Has Canada reached Peak Craft Beer?
Do you know how far away from you your nearest brewery is. I have no idea where you live of course but I'm willing to bet. The answer is a lot closer than it used to be. No matter where you live in Canada and this goes I. Small towns of like three hundred people in cities of more than three million there is a craft brewery around the corner over the past decade. The rise of craft beer has actually been one of Canada's biggest entrepreneurial success stories but how long can that really last as an example? There are four cool little India Breweries within walking distance from my house. And I love it but I would have to be stupid to expect them all still be thriving and five here. Wouldn't I I mean there has to be a limit to how much Canadians love their beer. Right Jordan Heath Rawlings. This is the Big Story Stephanie. Marotta rights for Global Males Report on business. Hey Stephanie thanks for having me no problem. We're talking about one of my favorite topics. We had to do something. That's when I picked up the phone and said I'm calling you to talk about beer. Nolan's hung up on me amazing So start by putting into perspective. I guess because we're GonNa talk about this whole industry just how fast and big the rise of craft beer in Canada has been. It's been incredible. I think one of the reasons the story is resonating. So much with people is because no matter where you are in the country. It seems like there's a new craft brewery opening every month. Almost it's just skyrocketed so the number of breweries over the last five years has more than doubled so in two thousand fifteen. We had three hundred and eighty breweries across the country. That is now almost a thousand. It's crazy it's been astronomical and really that growth looks very different depending on where you are in the country so in Ontario British Columbia and Quebec. Those have the most mature. Craft Brew Industries at the moment and the between those three provinces they make up more than seventy five percent of all the craft breweries in the country but that growth has really caught up in other regions as well so last year. New Brunswick and Nova Scotia saw some of the fastest rates of newbury openings in the country but really Alberta led the charge on they saw sixty percent increase from seventy breweries. Two hundred and twelve breweries. Year-over-year year over here. So it's been an incredible amount of growth and when you have so many players coming into the market over just half a decade. The growth is just astounding. So how does that happen? A part of that a small part of it may be is the cool factor. No no that episode of high met your mother when Ted and Barney say that they want to open up a bar. It seems like a really fun place to be. But what's really interesting? Is that when you actually get to speak with these brewers? They have the most incredible stories. These are lawyers and engineers nurses and former Labor workers who are leaving their careers to come into this burgeoning industry and they're starting off by brewing in their garages before they scale to larger brick and mortar institutions. And they're starting off in these communities. That are really hungry for some economic development. So they're creating jobs and they're bringing money into the area. That's an attracted a ton of investment so from government investment arms like the BBC to private equity investors. A ton of money has been flowing into this because everyone wants a piece of this pie of on one end the success story of of creating jobs in an economy. That looks like what we're in right now and then on the other side have being able to say that Own a piece of a brewery. That's something really fun to say right. Answer the government gets into it then because these are popping up in neighborhoods that could use sources of jobs and economic development and so they will give them start up money essentially. Yeah through a couple of different methods. So we've seen a lot of investment from from governments into the sector so last year we saw the federal government and the government of Ontario Invest One Million Dollars Into Twenty craft breweries in Ontario. And that's in addition to a one point six million dollar investment from two thousand sixteen now while that sounds like small amounts in isolation. We're seeing a number of provincial governments across the country. Do exactly the same thing and further that we're seeing economic development arms like the BBC and the Atlantic Canada Opportunities Agency investing in in Craft Breweries and providing them with start up loans. When you put all of that together with a national scope that's a ton of money going into opening new breweries and then on the flip side. We've seen a lot of private equity go into this as well so often times when breweries can no longer access government funding for whatever reason it seems like a pretty easy thing to go out and find an angel investor venture capitalist. Who who wants to throw a million dollars into into a berry so this growth is still happening this year as we're talking. Yeah so the growth is expected to continue to climb. I was chatting with the Canadian. Craft brewers association and they expect another two hundred craft breweries to open up this year alone. That's a twenty percent increase year over year compared to the thousand that we currently have so. It's it's just going to continue to rise but there's gotta be a tipping point right like how much beer can Canadians reasonably consume. And I mean that seems like a funny question but it's not like at some point we're going to saturate the market right. I don't doubt the Canadians can drink their fair share of beer. Sure at all But I've seen a number of industry watchers trying predict this tipping point. And this moment where we're going to hit peak craft beer and I've had a lot of conversations with Roy Moore is the people who fund And Brewery Associations and from what? I'm hearing across. The board is that we are at this tipping point so we're seeing a number of craft breweries closed. Get put up for sale or diversify away from craft beer altogether and a large part of that is because Canadians are drinking less beer really. We're seeing it in the numbers so fifteen years ago. Canadians drank so much beer. That beer sales made up for fifty percent of all alcohol sales in the country. Now it's at a point that's only nine percent and that gradual decline is quickening now. It's not all doom and gloom. Canadians are still drinking beer. Just in different ways so one bright spot is that comedians do seem to be drinking more craft beer even though beer sales are declining overall. So if we look at the L. C. B. O. Just to is late that as an example last year craft beer sales increased twenty seven percent year-over-year now that is slower than the forty percent increase in. They saw the year before in twenty teen while. They're still seeing a spike. It's beginning to slow down and despite that big surge in people buying craft beer. It's still only accounts for ten percent of total beer sales at the L. CBO. It certainly accounts for more than ten percent of the shelf space. It does luckily for grab brewers. It does a lot of liquor. Boards have been increasing. Their shelf. Space Craft Breweries little bits every year. Like Nova Scotia Liquor Corporation. They've increase their craft beer shelf space from twenty-seven percent last year to thirty two percent this year so we are seeing marginal increases and even at the L. C. B. O. I think is about eight years ago. They they listed thirty three different craft breweries and now that's increased to one hundred and eighty. The issue is that that falls far short from the three hundred breweries. That are in Ontario alone. There are one hundred twenty breweries that can't get listed and even if you are listed that doesn't mean that you're in every store across Ontario depending on how much beer you produce. You might only be able to get listed in two or three Elsie. B O's within a certain distance from your store so that speaks to something that I wanted to get out because you talk about. How startups for Craft Breweries are exploding? And everybody wants to get into it. And it's not that hard to get funding and get going. How difficult is it to sustain a craft brewery as as a business you know how many of these Newbury's actually break even Make money statistics. Canada says that only fifty percent of the small to medium size breweries in the country are profitable and from speaking. With brewers. It takes about five to seven years to start turning a profit now. We're at an point in candidates beer industry because craft beer really started to grow about five years ago. So we're just now hitting that point where craft brewers are starting to figure out whether they're able to make ends meet and what. I'm seeing a lot of something that I'm hearing. That crafters trying to do is they're trying to get in on different segments. That are growing faster than craft beer so at a point where consumers are moving away from beer and drinking more wine. They're drinking more spirits more ready to drink products. So I'm hearing. The brewers are getting into distilling. They're getting into some of. Those funds Seltzer products. That are more low calorie and speak to a healthier lifestyle. So you're starting to see little tweaks and you're also seeing some brewers start to realize that maybe they can't make this work after all this podcast will be right back after a really quick message. Can you guess the average dollar amount Canadian households have in savings according to the most recent data? It is just eight hundred and fifty two dollars now. The recommended rate of savings in Canada is ten percent and traditionally Canada's historical rate has been around seven point five percent last year though. It was one point seven. That doesn't sound like a lot because it isn't it can be hard to save today for people who are often carrying debt. It can be even harder in fact thirty nine percent of Canadians right now of all ages. Don't think they will ever save enough for retirement. So how do you save when there's not much there to start with? 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