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?