Majors are responding to popularity of craft beers

TORONTO—With sales of wine and spirits having rapidly caught up to beer consumption and lesser players picking up new fans in an increasingly competitive market, beer tastes and beer makers are evolving.

Ontario’s beer drinkers are becoming more supportive of the little guys in a competitive beer market and the major players are responding to this trend of healthier, more natural products.

According to numbers released earlier this year, sales of the province’s craft beers have increased steadily over each of the last three years at the LCBO.

“From August 2007 to July 2008, sales of Ontario craft beer in LCBO stores is up 38 per cent in total net sales for a total of $3.64 million worth,” said Chris Layton, media spokesperson for the LCBO.

In fact, sales are up over 30 per cent each of the last three years as beer drinkers become more adventurous and refined their tastes for the more exotic. In 2007, craft beer sales jumped 49 per cent compared to 2006.

While craft beers in the province equal just four per cent of the total market, “it is growing substantially more than the beer category as a whole,” Layton said. Overall, beer sales rose 1.7 per cent in 2007-08.

In-store marketing and specialty displays are part of the reason for the increasing amount of craft products leaving the stores.

“We’ve been working with the Ontario Craft Brewers to increase the profile of their products at the retail level,” Layton said. “By far the most substantial growth is with Ontario Craft Beer in our system.”

Chris Goddard, marketing manager at Toronto-based Steam Whistle, credits specialty craft beer displays at the LCBO and a more organized Ontario Craft Brewers as reasons for the surge in recent sales.

The four-year-old Ontario Craft Brewers and its 29 members have made a concerted effort to push the craft beer as a quality premium offering and alternative to the large, multinational companies, said Lisa Dunbar, OCB’s senior marketing manager.

“People are slightly disillusioned with the big brewers and that they are not Canadian owned,” Dunbar said, pointing to the 100-mile diet mindset as being important to discerning beer drinkers. 

Since 2007, the LCBO has trained one staff member at 100 of its stores in the province as “Beer Guys” and “Beer Gals” to help consumers wade through the extensive beer varieties available. The LCBO stocks about 90 different craft beer products from 30 companies across Ontario.

Beer Guys and Gals know the ins and outs of craft beer and are able to provide food pairing and recipe suggestions. Layton said beer is becoming more like wine in that drinkers are looking to serve just the right beer with the meal.

Layton said the premium and budget ends of the beer market—craft beers and the ‘buck a beer’ deals—are responsible for most of the sales growth in the province.
Steam Whistle Brewing, which still produces just one single product, is number two in Ontario in terms of premium craft beer sales at LCBO stores.

The company recently started bottling the Pilsner in 500 ml cans, echoing more of a European-style serving size, said Chris Goddard of Steam Whistle, which is housed in the former CPR Roundhouse south of the CN Tower.

“Everyone else here in North America is going with a 473 ml can based on what is used in the U.S.,” Goddard said.

Steam Whistle’s canning line has only been up and running since July, however Goddard said the canned product has already proven successful.

Offering a canned option for beer is catching on among Ontario’s 40 or so craft brewers.

“It’s safe to say there are 10 that are doing it,” Goddard said, suggesting, however, that there is also a concern among producers of taking away market share from their bottled product with a canned version.

The attraction among beer drinkers of single can sales is the low investment—Steam Whistle sells its Pilsner for $2.70 each—and the ease at which a single can fits into a cooler, versus having to buy a six-pack, Goddard said.

It also encourages beer drinkers to try something new, knowing that if they don’t like it, they’ve only purchased one can and not an entire case.

Dunbar said consumers want to know their product is both local and made with natural, high quality ingredients, something of importance to small brewing operations.

“They work hard and they want the best. Craft brewers are not willing to sacrifice on quality. We know there is an appetite for craft beer,” she said. 

With small or non-existent ad budgets, the biggest hurdle for craft brewers, Dunbar said, is getting the consumers to try the product in the first place.
“They don’t know where to start.”

In response to the confusion over choice, the LCBO created the OCB Discovery Pack consisting of six different products. It became a huge seller when introduced in 2007, Dunbar said.

Specialty displays in LCBO stores containing a rotating selection of offerings from four craft brewers have also been set up to introduce lesser known products to consumers.

The past few years have witnessed the birth of several small, family run and completely independent breweries providing new options and tastes for beer drinkers.

Beau’s All Natural Brewing started up two years ago and is already showing triple digit sales growth, mostly thanks to tap product at bars and restaurants.

Based in Vankleek Hill, between Ottawa and Montreal, the family-run operation brews just one beer year-round, Lug Tread, using organic malts and certified spring water.

“We started off with seven restaurants and no bottled product and in two years we’re up to 130 restaurants, plus the LBCO,” said Steve Beauchesne, who co-founded Beau’s with his father, Tim.

While freshness and quality is a consistent goal of craft brewers, Beau’s has taken it to the extreme by consciously keeping their market small and limiting it to eastern Ontario.

“We don’t sell a bottle of beer if it’s more than one week old. I use the analogy of bread—it’s still good after three days, but it doesn’t taste like it did on the day it was baked,” Beauchesne said.

They encourage their licensees to only order what they need for the week and will not deliver any further than someone can drive there and back in one day.

In the company’s second year of business, they’ve brewed and sold approximately 2,000 hectolitres, or 350,000 pints in bars and restaurants from Kingston to Ottawa.

“By keeping ourselves local, we’re really local. We go for drinks at our customer’s bars.”

The personal touch works at Beau’s, which spends nothing on external advertising, choosing instead to use the savings for higher quality ingredients and longer aging.

Beauschene said that restaurants are missing out on a chance for increased profits by not offering premium beer products.

“We do really well in higher end restaurants where there are people looking for something that had a lot of care put in into it,” he said.

“Where customers are looking for higher quality food, patrons looking for higher quality beer, restaurants have a lot to gain by switching. The cost might be more, but they sell more,” Beauchesne said.

Ron Keefe, owner of Toronto’s Granite Brewery restaurant and brewpub, agrees.
“Beer is becoming more acceptable and recognized as a great accompaniment to food,” he said. “Even 20 and 21 year olds are looking for different beers.”

Keefe said stronger beer varieties with more hops and malt are picking up in popularity among his customers. Granite makes only ale in eight different styles.

Gone are the days when beer drinkers stuck to one brand and never wavered in their devotion. Keefe said drinkers now are more educated about the options available from craft brewers.

“There is definitely a growing acceptance of the small brewers in Ontario. And they’re making pretty good beer,” Keefe said. 

Even politicians at Queen’s Park have latched onto the trend by voting on the official craft beers earlier this summer.

Instead of debating private member bills, MPPs tasted 46 craft beers and came up with seven category winners: Neustadt’s Scottish Pale Ale, Great Lakes Brewery’s Golden Horseshoe, Robert Simpson Brewing Company’s Anti-Gravity Light, Old Credit Brewery’s Amber Ale, Brick Brewing Company’s Waterloo Dark, Scotch Irish Brewery’s Sgt. Major IPA and Mill Street Brewery’s Belgian Wit.

Adam Moffat, manager of marketing and brand public relations with Molson Canada, said there have never been more options available from both large breweries and the smaller craft beer producer.

“In Ontario, now is a great time to be a beer drinker,” he said. “The craft brewers are going strong, but bigger can be better. It helps us maintain our consistency of products.”

In 2007, Molson introduced the Sub-Zero draught system to bars, a proprietary system that maintains the cold temperature of the beer from the keg, through the line, and into the draught tower, which is coated with a layer of ice. When the beer is poured, it is guaranteed to be below freezing. It is currently available for Coors Lights and Molson Canadian.

“It delivers a pint that is several degrees cooler than a pint you can pull off any other tap line. It’s become very popular on-premise,” Moffat said. 

Molson has also followed up the cold certified Coors Light can, introduced last summer, with a version in bottle form released this past June. The label uses temperature-sensitive thermal chromatic ink technology to change the colour of the label.

When warm, the mountains on the label are white, but as it chills, the mountains turn a shade of blue, indicating is it at the perfect 4-degree temperature for drinking.

Moffat said the label allows the bar patron to look into the beer cooler and know that the bottle is in fact cold.

Over at Canada’s other large brewer, Labatt, the recently introduced Stella Artois Legere, one of the company’s specialty premium brands, is selling well at LCBO stores and in restaurants.

The imported lager contains 4 per cent alcohol per volume, compared to the 5.2 per cent in Stella, which is the world’s most popular Belgian beer. It is described as having a fruity flavour, a subtle hops aroma and a light finishing taste.

“We’re really excited what that product would be able to do with the trends in certain beer segments,” Andrew Sneyd, marketing director for Labatt brands, said.

“The light beer segment is growing. Only a small number of brewers offer an imported beer in light form.”

Sneyd said more and more people are making healthier choices with beer and are choosing lighter options, allowing them to have beer on more occasions. 

They are also looking for access to global brands, allowing them to experiment with new and lesser-known beers.

With the increased popularity of foreign specialty beer, Sneyd admitted that the move is coming at the expense of mainstream domestic ales.

“We’re seeing more beer consumers moving to specialty beers like imports and we’re also seeing growth in lagers and lighter pallet offerings,” Sneyd said. “We have to make sure we have offerings that work for all those people.”

He said offering lighter varieties of popular brands allows consumers to drink more responsibly and to make healthier choices.

In April 2007, the company brought Alexander Keith’s red amber ale into Ontario. It has become a popular choice with those interested in proper food and wine pairings, Sneyd said, adding that it is not only wine that gets paired with meals anymore. 

This past March, Labatt launched a variety of its Blue brand in a de-alcoholized formulation for sale in convenience and grocery stores.

“We’ve changed the landscape on how we present a non-alcohol beer,” Sneyd said.
When most non-alcoholic beer is brewed, the fermentation process is stopped part way through, therefore lessening the alcohol content in the final product to less than one per cent.

“What we do with Labatt Blue De-Alcoholized is we make Labatt Blue and remove the alcohol from it,” Sneyd said.

The process involves evaporating the alcohol off after fermentation using a centritherm, which ensures the same taste as conventional Blue.