Canada, ON: Steam Whistle Brewing and Beau’s All Natural Brewing Co. announce joint distribution deal

Two of the biggest craft breweries in Ontario have announced a joint distribution deal, something at least one long-time industry watcher suggested could be a prelude to a merger, the Toronto Star reported on November 16.

Toronto’s Steam Whistle Brewing and Beau’s All Natural Brewing Co., based in Vankleek Hill, Ont., said on November 16 that they’ll be merging their sales teams and distribution networks, effective immediately.

Steam Whistle CEO Greg Taylor said the new arrangement gives both breweries a broader portfolio of products to approach restaurants and bars with, including Steam Whistle’s flagship Pilsner and Beau’s Lug Tread, as well as several smaller brands brewed by each company.

“We see portfolio selling as a big part of the future,” said Taylor, who earlier this year reached a similar arrangement with B.C.-based Phillips Brewing and Malting Co. In 2019, Steam Whistle signed a deal to produce some brands from Colorado’s New Belgium under license.

Taylor denied the deal was the first step on the way to a possible merger of the two companies.

“There aren’t any plans for that,” Taylor said.

No money is changing hands between the two privately-held companies as part of the deal, but ongoing sales revenues will be split based on which brewery’s beers are sold.

The announcement comes at a time when many craft breweries are still reeling from the impact of the global COVID-19 pandemic, said Beau’s CEO Steve Beauchesne.

“For breweries who have a significant portion of their business in restaurants and bars, it’s been a difficult couple of years. For us, that was 50 per cent of our volume. To have half your revenue disappear overnight, that’s hard,” said Beauchesne.

Now, as those restaurants and bars are ramping up again, they’re still not ordering at pre-COVID levels, Beauchesne added. That, he said, was a key reason for the deal with Steam Whistle.

“Our customers need the same support they did before, but they’re only ordering 20 per cent of what they used to,” Beauchesne explained.

The move will result in “a small number” of layoffs at Beau’s. No layoffs are expected to take place at Steam Whistle.

Beauchesne also denied a takeover or merger is in the works.

“There’s nothing in the agreement about further steps, or other steps. We discussed other options, and this was the one we felt most comfortable pursuing,” Beauchesne said. “I’m excited by this partnership. I’ve known and respected Greg for 15 years.”

Despite the denials, at least one key beer industry watcher says the move could be a prelude to Steam Whistle purchasing Beau’s, with both companies having been significantly weakened by COVID.

“This really does feel like the prelude to a merger,” said Jordan St. John, editor-in-chief of The Growler, a magazine covering Ontario’s craft beer scene.

Beau’s has expanded rapidly since its 2006 founding, and before COVID it was brewing roughly 60,000 hectolitres per year, or almost 17 million 355 ml cans, said Beauchesne. Steam Whistle doesn’t disclose its brewing numbers, but Taylor said it’s less than 100,000 hectolitres per year.

“When your whole business plan counts on continued expansion and all of a sudden draft beer sales grind to a halt for two years, that’s going to hurt,” St. John said.

Long-time beer author and consultant Stephen Beaumont suggested that a merger is unlikely, because there’s too much similarity between the two breweries, at least geographically.

“I don’t see a merger happening, because they’re both mid-sized breweries based in Ontario,” said Beaumont, who isn’t convinced the distribution deal will be a big success.

“When Steam Whistle made the Phillips announcement, that made more sense, because there really wasn’t any crossover. I don’t really see this one working in the same way,” he said.

Steam Whistle’s Taylor wouldn’t be more surprised if other breweries follow suit with similar arrangements as they make their way out of COVID.

“I think every single brewery right now should be asking itself ‘how can we be more creative than we were two years ago?’ ”

18 November, 2021