Beer's bonanza

Shifting tastes and demographic preferences are making craft brews more popular than ever. Find out what’s behind the buzz.

On a leisurely sunny holiday weekend, Geoffrey Singer pours himself a cold one and heads for the porch of his Toronto home. He’s keen to taste-drive the beer — Red Racer India Session Ale, produced by Surrey, BC’s Central City Brewers + Distillers — but first he sets both the glass and the empty can on the arm of his Muskoka chair to take a snapshot. He thinks for a moment, then types into his smartphone: “Hoppy and refreshing, but lighter on the alcohol. Do we have a consensus on what makes a great session ale?”

Singer is among the three million worldwide users of Untappd, a social media app that lets beer enthusiasts “check in” with each other, review the drinks they’re enjoying and find pubs, restaurants and breweries nearby that sell those precise brews. While the 46-year-old has long bypassed mass-market brands in favour of craft beers — those made more traditionally, and often more flavourfully, in smaller batches by local independent brewers — the rest of the world is finally catching up to him. Call it the new wine; craft beer is the latest “it” beverage, with 10,000 microbreweries worldwide and a net worth estimated at US$50 billion, and growing

Indeed, by all accounts craft brew is shaking up the beverage industry. Sales of craft beer increased by nearly 15% in the US last year to a total of US$4.6 billion, according to Nielsen. In Canada’s $9-billion brewing industry, craft beer servings in restaurants rose by 7% in 2014, even while overall beer consumption dropped by 6%, reports Toronto market research and analysis firm NPD Group. And craft beer is the fastest-growing segment within the beer category at the Liquor Control Board of Ontario (LCBO), with sales increasing 20% to 30% per year, according to the Ontario Craft Brewers, as consumers become more interested in flavoured, local drink options.

This shift in beverage preferences is part of a larger trend toward a more discerning consumer palate — think artisanal cheeses and sophisticated salts — says Manjit Minhas, co-owner of Minhas Breweries and Distillery (which, in turn, owns Calgary-based Minhas Micro Brewery) and one of the newest investor panellists on the CBC reality TV program Dragons’ Den. “People’s tastes have become more complex, so I believe that beer has become the new wine over the last 10 years,” says the 35-year-old entrepreneur. “There’s more of a variety of taste profiles that satisfy more than just a regular lager or ale drink.”

Minhas ought to know: her company produces 106 varieties of beer — including craft and specialty brews such as Lazy Mutt Gluten-Free lager, Thumper American IPA (India pale ale) and Chocolate Bunny stout — with sales throughout Western Canada, Ontario and the US, as well as 16 other countries. “The craft industry is attracting new consumers from different segments who would normally drink different things,” she says. In other words: non-jock men and young women, who traditionally haven’t been courted by beer marketers.

Demographic preferences are also playing a role in the craft beer craze. Today’s young people are more interested in quality, variety and local products than previous generations were, and appreciate the air of “inclusive exclusivity” that craft beer offers. So, for example, while US research indicates that half of 25- to 34-year-olds have tried craft beer, nearly the same proportion (44%) of 21- to 27-year-olds have never tasted a Budweiser.

“Millennials are really exploring this craft beer market because it’s providing new opportunities for different experiences day in, day out,” says Roger Mittag, a consumer beer educator and professor at Toronto-based Humber College’s School of Hospitality, Recreation & Tourism. At the same time, older consumers are finding their way to the richer flavours of craft beer as an alternative to wine. “We’re splitting it between the boomers and the millennials, which I find fascinating,” he says. “Beer has always been about the party. But we’re starting to get away from that and that’s a really good sign for craft beers.”

FROM BEER TO THERE, AND BACK AGAIN

Of course, locally brewed craft beer is not new to Canada. “It’s gone all the way back to the original traditions of how beer was consumed and that was a very local market,” says Bob Lawrence, senior vice-president of operations at Charlottetown-based Prince Edward Island Brewing Co. “The large multinational brewery is really something we’ve only seen post-Prohibition.”

In the mid-1980s, craft beer resurfaced in Canada with operations such as Brick Brewing Co. and Creemore Springs Brewery. Others followed, including Toronto’s Black Oak Brewing Co., founded in 1999 by professional accountant Ken Woods. “Working nine to five wasn’t that enticing to me. I really wanted to do the entrepreneurial thing,” says Woods, 52, who became interested in a suds-soaked career while working part time at Denison’s brewpub in Toronto after graduating from Ryerson University with a bachelor of business management in 1994. He earned his accounting designation in 1996 while working in finance and purchasing at EDS Canada’s offices in Toronto and Whitby, Ont., but continued to mull over the beer business. “I spent 10 years working on the business plan and touring and reading about breweries and trying to crunch the numbers as much as I could,” he says.

In 2012, more than a decade after fulfilling his dream of opening a brewery, Woods started to see a serious uptick in craft beer sales, allowing him to hire more staff and expand the business. Now, in addition to its award-winning Pale Ale and Nut Brown Ale, Black Oak produces many seasonal and specialty brews (such as Epiphany #1, an abbey-style ale in the tradition of Belgian monks that’s aged with cherrywood) in its 11,000-sq.-ft. facility housing six 40-hectolitre tanks. (A hectolitre is roughly equivalent to 12 cases of 24 beers.) “Sales are going up but there’s more competition now getting into the craft beer market as well,” he says.

And that’s what’s different about the craft beer industry today: the sheer scale of it. There were 483 regional craft breweries operating in Canada in 2015, making it the sixth-largest country in terms of the number of craft brewers after the US, UK, France, Italy and Russia, according to a report by biotechnology company Alltech.

The aggressive growth in the number of small craft brewers is something Mark Murphy, founder and co-owner of Left Field Brewery in Toronto, has also witnessed firsthand. The 33-year-old accountant stepped into the industry three years ago, following stints at BDO Dunwoody (now BDO Canada), AGF Management and Sears Canada. But even in that brief time frame, the craft beer landscape has changed dramatically. “When we announced the opening of Left Field in 2013, the Ontario Beer Network had 100 breweries listed,” he says. “Today, it’s at 300.”

The explosion in craft producers has not gone unnoticed by the three major brewers in Canada. In turn, acquisitions are letting the big players get a piece of the fast sales action. Last July, for example, Molson-Coors brought its craft-style beer, Belgian Moon, to Canada. And in October, Labatt Breweries purchased Toronto’s craft beer darling Mill Street Brewery.

Despite the increased competition, Murphy and his wife, Mandie, have been able to grow their business considerably, doubling Left Field’s production of beer to 2,000 hectolitres in 2015 from 1,000 hectolitres the previous year. They also opened a 6,000-sq.-ft. storefront brewery in Toronto last year and have managed to place their brews, including flagship Eephus and the occasional one-off, such as Sweet Jesus Mocha Marshmallow Stout, on tap at 80-plus bars and eateries and in 13 Toronto LCBOs. Left Field’s development is aggressive — last year it produced 10 different beers and this year it plans to brew 17 unique styles.

The proliferation of craft beer is equally strong in other parts of Canada, especially in East Vancouver, which the Los Angeles Times recently dubbed the craft beer capital of Canada. “Yeast Van,” as it is affectionately known, is home to 20 microbreweries alone, many of which the Times notes are less than five years old. Other notable Canadian markets are major cities such as Toronto, Montreal and Ottawa, while brewers in Atlantic Canada, northern Ontario and the Prairies are also experiencing growth.

Just ask Nicole Barry, who cofounded Winnipeg’s Half Pints Brewing Co. in 2006, and in 2014 launched PEG Beer Co., a 7,000-sq.-ft. brewpub — the hot cousin of local breweries. “When I started in 2006, there wasn’t a craft brewery here,” says 37-year-old Barry, another brewery owner with an accounting background. “We saw what was happening in other cities and wanted that here. So while you could go to a brewpub in Ottawa, until now, you couldn’t in Winnipeg.”

As for PEI, the industry is still quite young but seems to be following a similar trend in terms of transitioning from mainstream to craft beers, says Lawrence. He notes, however, that the transition is slow, in part because it takes time to educate the consumer about this new style of beer. “The consumer really needs to understand craft beer, and then there’s an evolution as to what they buy.”

That’s an important distinction because part of being interested in craft beer means constantly being on the lookout for a new, better, tastier brew. “Craft brewers really need to keep product development and where they’re going top of mind,” says Lawrence. “Generally, it’s not the ‘I’ve got six beers that I’m happy with and we’re going to run our business’ approach. There’s the continual dynamic of bringing new products to market.”

CRAFT'S CHALLENGES

Beyond the passion and creativity required, developing a constant flow of flavourful new brews is a relatively straightforward process. Recipes are often developed within the brewery and, while some have the owner operate as brewmaster, others hire retired brewmasters to fine-tune recipes. That’s the case with Toronto’s Spearhead Brewing Co., which turns to Tomas Schmidt, a former brewer at Labatt. “When we first began, all of our recipes started on my kitchen stovetop,” says Dimitri van Kampen, Spearhead’s founder. “From there, I’d take it to Tom and he’d brew test batches to get it where we wanted it to be. Then we’d take it to our contract brewer and produce a batch there.” Now Schmidt also does recipe development.

The first hurdle seems to be getting the products listed with the local beer retailer or liquor distribution centre, with different regulations from province to province. In Ontario, for example, the Beer Store is owned by three multinational beer firms: Molson-Coors, Labatt and Sleeman Brewing. And the store, which generally sells beers by having customers select a type off a wall or from stacks of cases, isn’t exactly conducive to selling a finely crafted beer, which relies on its creation story, artistic label and depth of flavour to grab new customers. So while it’s possible to simply pay the listing fee and get your beer listed with the Beer Store, it’s not ideal, say some craft brewers.

Meanwhile the liquor store has more of an application process, which can take a few months. “They have to look and decide whether they can fit any more product onto the shelves and whether it’s in the right category or not. And then it has to go through quality-control checks and then the listing is either approved or denied,” says Mittag. “And that happens to everybody, whether it’s craft beer or any imported beer.” Except in Alberta, a province of privatization in which, until recently, you could get a listing relatively easily.

These days, local producers have a distinct advantage due to an increasing number of provincial protection acts. In October, for example, the Alberta Gaming and Liquor Commission announced it would give tax breaks to its provincial brewers, leaving some non-Alberta breweries to mark up their product. “It’s a big tax and that meant overnight our beer went up 60¢ a bottle,” says Lawrence.

Brewers anticipate more of these types of protectionist tax policies could follow. “I think that here in Canada you’ll see more localization and less opportunistic expansion outside your market,” says Lawrence. Minhas agrees that interprovincial growth is a looming market challenge. “It’s easier to sell our beer made in Calgary down in the United States than in other provinces,” she notes, citing the ability to negotiate deals with large US retailers such as Costco and Trader Joe’s.

Even with these specific challenges, Barry argues the industry is in good shape. “I often joke that it’s really hard to find a struggling craft brewery. You don’t hear about many craft breweries going bankrupt,” she says. “Sales aren’t an issue.”

At the same time, with aggressive growth in the breweries in Canada, the market is propelling itself towards saturation. “It’s getting to the point where there are so many new entrants, I wonder if soon only the strongest survive,” says Murphy. “There’s always been a focus on quality in craft brewing, but it’s getting more important as there are new entrants. Not every brewery is being started by someone who has the most experience so sometimes there are bad beers. It can be a bit of a crisis for the industry if more bad beer is being produced.”

For now though, says Woods, the growth is more than welcome and with more educated consumers, he hopes for more drinkers to add a craft option to their drinking portfolio. “Because these days,” he says, “you’re not drinking the same beer your parents drank.”

About the Author

Astrid Van Den Broek


Astrid Van Den Broek is a freelance writer based in Toronto.

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