As anyone who’s tried to parallel park a Hummer can attest, bigger isn’t always better. And given the growing popularity of craft beer, the new mantra for prospective brewers may be, “go small or go home.”
Crafting a Definition
As Dr. Bart Watson – Chief Economist for the Brewers Association in the United States – explains, a craft brewery displays three characteristics:
1. Small: Annual production of 6 million barrels or less.
2. Independent: Less than 25 per cent of the brewery is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer.
3. Traditional: Brewery has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation.
Mastering the Craft
“Of course, in the 1800s everyone was essentially a craft brewer since everything was handled locally,” said Bullied.
In the 1830s and 40s, the landscape shifted to a few larger breweries as economies of scale became the focus. But in the 1970s, government legislation did something unusual: It made things better.
“Legalization of home brewing in the U.S. and reduction of the federal excise tax for small brewers started to open things up,” said Dr. Watson.
Since a similar relaxing of prohibitions in Canada, the craft beer market is really hopping.
Small Brewers Post Big Numbers
“From 2008-2014, licensed Canadian brewers producing fewer than 100,000 hectoliters (approximate figure used to identify craft brewers) grew by 85%, while their share of total Canadian beer production rose from 5.2%-10.6%,” said Beer Canada President Luke Harford.
Of course, when your new sibling stole your parents’ attention, you probably kicked and screamed until you got noticed again. Fortunately, the reaction of traditional brewers to the new kids on the block has been more restrained.
“Much of craft’s growth isn’t at the expense of other domestic producers but volume that would have been lost to wine and spirits,” Watson explained.
That’s not to say that growing the craft beer market is challenge-free. In Ontario, the Ontario Craft Brewers’ (OCB) proposal to open craft beer stores to improve exposure was turned down by government.
“Instead, they chose to open sales in grocery stores, make structural changes and encourage the Liquor Control Board of Ontario to take a further leadership position with craft beer,” said Steve Beauchesne, Co-Founder and CEO of Beau’s All Natural Brewing Co. and Vice Chair of Ontario Craft Brewers.
While it’s not what the OCB was seeking, Beauchesne likes to see the craft beer stein as half full.
“While different from our proposal, we welcome these changes as they should create meaningful, positive change in the province.”
Craft brewers may step on a few toes, but barley producers give them two thumbs up.
“Because they use 3-4 times the amount of malt used in the industry as a whole, craft brewers have a profound impact on farmers and the malting industry,” said Watson.
The Art of the Craft
“Using small batch processes, we produce more interesting beers on a smaller scale with better ingredients. But ultimately, it begins and ends with quality.”
Add to that the growing consumer interest in buying local, and these craft guys may be onto something.
“They connect with local beer lovers in ways that larger beer companies simply can’t,” said Watson.
What’s Brewing Abroad?
When you’re this good, word is bound to travel. Watson is seeing strong demand overseas in the U.K., Sweden, China and Korea, among others, while Bullied is excited about the Japanese market.
“Japan has very high standards for beer so they buy a lot of barley from Alberta. We’re growing some of the world’s best malt in our own backyard, which is a huge advantage.”
While success always brings challenge, Watson is optimistic about the future of craft beer.
“The demand is being driven by flavor, variety, quality and a love of ‘local’, and those elements aren’t going anywhere.”
And that translates to good news for both consumers and producers: Like the Hummer that finally squeezes into the perfect spot, the craft beer phenomenon is here to stay.