The Bar Towel

From the Globe and Mail
http://www.theglobeandmail.com/report-o ... le2263636/

I found this to be a fascinating story from a business perspective. Brewing beer is now a business with a low cost of entry. Just about every new(ish) craft brewery has their sales grow by leaps and bounds, can't keep up with demand and has plans to expand. Beau's plans to have a capacity of 150,000 hl is no small potatoes (or should that be no small hops?). To make room for all this extra beer sales there either has to be a significant shift in the beer mix between the macros and micros or an increase in total beer sales. Either that or a lot these startup craft breweries will find themselves competing not with the macros but with each other and not all will survive.

Cool article, thanks for posting. The Flying Monkeys video at the bottom is interesting too.

I get it, Spearhead is 'cutting edge' because they have a beer with pineapple in it but how in heaven's name can they honestly be thought to be among the "shakers" of the Canadian industry? ONE BEER!

Look, they have potential and are a good group of guys but I think this whole "Beer without Boundaries" slogan thing is allowing people to jump on their wagon to the detriment of other real shakers who have been shaking the industry both here in Ontario and elsewhere in Canada for much longer and to a much greater degree.

Just my 2 cents.

PaulV, you must be a man of many means if starting a micro brewery is low cost entry to you. A million would not get you very far in this buisness.

W.

Weissebier wrote:PaulV, you must be a man of many means if starting a micro brewery is low cost entry to you. A million would not get you very far in this buisness.

W.

I can assure you that I was hardly speaking from a personal viewpoint!
"Low cost entry" is a business term to denote how easy it is to get started in a particular business. Want to start your own cell phone company? Think billions and wait years to see a profit. Or why today it would be impossible to start a new cable TV network since all of the potential market is already serviced by an existing provider.
Spearhead started with an investment of $500,000, not an inconsequential amount, but not huge for a startup either. Given the dozens of craft breweries that have started up in the past 10--15 years and have been successful, the barrier to entering the beer making business is not vey high.

paulv wrote:

Weissebier wrote:PaulV, you must be a man of many means if starting a micro brewery is low cost entry to you. A million would not get you very far in this buisness.

W.

I can assure you that I was hardly speaking from a personal viewpoint!
"Low cost entry" is a business term to denote how easy it is to get started in a particular business. Want to start your own cell phone company? Think billions and wait years to see a profit. Or why today it would be impossible to start a new cable TV network since all of the potential market is already serviced by an existing provider.
Spearhead started with an investment of $500,000, not an inconsequential amount, but not huge for a startup either. Given the dozens of craft breweries that have started up in the past 10--15 years and have been successful, the barrier to entering the beer making business is not vey high.

however many people in the US are predicting that 2012 will be the year the bubble pops.......

i dont think we are that far away in ontario either, we may see more Indie Ale House size breweries but bigger then that i dont think there will be many more

actually i would bet that the next new ontario brewery to make a big splash in the craft beer game will buy an existing (failing) brewery rather then start one from scratch

matt7215 wrote:however many people in the US are predicting that 2012 will be the year the bubble pops.......

is there an article or source you can point to?

The comment from Dimitri on the number of female customers is interesting. In my observations, the rise of craft beer sales has a lot to do with women coming into the beer fold where they weren't interested before. My wife, mom and sisters are all bigger beer snobs than me!

Even something as trivial as dropping by Volo, that used to be the domain of beer gut nerds like me, now reveals many young women coming in to try new beers. On a couple of visits, it was like ladies night in there and they were more adventurous in their pints than us.

Marketers are always talking about disenfranchised target markets. I suspect the craft brewers stumbled upon an untapped market beyond their own clique and are growing by luck. Not a bad thing, but it could be quickly hijacked.

Beer geeks like us might be swayed by authenticity, which the younger demographic also appreciates. However, there are probably lots of people coming to the craft fold because of taste and quality. The big boys could actually match those if they put their mind to it. It might not seem 'authentic' to the tribe, but lots of people will drink flavourful beer if it was offered to them.

paulv wrote:

Weissebier wrote:PaulV, you must be a man of many means if starting a micro brewery is low cost entry to you. A million would not get you very far in this buisness. .

Spearhead started with an investment of $500,000, not an inconsequential amount, but not huge for a startup either. Given the dozens of craft breweries that have started up in the past 10--15 years and have been successful, the barrier to entering the beer making business is not vey high.

I have often made the point to the wonderful folks who are willing to lay everything on the line to start a small business in a volatile, massively over regulated market that you need a million to start a 5000 hl brewery. 500 grand to buy equipment and convert the leasehold and 500 grand to survive the first year. Remember, this is a local, small business... not a national tech startup.

The Spearhead effort falls into neither category. It is a marketing effort designed to sell you brand equity without committing to the capital investment. Look at the website. An unbelievably large corporate structure for zero assets other than a few decorated vehicles parked at Cool Brewing. I can see where the 500 grand is going. It is a proven recipe with Sam Adams as long as the product meets sales expectations.

I wish them all the best but my respect goes to the folks who make the commitment to actually craft a beer and not a tagline. I have often called Steve at Beau's a sleazy marketing knob but he does it incredibly well and put it all on the line to get there. Good on him.

Tapsucker wrote:The comment from Dimitri on the number of female customers is interesting. In my observations, the rise of craft beer sales has a lot to do with women coming into the beer fold where they weren't interested before. My wife, mom and sisters are all bigger beer snobs than me!

Even something as trivial as dropping by Volo, that used to be the domain of beer gut nerds like me, now reveals many young women coming in to try new beers. On a couple of visits, it was like ladies night in there and they were more adventurous in their pints than us.

Marketers are always talking about disenfranchised target markets. I suspect the craft brewers stumbled upon an untapped market beyond their own clique and are growing by luck. Not a bad thing, but it could be quickly hijacked.

Beer geeks like us might be swayed by authenticity, which the younger demographic also appreciates. However, there are probably lots of people coming to the craft fold because of taste and quality. The big boys could actually match those if they put their mind to it. It might not seem 'authentic' to the tribe, but lots of people will drink flavourful beer if it was offered to them.

I've made tihs observation before and it's been met with a resounding response of, "that's kind of sexist...". On three or four seperate occasions this has happened. I continually fail to see how it is discriminant in anyway and fully agree with you, and will continue to believe that women who were previously indifferent towards beer or disliked beer have been finding beers from micros that they enjoy, and that they are a major reason for the growth in the craft market.

Rob Creighton wrote: I have often made the point to the wonderful folks who are willing to lay everything on the line to start a small business in a volatile, massively over regulated market that you need a million to start a 5000 hl brewery. 500 grand to buy equipment and convert the leasehold and 500 grand to survive the first year.

It really is a matter of scale. I think we will start to see more nano's all over. The capital cost to add a nano to an existing business is (I assume, not having personally done either) a fraction of the cost of starting a full on production brewery.

What may prove to be an interesting turning point though is when some of the mid-sized breweries get big enough that they can no longer afford to rent capacity to contract brewers.

I think that we are definitely starting to see the "sea change" of seeing good beer in mainstream places, being drank by mainstream audiences. The more intense stuff will always be on the fringe, drunk by the more dedicated beer fans but I have said for a while now that its kind of pathetic for any major bar in Toronto to not have at least one of Steamwhistle, Amsterdam, or Mill St. on tap. Similarly, for a bar in Ottawa to not at least have Lug Tread on tap is an oversight.

Man, Spearhead started heavy marketing before the kegs were tapped.

Remember that week (month?) of launches they did at every beer bar in the city. All the Spearhead posters at that time made me think of the "Gabbo" teasers from The Simpsons.

Like Rob said (much more eloquently than me), they started selling a brand right away.

Quick story that I've never shared here, because I didn't want to seem like I'm bashing a new local brewery, but well, since we're talking about it:

I remember being at one launch where they were doling out free samples. One woman at the bar said that it was a "really good... what is it a pale ale?".

The rep quickly turned and replied with "Clinton-like" pointing, as though he was giving elocution lessons and said: "Say it with me: Hawaiian. Style. Pale. Ale." She repeated the words. He smiled, said "good", and then gave her a shirt.

I always thought that that was kind of dickish and condescending...not reflective of the organization as a whole I'm sure, but I think that one rep got a little carried away with "getting the word out".

In terms of Beau's: I actually quite enjoy their marketing, and maybe, as Rob says, proves why they're so good at it. The Jekyl and Hyde package with the 7 inch vinyl? I would've bought that in a second if I had the chance...

JeffPorter wrote:Man, Spearhead started heavy marketing before the kegs were tapped.

I am of the opinion that beer is 90% marketing particularly for the macros where as often as not the bottles of beer go along the line and at some point the labels that go on the bottles are simply changed to a different brand. Marketing and spin for the micros is still important but at least with them there is a quality product that can be differentiated.

bufordsbest wrote:

matt7215 wrote:however many people in the US are predicting that 2012 will be the year the bubble pops.......

is there an article or source you can point to?

there was one that was posted on ratebeer not to long ago, ill go try to find the link