Nanobreweries: The next phase of evolution in Singapore’s craft beer scene

Clockwise from top left: Compendium, Niang Brewery, Off Day Beer Company and Singapore Distillery. (PHOTO: CNA)
Clockwise from top left: Compendium, Niang Brewery, Off Day Beer Company and Singapore Distillery. (PHOTO: CNA)

CNA’s recent coverage of craft breweries in Singapore has made one fact clearer than a cold-crashed beer: craft beer brewing is no longer a hobby for many but an opportunity to grow a viable business.

As nascent as the industry is, however, craft beer brewing in Singapore has the potential to be stymied in its infancy.

Two high barriers to entry still exist: an unnecessarily prohibitive cost in licensing fees and an unintended case of Hobson’s choice within Singapore’s microbrewery policies.

An unnecessarily prohibitive cost
From both the article itself, as well as the experience of local microbrewers, the cost of operating a brewery is prohibitive for aspiring entrants to the scene.

To operate a microbrewery in Singapore, one pays a flat fee of $8400 a year to produce up to a whopping 1.8 million litres of beer per annum.

Both figures provide some pause for thought: If Singaporeans imbibe about two litres of alcohol annually, can each microbrewer actually hit its quota and serve 900,000 customers?

This is doubtful; that number is three times more than the 300,000 Singaporeans who are regular drinkers.

Moreover, not only are Singaporeans spoilt for choice with a variety of alcoholic options, both local and foreign; craft beers have a very niche appeal to a limited market segment right now.

Under the current circumstances, the amount a microbrewer could feasibly produce to meet existing demand is probably a hundredth or a thousandth of the existing quota.

So the $8400 licence fee is a higher-than-necessary outlay, given the already restrictive start-up costs in the food and beverage (F&B) industry – equipment, rental, registrations, permits and raw materials, among others.

Even if the intention is economic in nature – to discourage the production of a good deemed harmful to consumers’ health – the excise duty payable on each litre of beer produced already serves this prohibitive purpose.

If existing brewers already feel the financial burn, then what more new entrants into the market?

An unintended Hobson’s Choice within policy
A loosening of these restrictions was made in 2019, when Senior Trade and Industry Minister of State Chee Hong Tat announced an enhanced fee arrangement for new microbrewery start-ups.

It allows them to pay a pro-rated licence fee based on the period of operation of the licence in the first year, subject to a minimum operating period of three months.

Instead of committing to a full annual fee of $8400, new and aspiring microbrewers can pay just $2100 to commence with brewing beer for business.

Therein lies the rub, possibly unintended: regardless of whether the fee is $2100 or $8400, it is still a Hobson’s choice.

In order to even brew one litre of beer for business, new microbrewers must pay $2100 while existing microbrewers fork out $8400 – or forfeit all business brewing eligibility.

At the same time, there is no differentiation between microbrewers who brew 1800 litres, 180000 litres or 1.8 million litres – all are charged the same fee.

To get more bang for their buck, microbrewers would want to brew greater volumes in order to spread out the cost of the licence fee. This would also translate to lower prices for the customer.

But this has to be managed in conjunction with existing demand for their beer, as well as the additional excise duties they pay on each litre of beer brewed.

Nanobreweries: The next phase of craft beer in Singapore
Based on the back-of-envelope calculations provided earlier, microbrewers in Singapore might only be able to manage a production quantity of anywhere between 1800 litres to 18000 litres per annum.

While the figure might be more for some, it is possibly much less than the present quota of 1.8 million litres.

In this case, Singapore Customs could consider how the craft beer scene in Singapore might evolve: by regulating smaller breweries under a nanobrewery scheme.

This would be simple to implement, as it would sit alongside the microbrewery scheme that exists in the present Excise Factory Scheme.

In the US, a nanobrewery can be defined as one that produces 2000 barrels (approximately 234000 litres) of beer per year.

In a Singapore context, a proposed definition of a nanobrewery could be:

A very small-scale brewery that ferments or manufactures beer, where annual production volume is less than 180,000 litres.

A nanobrewery would thus be 10 per cent of a microbrewery’s size.

Next, instead of a flat fee for licensing, nanobreweries could be charged a variable fee between $84 to $840, based on the volume of beer produced per annum.

Again, there is relative ease of implementation, as it would ride on an existing process; the output of microbreweries is already tracked due to the requirement to pay excise duty on the beer produced.

For parity, nanobrewery licencing rates should be commensurate with that of microbreweries.

Since microbrewers pay, by ratio, $84 for every 18000 litres of beer produced, it would be fair to charge both new and existing nanobrewery applicants $84 as their annual licence fee upon first or annual registration.

Thereafter, nanobreweries exceeding 18000 litres of annual beer production would pay $84 for every subsequent 18000 litres of beer produced, up to 180000 litres, or up to $840.

The moment nanobreweries exceed 180000 litres of annual beer production, they would automatically become microbreweries and pay the full $8400 fee.

This table provides a summary:

Annual Production Volume Fee (SGD) Remarks
First 18000 litres $84 To be paid by new and existing applicants as annual licence fee upon first/annual registration.
Every 18000 litres thereafter, up to 180000 litres $84 To be measured based on volume produced and paid by new and existing applicants along with excise duty payable. Licence fee would be for up to 180000 litres or $840.
More than 180000 litres and up to 1.8 million litres $8400 Nanobrewers exceeding 180000 litres annual production automatically become microbreweries and pay full $8400 fee.

Let the beer market decide
With lowered barriers to entry and the rise of nanobreweries, the market will inevitably be flooded with lower quality products at the beginning.

While this is a fear which existing microbrewers have acknowledged, it is a harsh truth for all industries, F&B or otherwise.

Yet, the invisible hand has its way of deciding who should stay and who should go.

A little over a decade ago, a pub in Clarke Quay called Beer Market opened with a unique concept – instead of fixed prices for its beer, prices would vary according to demand and supply.

The higher the demand for a particular type of beer – and presumably, the lower that beer’s supply went – the higher its price would go.

Conversely, beers that weren’t in demand would correspondingly see both their prices drop after a while and consumers taking the opportunity to buy these beers at discounted prices.

The spike in demand for those beers would see their prices go back to normal, while the movement away from the previously popular beers would see those prices go back to normal too, and so on.

While it had its fair share of fans, Beer Market closed around 2015, itself presumably a victim to market forces too.

Likewise, in the case of nanobreweries, even if the prohibitions to enter the brewing industry in Singapore are decreased somewhat, the beer market will ultimately decide which brewers will exit the market.

That should lift the spirits of regulators and hopheads alike as they raise their glasses in cheers to more – and better quality – Singapore-made beers .

Slowing down in order to speed up

Hare watching a tortoise cross the finish line.
Getty Images

Sometimes, it’s important to slow down in order to speed up.

I was reminded of this paradox while listening to John C. Maxwell’s podcast on “How to Leadershift Successfully”.

This episode centres on how to effect change from without through starting the transformation journey from within, as part of the process of becoming a better leader.

In the recording, Maxwell touches on the concept of “fast forward”, where societal and global change has been taking place in faster and shorter cycles.

While talking about it, he says:

I love people who say, You know what, I tell you what: It’s just the pace is going crazy; I can hardly wait for things to slow down. (Pause.) Slow down. (Pause.) That means you’re gonna die. (Laughter from the audience.) Things aren’t gonna slow down. Fast is faster. And it keeps going – with technology and social media, fast just gets faster. I mean, fast isn’t gonna get slower; fast isn’t gonna stop; fast isn’t gonna call “time-out”. Fast is faster.

The insinuation: when someone talks about “slowing down”, they are both resistant to change and unaware that change is the only constant in life.

On the surface, Maxwell’s reading makes sense. Diffusion of innovations theory posits that there will always be laggards in some way, shape or form.

But there’s the rub. Both theory and practical experience show that it’s not that people don’t change or don’t want to change.

If they will change – eventually – then where is this resistance, that Maxwell is describing, coming from?

In addressing the matter of resistance, Maxwell himself is instructive, having previously mentioned:

Don’t pretend resistance will go away on its own. Draw it into the open. Invite the voices of discontent to the table. Put your pride aside and listen. Remember, it isn’t personal. You can’t deal with resistance until you understand it, and you won’t earn buy-in until you understand people’s reservations and the reasons behind them.

And in the podcast itself, Maxwell himself goes on to talk about how leaders can hone their craft through introspection, offering sample reflection questions such as:

How open am I to change?
Am I becoming a better listener?
When will I begin to ask more questions?
Can I become comfortable with ambiguity?
Do I rely on my intuition enough?
How adaptable am I as I begin to lead?

(my emphasis)

In light of these ideas about listening, understanding and changing one’s own beliefs, perhaps some self-reflexivity is needed when thinking about the anecdote and the leadership principles that Maxwell has shared.

For starters, it’s a known fact that when:

…we hear something that opposes our most deeply rooted prejudices, notions, convictions, mores, or complexes, our brains may become over-stimulated, and not in a direction that leads to good listening. We mentally plan a rebuttal to what we hear, formulate a question designed to embarrass the talker, or perhaps simply turn to thoughts that support our own feelings on the subject at hand.

So there might some degree of bias clouding the interpretation of what the speaker of said anecdote is saying.

Perhaps leaders need to ask:

  1. Am I hearing what the speaker is saying – but not actually listening to what the speaker is saying?
  2. Is what the speaker saying what I think it to be, or what it actually is?

The results from this exercise might then turn out to be very different from the reality that has been perceived, especially around the idea of “slow down”.

The phrase might not mean “slow down” or “stop”, and it might not be even about the speaker who utters the phrase.

Leaders might want to consider that “slow down” could well be a polite way of talking about leaders and/or their leadership.

And the phrase itself could well have a multiplicity of meanings, three of which could be:

  1. Take stock.

    Originally, there was an intention to move in a certain direction. However, the organisation seems to be in a different place right now.

    Is there a new direction of which people are unaware? Have the objectives shifted – which entails a corresponding shift in execution?

    Or worse: Has everyone been doing things wrongly, such that the organisation is way off-course?

  2. Find a better way.

    There needs to be change, but it needs to be done in a better way.

    People might not know what this is yet, but they do know when things being done at the present moment are not working out.

    Can leaders work with people to find that better way, together?

  3. Streamline.

    There are new things that have to be done in order for change to happen.

    Correspondingly, there are things that have to carry on being done, because they are a part of the core business.

    What are the things that can be done away with, either because they have lost their relevance, or were never relevant to begin with?

    A greater focus reduces the feeling of being overwhelmed, which in turn reduces the desire for “slowing down”.

These are but possibilities, of which no certainty is known.

Yet, it is possible for leaders – and, perhaps, Maxwell himself – to be certain of what actually is going on when someone says “slow down”.

But this entails the very act of hitting the brakes – and even coming to a halt.

As Maxwell himself argues, leaders need to be comfortable with the counterintuitive – and, seemingly, counterproductive – ambiguity this creates.

Only then will they be able to, slowly but surely, transform their organisations and the world in meaningful ways that are effective for the fast-changing times.

Stuff you must read today (Sun, 16 Feb 2020) – The Explaining Incompetence Edition

  • Research: Do People Really Get Promoted to Their Level of Incompetence? | Harvard Business Review
    A confirmation of The Peter Principle and how firms can manage around it: creating a structure in which top performers are rewarded with pay rather than promotion; and promoting, to managerial positions, staff who are above-average in individual contributor roles, but savvy in skillsets of leadership.

  • The Basic Laws of Human Stupidity | Carlo M. Cipolla
    An essay by an Italian economic historian that provides an explanation for human behaviour in the world.

  • The Dunning-Kruger Effect Shows Why Some People Think They’re Great Even When Their Work Is Terrible | Forbes
    “…many people are underperforming simply because they don’t know that they could be doing better or what really great performance looks like. It’s not that they’re necessarily being defensive, rather they just lack the knowledge. In fact, he told me that research subjects were willing to criticize their own previous poor skills once they were trained up and could see the difference between their previous poor performance and their new improved performance”.

  • If Humble People Make the Best Leaders, Why Do We Fall for Charismatic Narcissists? | Harvard Business Review
    “…narcissistic individuals radiate ‘an image of a prototypically effective leader.’ Narcissistic leaders know how to draw attention toward themselves. They enjoy the visibility. It takes time for people to see that these early signals of competence are not later realized, and that a leader’s narcissism reduces the exchange of information among team members and often negatively affects group performance”.
  • Putt’s Law |
    “I really admire managers who follow the management-by-walking-around (MBWA) principle. This management philosophy is very simple: The best managers are those who leave their offices and observe. By observing they learn what the challenges are for their teams and how to help them better.

    So, what I am looking for in a manager?

    1. He knows he is the least qualified person to make a technical decision.
    2. He is a facilitator. He knows how to help his technologists succeed.
    3. MBWA.”