process of getting the distillery up and running, meant that the company could only start formally last year.
Having to kick off his venture during a pandemic was not ideal, but Mr Sekaran said his gins with a focus on Asian flavours have had a “good reception” so far. To meet demand, his distillery located in a flatted factory in Ang Mo Kio has been operating seven days a week to churn out about 500 bottles of gin a day.
IN HIGH SPIRITS
The global artisan world of alcohol has seen effervescent growth for some time, with the concept of “craft” taking off in beer before spilling over into other alcoholic beverages.
Industry players say there is no proper definition, but "craft" generally refers to beer and spirits made in small amounts by micro and independently-owned outfits. Apart from small-batch exclusivity, they are also often seen as emphasising quality and having a wider range of innovative flavours.
In line with the global trend, Singapore has seen more microbreweries and distilleries setting up shop. They supply the market with locally-made beer, gin and even whisky, sometimes with uniquely Asian or Singaporean flavours.
Euromonitor said there were more than 20 microbreweries here in 2019. Growth was partly helped by the introduction of a new licence in 2012 that allowed producers of less than 1.8 million litres a year to pay a lower annual fee of S$8,400. Previously, all breweries had to pay the same annual fee of S$43,200.
But even with the rapid growth in numbers, industry players say the local scene remains nascent compared to other markets with more active craft beer movements, and is far from being saturated.
For instance, New Zealand’s brewers association said in 2019 that the country had more breweries on a per capita basis, compared with the United States, United Kingdom and Australia.
“People tend to look at the sheer number of brands here and think there’s an overcrowding problem, but that really isn’t the case,” said Mr Kasster Soh, who wears many hats in the craft beer scene and is most recently, one of the co-founders of one-year-old beer brand, Off Day Beer Company.
As for craft spirits, which had a later start, there are four distilleries at the moment – Tanglin Gin, Compendium, Brass Lion Distillery and Singapore Distillery, all of which emerged over the past three years.
“I think all of us probably had the idea at around the same time,” said Mr Sekaran, who recalled there were no distilleries in Singapore when he first had the idea of opening one in 2017.
“At the time, the craft beer movement was under way so in my head, I was like ‘We have craft beer but there’s no craft spirits, why?
“But craft gin was also starting to come in from overseas and bars like Atlas were opening up. So there was some excitement going on and maybe people will also get excited about local spirits,” he added.
Accompanying the rise in supply, demand has also seen an uptick amid a greater appreciation from consumers.
“When I first started craft beer about eight years back, it was very hard to sell an IPA but these days, people are not just coming to the counter to ask for IPA, they are also asking us for sour beer,” said Mr Kevin Ngan, who co-owns Off Day Beer Company but also runs several craft beer bars like Good Luck Beerhouse and founded Singapore’s first incubation brewery The General Brewing Co.
“The landscape has really changed.”
Those who enjoy a twist to their beer are mostly the millennials, said Euromonitor International’s senior research analyst Jarred Neubronner, who noted demand from this group as one of the factors propelling the growth of craft beer in Singapore.
Echoing that, both Mr Soh and Mr Ngan said younger drinkers tend to crave for something different as they place more emphasis on “what they consume or the people behind the brands”.
More broadly, Singaporeans are well travelled while the advent of the Internet and social media have helped people to pick up new trends from abroad. More craft beer bars have also emerged in the last five years, adding more avenues for consumers to venture beyond the usual lagers and stouts, they added.
“It is inevitable that craft beer will pop up on people’s radars,” said Mr Soh, who also manages alcohol distribution business The Mad Tapper, liquor store Temple Cellars and craft beer bar Freehouse.
Mr Simon Zhao, founder and master distiller at Compendium, shares similar observations.
Prior to setting up Compendium about two and a half years ago, the 36-year-old founded Rachelle The Rabbit Meadery in 2016 where he focused on making mead – a fermented, honey-based alcoholic drink.
Mead remains a staple at Compendium as it is distilled to make the brand’s own neutral spirit, instead of importing from overseas like other distillers here. This neutral spirit is used as a base to create the gins at Compendium, such as the distinctly Singaporean Rojak gin.
“Back then, we had to explain to everyone what mead is and how it is made. To make it easier, we called it honey wine,” he said. “But now we say mead and consumers get it.”
A NICHE MARKET?
That said, some noted that craft drinkers remain a small community and brand loyalty remains a work in progress.
Mr Sean Ou, principal trainer from wine, spirits and sake training and consultancy The Beverage Clique, said consumers tend to gravitate back to name brands for reliability or “a familiar taste”.
“More people are now willing to try, which is good, but what happens after that? Is it a fad or something more sustainable? Only time will tell,” he added.
Mr Chen from Niang Brewery also pointed out the challenge of keeping up with a market that constantly chases for something new.
“Let's say you have a new product and people are willing to try but if you’re re-brewing the same thing, some craft beer spaces may not want to take it because their customers will want something different.”
Meanwhile, the idea of locally-made craft beer and spirits may still be a foreign one to the majority.
Take for instance the private-hire driver whose car CNA took to Singapore Distillery’s office in Jalan Senang for this interview. Noticing the company’s signboard, he did a double take and asked: “They are making alcohol here? Really?”
When asked if he would give smaller local brands a try, the man in his 40s replied: “I don’t know if it’s good. I’m used to what I like. Is this expensive?”
Data from Euromonitor showed craft beer accounted for only around 3 per cent of total beer consumption in Singapore last year, although that has more than doubled from 2015.
As for craft spirits, the market share based on volume consumed was 0.2 per cent in 2015 before edging up to 0.8 per cent in 2019, according to latest available data from the research house.
Industry players acknowledged that the work continues to capture new segments of the market.
From the get-go, Off Day positioned itself as a “friendly” and “lifestyle-driven” brand with a core range of beers that would also appeal to the everyday drinkers.
“The beer we want to do is driven towards the occasion or moments in life. The flavours are still complex but we also put in a lot of effort to make sure they have great approachability for the average joe,” said Mr Soh.
Compendium introduced soju, Korea’s signature liquor, earlier this year as a more approachable option to attract the young and even casual drinkers.
“Sometimes people who don’t drink might be worried about trying a new gin because of its price or alcohol content, so we wanted to have a more entry-level product,” said Mr Zhao.
Singapore Distillery has chosen to ramp up on marketing, both on social media and more traditional mediums like bus advertisements and distributing flyers.
“I think the main issue is just letting people know there are locally-made spirits,” said Mr Sekaran.
“One of the things that we did was to go around and give flyers to the houses nearby. There was a man who was very surprised to know there’s a distillery near his place and he came by the next day to buy two bottles. He’s been a regular since.”
But when it comes to more budget-conscious consumers, industry players said their hands are tied as the chase for flavour naturally comes at a cost.
“The focus shouldn’t be on a price war, but more of our identities and helping people to understand our operations and why we are different,” said Mr Zhao.
Referring to how Compendium makes its own base spirits, he added: “With the additional time and effort, that naturally brings up the cost of a product. We can also import neutral grain spirit and that will bring down the cost but the flavours will be very different.”
Mr Ngan echoed that: “If you knew what went into making a product and the care to ensuring its quality through the value chain, the focus may not be so much on pricing. The driver you met wouldn’t ask if it’s expensive but he might think this is worth his money because this is freshly made.”
COSTS ADD UP
There is also the cost of doing business in Singapore to consider.
Distillers currently pay an annual licence fee of S$28,000 and are also subject to an alcohol tax of S$88 per litre of alcohol content.
For Singapore Distillery, the latter works out to about S$31 of tax per bottle sold, said Mr Sekaran.
“In addition to paying the same tax that an importer would pay on foreign-made alcohol, we also have to pay licence fees that importers will not need to pay,” he added. “All these put us at a disadvantage compared to foreign brands.”
Having to be located in a food zone – designated areas for companies to carry out food manufacturing activities – also means higher rent, adding to the squeeze on local players.
Compendium said while it understands the need to ensure high food safety standards, its rent in Mandai Foodlink is three times higher than a space in a regular industrial area. To cope with the costs, it has chosen not to hire any employees.
“Cost cutting is very important. If we can’t save on other areas, then we can’t hire,” said Mr Zhao who takes on research and development single-handedly. His three other business partners manage operations, distribution and marketing respectively on their own.
Flexibility in licencing and rentals will be of great help, he added.
Mr Frank Shen, who is in charge of distribution at Compendium, echoed that: “Brand communication is very important for a brand like us … but even if I create a tasting room here, who will come to Mandai?”
Costs aside, local distilleries also noted that rules and regulations have not quite caught up with growth in their industry.
Mr Sekaran recalled the process of starting his distillery as “quite a pain”.
“There were no guidelines so nobody knew what to do. We’d call in to ask about starting a distillery and the other party asked if it’s a petrochemical distillery,” he said with a laugh.
“In the end, we told them we are like a brewery but instead of making beer, we make gin.”
Over in the craft beer space, local players now pay much lower fees with the launch of the microbrewery licence in 2012. New market entrants also get the option to pay their licence fees by the quarter during their first year of operation.
These are “very supportive moves”, industry players said. Still, breweries face a host of other challenges such as the booze taxation which is at S$60 per litre of alcohol.
They are also not spared from the high cost of importing ingredients, rents and manpower shortage, said Mr Ngan.
This is why he positioned The General Brewing Co, which he started in 2018, as an “incubation brewery”.
“We figured that what Singapore needs is an incubation facility that can help to find the sweet spot for local brewers to jump into the space without having to waste a lot of money building a brewery from scratch,” he said.
And this has worked out for Niang Brewery, which partnered The General Brewing Co to have its beer made.
“It is the cheaper alternative … and this allows me to focus on building a good product and a solid customer base,” said Mr Chen, who has put in a five-figure sum into his craft beer brand so far.
With the COVID-19 pandemic hurting most sectors, craft players have not been spared, especially when restaurants and bars had to be shuttered during the “circuit breaker” period. Sales at these establishments are usually key for these brands, much like the rest of the local liquor trade.
Fortunately, the pandemic has also spurred a shift to buying online.
“People stayed home during the circuit breaker and travelling is still not allowed, so a lot of the discretionary income has been re-routed into the general local economy over the course of last year. The rising tide floats all boats and Off Day benefited as well,” said Mr Soh, without disclosing figures.
Compendium also saw a rise in its online sales – a pivot it had to make when it noticed business-to-business sales starting to slow at the start of last year. By the time circuit breaker came about, it rolled out a DIY cocktail kit, which proved to be a hit with more than hundreds of orders a day, said Mr Zhao.
Since being allowed to reopen, restaurants and bars have seen a return of customers as people crave for some form of normalcy. And industry players have noted another ripple effect of the pandemic.
“COVID also helped bolster the support local message and what has helped is that more restaurants and hotels are beginning to see value in stocking local craft beer,” said Mr Ngan.
Previously, the fight for shelf space at many local dining spots or bars can be tough for craft players.
“It’s all about dollars and cents. Craft being handmade and in small quantities, the prices can be a bit challenging for some of the smaller restaurants and bars,” said Mr Ou from The Beverage Clique, citing his previous work experience at an alcohol distributor.
“But to have one or two craft beers on the menu wouldn’t hurt actually and could be good for these businesses. There might be a customer who’d walk in, notice the craft brands and think ‘These guys have locally-made alcohol, interesting. I’m going in.’,” he added.
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Mr Ngan certainly hopes more will think the same. “Instead of taking imported beers or commercial beers, some of these establishments have given us the opportunity recently. Hopefully, this can be the trend moving forward.”
So far, local craft beer and spirits brands have been able to carve out a niche for themselves by focusing on local and regional flavours, which helps them to appeal to both local and foreign consumers, said Euromonitor’s Mr Neubronner.
Asked where the industry could be headed, he noted that Singapore is commonly regarded as “the drinking capital of Asia” due to its vibrant nightlife and innovation in cocktail bars.
“Innovation in Singapore’s bars comes from a mix of international artisanal influence and local flavours. Homegrown craft spirits can build upon this reputation to grow in prominence with local and Asian ingredients as a unique differentiator,” he added.
Continued product development is on the pipeline for all craft players that CNA spoke to.
After expanding its range with an orange gin earlier this year, Mr Sekaran said he plans to “keep up with the momentum” and has many flavours up his sleeves. The brand is also looking beyond Singapore and has been in touch with interested parties from the United Kingdom and Malaysia.
At Compendium, its DIY cocktail kit will be refined and re-launched given the popular demand last year. A couple more spirits will also be launched, said Mr Zhao, who believes that the element of novelty is the way to keep going.
“There are still so many more things we can do, like different local flavours to introduce to the Singapore market and also Singapore to the world market,” he said.
“We are having more players, but it’s not a competition. We are all trying to push the Singapore brand out there.”
As for Niang Brewery, Mr Chen is working on collaborations with other partners to roll out “seasonal beers”, while ensuring consistency in its products.
“Consistency is what wins the heart and will make people keep coming back. Like myself, there are a few brands that I always go back to because I know they will never fail me, so this is what I want to work on for my own.”
This year will continue to see more local brewing aspirants entering the scene, according to Mr Ngan. This is inevitable as the market continues to develop, but the risk is becoming oversaturated like what happened elsewhere.
“What we will see is definitely more brands in 2021 and 2022 … and my hope is we don’t suffer the same as what has happened in other markets where we are flooded with a lot of local brands that aren’t bringing in value for the industry,” he told CNA.
“It’s important to keep standards high because at the end of the day, we all just want good beer, right?”