Craft beer growth gives barley sector a boost

Craft beer now accounts for 10 to 15 percent of national beer sales by volume, and this is expected to rise to 15 to 20 percent over the next five years.  | Getty Images

Production requires about three to four times more malt than mainstream beer-making, which is good news for growers

The thirst for a new kind of beer continues to grow in Saskatchewan.

The province’s craft beer sector has grown steadily in recent years and one brewer says it is not done expanding yet.

“We just view it as nothing but untapped potential, especially for Saskatchewan,” says Mark Heise, president and chief executive officer of Regina’s Rebellion Brewery, now the largest producer of craft beer in Saskatchewan.

The growth trend for the craft beer sector has proved to be true not only in Saskatchewan but across the country.

In 2016, the number of Canadian brewing facilities had increased to an all-time high of 775, up 20.3 percent from 2015.

While the majority of these brewing facilities are in Ontario and Quebec, Saskatchewan is within the top three provinces for the number of brewing facilities per capita (at a rate of 4.6 per 100,000 drinking age adults), with about 17 breweries as of earlier this year.

This growth is good news for Saskatchewan malting barley growers because craft beer production requires about three to four times more malt than mainstream beer production, says Peter Watts, managing director of the Canadian Malting Barley Technical Centre.

“The growth in the craft sector leads to an incremental growth in demand for malt and ultimately malting barley,” Watts says. “Already 35 percent of all malt in North America is used by the craft brewing sector and that may rise to 40 to 45 percent in the next five to seven years.”

But the bad news is that this growth is likely to slow.

A recent article from the United States’ Brewers Association shows that while the country’s craft industry was still growing as of last year, growth had declined.

It looks like Canada might go in a similar direction. Canadian beer production declined 2.4 percent from 2015 to 2016 and sales volumes declined 0.7 percent during the same time period.

“My takeaway is that growth in both the number of craft breweries opening and volumes is slowing, which is not surprising as it grew at double digits for so many years,” Watts says.  

However, he expects the growth will continue, just at a slower pace.

“I would also say that the craft sector itself will continue to grow. Today craft accounts for 10 to 15 percent of national beer sales by volume, which could rise to 15 to 20 percent over the next five years,” he says.

The craft market represents a small percentage of the overall beer market in Canada, perhaps as low as one to two percent in Saskatchewan.

For example, Rebellion is on track to produce about 3,000 hectolitres of beer this year. While that is up about 1,000 hl from two years ago, it’s still nowhere near Great Western Brewery’s average of just under 200,000 hl a year. 

Great Western competes with the major international players in the traditional beer market but the company is positioned between traditional and craft beer makers in the marketplace.

“We like to think of Original 16 as craft beer, as we double-age the beer and we only use Saskatchewan-grown barley,” says Great Western president Michael Micovcin. “But other people might not consider it craft just because of the size of our brand.”

Furthermore, Great Western has always promoted the use of local products, another attribute often associated with craft brew. The brewery runs a program in partnership with Prairie Malt in Biggar, Sask., to source 100 percent Saskatchewan barley for its beer and uses, on average, 2,500 tonnes of Saskatchewan barley a year. 

But despite the confusion around the definition of craft beer, and where Great Western fits, Micovcin says the growing number of micro craft brewers in the province is a welcome addition.

“We’re personally excited that the face of the industry is changing and that there are more local producers, which we think is wonderful,” he says, adding that Great Western has begun to collaborate with the local craft beer community. 

“Our collective interest is to promote Saskatchewan-produced beer. We really have a common goal of supporting and promoting local growers. We’re looking for ways we can help each other in the best ways we can.”

The craft beer industry had grown in Saskatchewan at least partially because it has worked with the provincial government to create a welcoming climate.

Last year, the provincial government changed regulations to allow private and public liquor stores to fill beer growlers in an effort to make craft beer more accessible.

Also last year, the government announced a change in the tax markup structure for craft breweries. While previous regulations had breweries that produced more than 5,000 hl of beer a year being taxed at levels that many felt were not sustainable for small businesses, new regulations saw the markups decrease.

Heise says the changes have come because of a good working relationship between the industry and local government.

“We’re not pitching things to take advantage of, or exploit a market,” he says. “We’re trying to do things that legitimately improve the province’s economy and consumer’s enjoyment and experience of purchasing of alcohol in the province.”

Saskatchewan Agriculture Minister Lyle Stewart says the craft brewing industry’s growth sends a signal to others that Saskatchewan’s value-added sector has significant opportunities.

Another key to the growth in popularity of craft beer could be that it’s becoming less of a niche market product. Although it’s hard to find statistical evidence of this, Heise says he has seen an increasingly diverse group of people drinking craft beer over the past couple years.

Part of this has to do with Rebellion’s marketing, he says.

“We view beer as something that can be part of the normal culture — it doesn’t have to be a fringe thing,” he says. “We’re really gone out of our way to appeal to everybody and welcome everyone in.”

“When you first open a craft brewery you get all the beer nerds and that’s great, but we never wanted to stop there.”

Although there is speculation that the craft beer trend will slow, several exciting new developments are happening within the industry.

Earlier this year Saskatchewan’s first craft malting operation was launched in Rosthern. Structured as a grower co-operative, Maker’s Malts aims to support the local craft beer and distillery scene by providing more of a niche approach to malt, says president Matt Enns.

“There are a number of things we can do better than the big maltsters just by nature of us being small,” says Enns, who is also one of the growers involved in the co-operative.

This includes the ability for the co-operative to deliver more diverse products, customized malts, guaranteed quality, and hands-on customer service.

“With us the buyer can talk not only to the maltster directly, but also to the guy who delivered the malt and the guy who grew it.”

Being a small malting company also allows the four growers involved in the co-operative to focus more on quality specs of the crop throughout the growing season, rather than just overall yields.

“The general farm-to-table movement has brought us to a bit of tipping point, where more of the general populace is looking for quality local products, and crucially, has become willing to pay for them.”

Watts estimates there are about 10 more small malting operations now across Canada, with another 10 in the works.

“We will definitely see more small malting operations opening in coming years,” he says.

Another indicator of future growth is that several Saskatchewan breweries are looking at new ways to get products to customers. Rebellion is one of several local breweries that have already, or are in the process of, incorporating canning lines into their operations, which Heise expects will take his business to a new level.

“In the beer industry now, 90 percent is sold in bottles and cans and 10 percent is sold as draft so we’re actually only playing in 10 percent of the market,” he says. “The real room for opportunity is to get into the retail market. That’s where the big growth is going to be.”

Heise says with new private liquor stores coming into Saskatchewan, the opportunity is increasing rapidly.

“We’re able to sell directly to them, and we’ve already been able to build some great relationships,” he says.

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