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Small ales, big sales

Craft beer-makers are thriving even as big brewers struggle


 

Last year, B.C.’s Phillips Brewing Co. doubled its staff. Next month, the Victoria microbrewery—a gold medallist at the Canadian Brewing Awards—will double capacity, says its amiable master brewer, Matt Phillips. The Nova Scotia native launched the brewhouse, one of seven Victoria beer-makers, eight years ago, juggling credit cards after banks took a pass on his business plan. Last year was among his best yet. “All the brewers I talk to have had a really good year,” says the 35-year-old, who is hoping to begin exporting to the U.S. In a recession-gripped economy, few other businesses can boast of such success.

In B.C. alone this year, a string of new microbreweries opened their doors, among them Driftwood Brewery and Surgenor Brewing on Vancouver Island, and Triple Island and Plan B Brewing Co. in northern B.C.—all pricing their products higher than mass-market beers. True, beer has long proved more recession-resistant than other industries. But last year, Canada’s overall beer industry, which has been flat since 2002, slipped into decline. Even heavyweights Molson and Labatt saw sales dip by three per cent. In the U.S., beer sales dropped a whopping 14 per cent in the final quarter of 2008. Indie “craft” beer-makers like Phillips, however, are bucking the trend. Despite a higher price point, and without marketing or advertising, they’re seeing double-digit growth. Indeed, they represent the industry’s fastest-growing segment—and they are striking fear into the mass-market brewers who dominate Canada’s $8-billion beer industry.

Last year, B.C. microbrewers posted sales increases of 14 per cent, outpacing even the bigger, more established craft market in the U.S., where sales grew by 11 per cent to $6.3 billion. In Ontario, where microbrewers have captured five per cent of the market share, the provincially owned LCBO rang in $17 million in craft sales, a 30 per cent increase over the previous year. Yukon Brewing Co., one of the country’s fastest-growing breweries, has even begun outselling mega-brands like Molson in Whitehorse, its local market—a shift that, 10 years ago, would have been unimaginable.

“The market is going like gangbusters,” says Paul Woodhouse, a chartered business valuator specializing in the beer industry for Vancouver’s First Key Consulting. “The big trend in beer right now is a switch from industrial beers.” Because more and more people want a “really tasty, hoppy, flavourful beer,” he says, a bunch of new craft beers have come to market. With names like Goldihops, Skull Splitter, Slam Dunkel, Trout Slayer, Old Leghumper, Ale Mary Full of Taste, and Back Hand of God Stout, they’re easy to spot.

Craft brews, known for an ever-increasing array of exotic ingredients, like saffron, honey, dark chocolate, bergamot oranges and black cherries, also fit with the foodie zeitgeist—although they’ve lagged well behind wine and organic produce, says Rebecca Kneen, who owns Sorrento, B.C.’s Crannog Ales, an organic microbrewery. “Our palates have evolved,” says Kneen, who adds we’re moving away from industrial beer the same way we have from Wonderbread, processed cheese, and other marvels of modern food science. (And yes, beer geeks are likely to stick their noses deep into a pint glass, take in the notes of a sahti juniper ale, or pick out the horse-blanket scent in a Belgian-style oud bruin.)

“Once you taste a craft ale,” says Nicholas Pashley, author of the new book, Cheers! An Intemperate History of Beer in Canada, “there’s no turning back.” Budweiser—now the top-selling King of Beers in Canada, too—has half as much malt, one-third the hops and one-tenth the IBUs, a standard measure for bitterness, than a standard West Coast India pale ale. It also has five per cent alcohol content, packing, says Pashley, all the punch of a four-year-old.

In response to this radical shift, even the big macrobrewers are trying to get “crafty”—a sure sign they’re nervous about slumping sales, and the army of tiny competitors chipping away at their market share. Last year, MillerCoors entered the game with three distinctive “small batch” beers. (“Craft Beer. Done Lite,” it cheekily promises.) Last summer, the Belgian-Brazilian monolith, Anheuser-Busch InBev, launched Beach Bum Blonde Ale and Jack’s Pumpkin Spice Ale, and a marketing campaign featuring vivid descriptions of flavours, aromas, pouring techniques and food pairings. The big beer-makers have been trying to buy their way into the sector. This fall, MolsonCoors, which owns Creemore Springs Brewery in Ontario, snapped up Granville Island Brewing Co., one of B.C.’s first microbrewers. MillerCoors also owns Blue Moon, the second-biggest-selling craft beer in the U.S.

MolsonCoors, which now has a U.K. research group studying how to make beer more attractive to women—an audience they’ve long chased off with breasty, sexist adds—has also launched low-calorie Molson 67. In Quebec, it’s also test-driving another gimmick: Molson M claims “smaller, finer bubbles.”

Canada’s beer landscape has changed considerably in the past decade, and not for the better for big brewers. Sales of the former national superstar, Labatt Blue, are “tanking precipitously,” says Pashley. Labatt’s owner, Anheuser-Busch, is instead pitching powerhouse global brand Stella Artois to Canucks. MolsonCoors, which continues to struggle under foreign ownership, is down five per cent from 2001 to a 40 per cent share of the national market. Intense brand loyalty is a thing of the past, says new CEO Dave Perkins.

Still, Big Beer makes up 85 per cent of Canada’s beer market. And they’re doing their best to make sure that’s not eroded any further. In Ontario, the Beer Store, which rings in some 80 per cent of beer sales, is owned by MolsonCoors, Labatt and Sleeman, a set-up that limits exposure of small brewers. Currently, Labatt and MolsonCoors each boast bigger sales than all the microbrewers combined. But traditional tactics—mergers, takeovers, and patriotism (roused to near-orgiastic heights with Molson’s “I am Canadian!” ads)—will have a tough time building on past success. Successive mergers have birthed two mega-corporations, and neither one is Canadian-owned (they’re not even U.S.-owned anymore). With wine hot on its heels, the country’s beer market has tapped out. “The big question industry analysts are asking,” says Woodhouse, is “where will earnings come from next?”

For craft beer-makers, it seems the sky’s the limit. Halifax’s Propeller Brewing Co. has seen four years of 20 per cent growth. Oskar Blues, which saw sales spike by 64 per cent last year, even poached a chief brewer from Coors—he was hooked, he says, by small brewer’s “huge” growth potential.

Enthusiasts see crafts carving out a 15 per cent market share by 2015. Realistic or not, the growing demand for microbrews stems from drinkers themselves, who are asking for fresher, tastier beer that’s made closer to home, by locally owned companies.
Stimulate your economy, and your taste buds. That could really take off, eh?


 

Small ales, big sales

  1. More great news for the #craftbeer industry!

    One of the fun facts is that big beer cannot ever compete in this field. They are always going to be macro, not micro, nor craft. Marketing will not make the liquid taste better. Producing craft on a grand scale is like mass producing a home baked cookie… I like the observation that "our palates have evolved" and can we add that our wallets have gotten smarter? We are spending our dollars on quality and we are spending in our communities. Check out this local initiative http://www.the350project.net

    I also heard great stats of craft beer industry growth in Michigan. Founders and Arcadia are stepping it up.

    • I just had a Founder's Porter. Those guys made damned fine beer.

  2. I am optimistic about a future where every town has its own brewer, and every region has its own specialties for drink and drinking culture.

    • That would be great.

      I'd note, though, that not all macrobrewing is terrible; that seems to be a distinctively North American phenomenon. I'm a big fan of Czech beers like Czechvar, Staropramen, and Pilsner Urquell, which are practically multinationals at this point.

      One thing's for sure: in the village level or worldwide, quality will eventually win out.

      • Oh, I'm not saying one thing or another about the quality of macrobrewing.

        I just think it would be nice to be able to go down to your local pub and get a beer you can't get anywhere else in the world, and to drink a type of alcohol that is unique to your local area. If you go to Saskatoon, you should be able to buy a bottle of Saskatoon berry wine. If you go to Nova Scotia, you should be able to get wine made from L'Acadie grapes. Beer recipes should be closely guarded secrets instead of just being lager with hops, and come in an infinite variety. I want to know where I am by what I'm drinking.

  3. Great article, I read it last night in the print version over a bottle of Propeller Bitter.

  4. Canada's echo-boom is peaking at about the legal drinking age now. Traditionally, younger drinkers are beer drinkers. However, I have noticed a distinct trend among the dads of echo boomers towards premium beers – craft or not. JM above refers to some premium Czech beers – some I know and love, others I will now put on my "to do" list – that are not small batch craft beers. The same can be said of Stell Artois, Grolsch, Hoegarden, etc… name your favourite. The point is quality ingredients, proper brewing techniques and product integrity.

    I would be interested to try a Labatt's 50 or Blue or Molson Export or Golden made the way they were before the Wonderbreadization changed their original characteristics.

  5. I think you’re all mistaken if you think macrobrewers can’t do microbrew style beers. They are totally capable of producing beers in smaller batches, or making them for more local markets. I would expect them to do this simply because there is the potential for higher margins, and a large company can provide value in terms of sharing support facilities and services or even space in a brewery, as well as marketing expertise.

    • It isn't just a matter of making beer in small batches and marketing them to local markets (though even there, microbrews tend to have more local information than macrobrews). One problem is image – the mere fact that something is made by a macrobrew brings out the skeptics. Go on beeradvocate – the beer snobs are not kind to attempts to produce a micro-macrobrew.

      Microbrews live and die on a kind of marketing where quality, not big budgets are key. This is part of why they are such a recent development. Without the Internet, and the ability to research different beers, I'm not sure we would have the microbrew revolution. Can macrobrews produce high quality beers in small batches, marketed to very specific niches? Can they gain street cred among beer snobs? Maybe, but my experience causes me to have some doubt. Michelob, for instance, has some attempts at craft beers. Most are terrible.

      What is a more likely outcome is that macrobrews will simply buy out promising microbrews, or that microbrews will become increasingly like macrobrews. New Belgium and Sierra Nevada are getting pretty big, for instance.

  6. Hats off to MacLean's and Nancy Macdonald for delving further into the nuances of the Canadian beer market. If you look at it from the very generalized perspective of MillerCoors and Anheuser-Busch InBev, as much of the mainstream media are wont to do, things look bleak. That neglects the grassroots craft brewing movement on both sides of our border that is reacquainting people with their taste buds.

    If you consider the variety of beer styles that we can enjoy (http://www.bjcp.org/2008styles/catdex.php), the vast majority of people in Canada have been marooned on the tip of an iceberg — and we haven't even begun talking about opportunities for food pairing (http://beertown.org/education/matching_chart.html… It's time to move on from Wonderbeer.

  7. Phillip's Brewery produces the best beer, without contest or thought. "Surly Blonde" — epic. "Slipstream Ale" — miraculous. "Longboat Chocolate Porter" — redefines chill.

    Buy all three.

  8. Andrew – spoken like a true molson accountant. The fact is the mega brewing conglomerates can't do it because they lack the brewing culture that drives all the great emerging craft breweries to innovate. You talk about 'margins' and 'marketing strategies' and cost efficiencies. They just have the passion and the courage to brew the beer they want to brew and dare you to like it – instead of conducting consumer preference research panels (which are, when you think about it, kind of the reason their beer has sucked for so long and their sales are tanking).

    • I wouldn't say their sales are "tanking" because 85% still prefer macrobrew. Somebody is buying the Budweiser and Molson beers at the liquor store. They like it because it "tastes like beer" to them, namely a weak flavoured beer that they chill in the refrigerator to reduce the taste even more. A lot of people simply don't like the taste of beer, nor like to experiment with new kinds of beer, even if they enjoy the alcoholic content.

  9. I love the rise of microbrews. When I was younger (high school/university), drinking was a ubiquitous feature of social events. However, the kinds of beer one is usually exposed to as a younger person is often terrible. I developed the assumption that I was not a beer person, and leaned towards wine and whisky. Not too long ago, I had gone on a long walk and was rather dehydrated. As such, I went into the first watering hole I ran into – a weird cafe run by a transvestite. Maybe it was the dehydration speaking, but I saw a .22 of Fat Tire, and for some reason it just sounded good. And indeed it was. Later I tried their 1554 – a beer that appealed to me conceptually (I like the idea of beer made from an ancient recipe that should probably be drunk in a goblet). It was even better. Today, of course, I would scoff at such offerings – for I have tasted the St. Ambroise Oatmeal Stout (my current reigning best beer ever), and it is good.

    The problem with macrobrews is that they tend to expose people to only a minority of the diverse world of beer. Generally they are crappy lagers or pale ales. Yet people's tastes vary considerably. I don't know how many people I have talked to that say, for instance, "oh I don't like beer, except maybe Guiness". Wouldn't it be a good idea for some big company to market a stout to those people?

    Of course living in the United States has been a big help in that regard. Beer stores here actually show their wares, unlike most I encountered in Ontario. This should be no surprise, given that Ontario's beer stores are run by a government licensed oligopoly (Sleeman, Molson and Labatt). They don't want you to know that there is a world beyond crappy blue (on top of that it is considerably cheaper here). No, they want you to be like my dad – to find the least crappy brand (he tends toward either Sleeman Dark or Upper Canada Dark) and buy 2-4's of it out of habit.

    Ontarians shouldn't need another reason to overthrow the current beer regime, but the microbrew revolution gives them a damned good one.

  10. Refreshing news indeed! (ok, sorry for that, couldn't resist) It is nice to see the corporate engineered beer finally getting it's just rewards. Personally I call it soda pop beer, and it has very little to do with real beer.
    As an analogy, take for instance the corporate hamburger, anyone remember the legal row a few years ago about calling burgers with fillers 100% pure beef? And the deal cut allowed for something like 17% fillers to qualify as 100%. When is the last time corporate burgerland had a sign in the window saying 100% pure beef?
    It is a similar fate suffered by beer. Why do they want you to drink it ice cold? Cold alcohol stuns the taste buds, now why wouldn't they want you to be able to taste it?

  11. interesting thread of comments here folks…and I will re-iterate that I and my colleagues are respectful of the thoughts, tastes and perspectives of beer drinkers. There's always lots of passion around when beer drinkers start talking about what they prefer or don't. I would suggest that our world class brewer masters and their team would like be a little bit offended by the suggestion that they are not capable of producing some of the product that people might like in a craft brew. Would love to forward this conversation further and perhaps engage some of our brewers if people are truly interested. For that matter I'd offer the chance for people to come out to the brewery, meet the brewers themselves and see for yourself that we might be larger in scale but that our brewers and their teams still put the time, devotion passion and commitment into what they continue to create with their artistry. Cheers @MolsonFerg

  12. Oh sure they're capable of brewing great beer, they're just not allowed to. Their "artistry" is stifled by accountants and research groups. The problem with the fake Craft Brews the large companies produce is they are 99% of the time weak watered down versions of the true style, ultimately confusing the consumer into thinking they're actually expanding their beer horizons but they're never leaving the safty net of bland lagers.

    Jack – In no way shouldn't you be entitled to enjoy the beers you do but people need to realize the "Czechvar, Staropramen, and Pilsner Urquell…" are the Canadian and Blue of their respective countries. Stella in England is referred to by many as "wife beater" and considered a beer to get pissed on, they have done a brilliant job here of marketing it as a premium beer . The marketing teams do need to be applauded they are good at what they do, convincing the masses that they're expanding their beer drinking experience while charging them a premium for another bland lager. A fancy glass does not make a fancy beer.

    MolsonFerg how many public affairs offices are there at Molson Coors for you to be the chief of? What do they all do?

    P.S. The guys at Philips do make outstanding beer!

  13. @MolsonFerg I appreciate you posting on this thread. I for one will take you up on the Molson tour…I wouldn't mind sharing a beer with you after as well. I am intrigued by this 'Microcarbonated Lager" that Molson will be launching. What light can you shed?

  14. Hats off to MacLean's and Nancy Macdonald for delving further into the nuances of the Canadian beer market. If you look at it from the very generalized perspective of MillerCoors and Anheuser-Busch InBev, as much of the mainstream media are wont to do, the beer market is cause for concern. That neglects the grassroots craft brewing movement on both sides of our border which is reacquainting people with their taste buds. Canadians are finally becoming aware that "beer" means a lot more than just lager (see http://www.bjcp.org/2008styles/catdex.php). And we haven't even begun looking at pairing beer with food (http://beertown.org/education/matching.html).

  15. I was never a big fan of beer, until in recent years when I discovered craft beers of Victoria. Now I am unabashed craft beer snob, if it's not craft beer, I'll just have a coke. Vancouver Island Brewery is number one in my book. Swans Brown and their yam fries are a deadly combo. Current favourite is Spyhopper, an award winning brew. Great article that made me aware of yet another local craft brewery.

  16. Yup. Vancouver Island has some damn good beer!

    What's great is that local bars support the microbrews as well. Blue Buck is now the go-to pint for many Victorians, and now with some competition, like the delicious Crooked Coast Amber Ale released this year, the market for microbreweries is really taking off.

    I come from Alberta where there is little to none of this going on. It is sad what I had been missing out on! Molson Canadian just does not taste very good. I went home recently and tried Calgary's "Wild Rose" brewery, which while not great, is nevertheless good to have in town. But what really drives the microbrewery market in Victoria is the fact that we also value and promote and love our small businesses. It is hard to see why Calgarians will care about microbreweries for this reason. Just a thought.

  17. Agreed. I'm proud to live where I can drink such great craft beer that is also local. I really see no value in paying what is already a lot of money (BC!) for crap Molson, Coors, Bud, nearly anything in a can when a few dollars more can get you a new, fantastic beer and experience each time. So much to choose from.

    I'm a big fan of almost everything Phillips makes, and some Lighthouse.

    Congrats Phillips, you deserve it.

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