(Guest Post) The Session #112: The Other Beer Economy

8055045283_f19683a3f3_oOntario is the laggiest of beer economies. Our policies are always at least 100 steps behind everywhere else that is culturally and geographically similar, and about 50 steps behind the industry. In response to Session #112 from The Beer Babe, ‘The Other Beer Economy,’ in which we discuss all the businesses that create a network that support the beer industry, I will provide you with an anecdote that illustrates just how much potential the “other beer economy” has here.

A major angle to my master’s Major Paper, “Ontario’s Craft Beer Industry: Current Assessment and Future Directions,” was the tension between beer entrepreneurs and the roadblocks that prohibition era policy frameworks created. Essentially to be a small-scale entrepreneur in beer in Ontario before 2014, you were working under really weird rules coming from both the LCBO (Liquor Control Board of Ontario) and the AGCO (Alcohol and Gaming Commission of Ontario), and before 2010 you were paying hilarious amounts of taxes. Through my research interviews I attempted to get a sense of how difficult or easy it was to navigate and adhere to said rules – were they clear? Who was overseeing? Who was auditing? Who would you answer to if you broke one of them?

The answers to the majority of these things were often unclear. Some were just easy to ignore, claim ignorance, which would then lead to a small change in that outdated policy (as I’m relatively sure happened with Beau’s and direct home deliveries…) etc., etc. So, the most potent of these was this: prior to Fall 2015, small brewers (that is, below 400,000 hects), were not authorized to pool their deliveries to points of sale. This meant that they weren’t even allowed to hire a third-party delivery service to store and warehouse their product and deliver to liquor stores and licensees.

Problems: I was aware of at least two of these types of businesses in Ontario that did offer this service (must’ve gotten one-off passes from the AGCO or something?) and had been doing it for years. Further, there were a number of open secrets about this or that brewery throwing their product onto this or that other brewery’s truck for certain bar deliveries who’d keep hush hush about it.

So, Fall 2015 comes around and as part of this new policy roll-out, surprise! Small brewers can pool their deliveries now! This was, of course, announced as if it had never been done before and had been strictly prohibited prior… but I digress.

Anyway. The point is, in 2014 or 2015 Ontario got wise to the fact that, in prohibiting this type of third-party delivery activity, they were also seriously stunting that level of entrepreneurialism that would only add to Ontario’s economy. We now have Coldhaus and RG Transfer, two distribution companies, expanding their operations and I’ve heard whispers of other delivery and warehouse services starting up in the province.

We’re still in a bit of a wild west moment for small brewers here in Ontario – it’s a lot of small companies just hacking it together and trying to do everything in-house. Secondary entrepreneurs filling those niches that are, frankly, costs that most business owners in other sectors would have outsourced anyway (like, marketing, for example, or even packaging!) are, I would argue, probably going to make more money than the majority of new brewers over the next few years, and faster. When you’re aware of a direct need, and only need to invest in say, one or two pieces of equipment and then charge other businesses for use of it, (I’m looking at you, mobile canning line dudes!) you’re laughing.

Basically, my thoughts are this: as long as Ontario keeps loosening up on the beer business like they have been, more entrepreneurs can enter the market and be more creative about the types of things they do in and around alcohol. There really is endless potential at this point.

Oh yeah: and hops/grain agriculture here is a bit of a joke. A sad, sad joke. I have other stuff to say about that, and in a nutshell it’s that agriculture needs a lot more government support than just creating market conditions. Farm businesses are high risk and complicated – and I’m no expert but aren’t hops particularly susceptible to disease? So I suppose that, on the manufacturing end, loosening the market is helpful, but government response to creating market conditions for new entrants to the agricultural sector needs to be a whole lot more hands on than it is.

 

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(Guest Post) BEAU’S SELLS OUT… TO ITS EMPLOYEES!

Welcome to It’s Not Just the Alcohol Talking, the craft beverages blog of Derek Harrison now in partnership with Tish Gaudio after a year and a half absence. Tish very recently defended her Master’s thesis “Ontario’s Craft Beer Industry: Current Assessment and Future Directions” and is stoked to keep writing about beer and the industry in a more casual tone, with the ability to break out into ALL CAPS every once in a while. Derek Harrison has been writing a craft beer column for The Windsor Independent for over three years and needs somewhere else to put some of his ideas because Dean won’t let him take up more than a page or two of space in the paper.

I tend to geek out on business ownership structures. I believe there is a lot of power in the backbone of how companies function, and I’m a sucker for anything that empowers local ownership, equity and internal democracy. It’s the reason I bank at a credit union over a big bank, for example. I could do all my banking with TD, but co-ops just tickle me pink, and I love the idea of keeping dollars local and “in the community,” so to speak. I crave a sense of closeness and accountability with the businesses I interact with, and those backing ownership structures can reveal a lot about a business.

I’m inclined to believe that so much of what draws us to the craft beverage movement is that sense of closeness and accountability. Something I have picked up on in no small way since I’ve spent time in the industry is the sense that craft beverage producers often see an antagonistic relationship between Craft and Not Craft. They are the little guy, emerging in the wake of the Big Bad Corporate Macro Brewers, and they have a responsibility to Do It Right. Independent ownership is important. If we know who owns our companies that don’t get too big, we can always ensure they’re on the right track.

All of that ramble is to say this: I am literally DROOLING over Beau’s announcement to sell the company TO ITS WORKERS.CinCIfAWUAAlCgO

Employee stock ownership plans are essentially where your employees get a stake in the company. It’s a solid move for succession planning, and encourages full transparency to all workers. Either way, the ethos of democratic ownership over one’s workplace exists to some capacity. It’s beautiful that Beau’s went this direction, as it reveals the ultimate faith in its workforce and their ability to drive the company to further success.

Naturally, our fears about what the next steps are as craft beer companies are getting larger – Beau’s is easily in the top four largest craft brewers in the province, operating at over 40,000 hectolitres/year and growing – is that craft brewers are destined to “sell out.” As these small, grassroots-minded companies get larger those major questions about what makes a company truly craft, or authentic, are popping up all over the place. We saw Mill St. get acquired by the Big Bad AB-InBev last year, and everyone had an opinion. We saw that same parent company funnel $3 million into rebranding Shock Top as a “Craft” brand in 2013. We’re a little hesitant to accept the grey areas.

Beau’s major decision to sell the company to its workers is proof that “selling out” isn’t the only option. As craft breweries get larger,they don’t necessarily have to lose the qualities we seek in craft brewers. There are a lot of options.6823149325_e60a644f35

 

Whether you like it or not, Ontario is at least ten years behind pretty much every other burgeoning craft beer region, so whatever waves we’re bound to go through here have already been covered elsewhere. In the States, plenty of discussions have emerged about craft brewer-owned investment groups. We’ve already seen larger Ontario-based beverage companies acquire slightly smaller Ontario-based beverage companies. I’m not so sure how I feel about hyper consolidation on the whole – but I think it’s pretty fantastic that people are finding ways to keep this activity within the province.

I think if we can ensure a large portion of our basic, day-to-day economic activity is harnessed locally we can empower each other and demand the level of accountability that large multinationals just don’t allow. When you add too many degrees of separation, that’s when you get problems (that’s what I think anyway. I spent all kinds of time on this during my Master’s degree. If you’re interested in this sort of thing, I recommend reading Michael Shuman, he has a lot to say on the matter).

In selling the company to it’s workers, what the Beauchesne’s just did was ensure that their company pretty much can’t be bought out – not in any Big Bad traditional sense anyway. (Heck, for all we know the company will collectively vote on being bought out by a Macro Brewer ten years from now, but could you really see that happening?) The beautiful thing about co-ops and employee-owned structures is that you have so many points of accountability to answer to. Even if 50% of the workforce is a little apathetic to major business decisions most of the time, they still get a vote – at the very least on their board of directors – no matter what. So when something comes up at work that they do care about, they’re not helpless to top-down decision making.

What employee ownership will look like for Beau’s remains to be seen. They employ over 120 and I can only imagine that those 120 people are going to have some serious sit downs to make some serious decisions about what their next steps are. There will have to be many a policy document written, many a vote to be had. Beau’s is already a B Corporation, a third-party certification that requires them to “meet rigorous standards of social and environmental performance, accountability, and transparency.” To meet these standards, Beau’s has had to incorporate certain accountabilities into their governance structure to provide legal protection of their mission and provide regular, stringent reporting on the impact of the business. They’re really really trying to Do It Right, here, and I love it.

On the whole, Beau’s being both a B-Corp and now a employee-owned is sending my heart a flutter. Good on you, you shiny angels of the industry. Don’t ever change.

 

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