Canada, SK: Saskatchewan’s brewing future continues to look bright

People in Saskatchewan are thirsty for a new kind of beer.

Saskatchewan’s craft beer sector has been growing steadily in recent years and one brewer says the future continues to looks bright, Grainews reported on October 27.

“We just view it as nothing but untapped potential, especially for Saskatchewan,” says Mark Heise, president and CEO of Regina’s Rebellion Brewery, one of the biggest producers 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 per cent 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 approximately 17 breweries in our province as of earlier this year.

And this growth is good news for Saskatchewan malting barley growers, as craft beer production requires approximately three to four times as much malt as mainstream beer production, says Peter Watts, managing director of the Canadian Malting Barley Technical Centre (CMBTC).

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

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

A recent article from the U.S. 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 the same direction. Here, the national beer production declined 2.4 per cent from 2015 to 2016 and sales volumes declined 0.7 per cent 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 per cent of national beer sales by volume, which could rise to 15 to 20 per cent over the next five years,” he says.

It’s important to keep the overall numbers in mind, as the craft market represents a very small percentage of the overall beer market in Canada, perhaps as low as one to two per cent in Saskatchewan.

For example, Rebellion is on track to produce about 3,000 hectolitres (HL) 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.

But although Great Western competes with the major international players in the traditional beer market for market share in Saskatchewan, the company finds itself positioned somewhere in between the traditional and craft market in terms of definitions. While in the United States, a craft brewer is defined by being small, independent and innovative, Canada lacks a concrete definition for what qualifies as craft brew.

“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 and CEO Michael Micovcin. “But other people might not consider it craft just because of the size of our brand.”

Furthermore, GW has always promoted the use of local products — another attribute usually associated with craft brew. The brewery runs a program in partnership with Prairie Malt, in Biggar, to source 100 per cent Saskatchewan barley for its beer and uses, on average, 2,500 metric tonnes of Saskatchewan barley a year.

“It’s important to us to work with local companies, to celebrate the fact that we are a Saskatchewan company,” Micovcin says. “We want to support local partners and local growers as much as possible.”

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.”

One of the reasons for the growth of the craft industry is that it has been working with the provincial government to create a more welcoming climate for craft operations in our province.

Last year the provincial government changed regulations to allow private and public liquor stores to fill beer growlers (glass jugs designed to keep draft beer fresh), in an effort to make craft beer more accessible to people in Saskatchewan.

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 were not tenable for small businesses, these new regulations saw the markups decrease in an effort to nurture the young industry and allow it to stay competitive.

Heise says these changes have come about as a result of a constructive working relationship between the industry and local government, one based on mutual goals of nurturing the local small-business environment and growing the economic output of the province.

“We’ve built a respectful back-and-forth dialogue and they’re willing to listen and we’ve earned that respect,” he says. “We’re not pitching things to take advantage of, or exploit a market. 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.”

“As consumer demand for locally-made products increases, Saskatchewan has seen tremendous growth in the craft beer industry,” says Saskatchewan Agriculture Minister Lyle Stewart.

“This industry’s growth sends a compelling signal to others that our value-added sector has significant opportunity to expand. Our government will continue to work collaboratively with alcohol producers as their success not only reflects the quality of the ingredients in our province, but also contributes to the prosperity of Saskatchewan.”

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 of years.

Part of this has to do with Rebellion’s marketing, which aims to position the brewery as a place where everyone is welcome, 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 down, there are still several exciting new developments happening within the industry in Saskatchewan.

For example, earlier this year Saskatchewan’s first craft malting operation was launched in Rosthern. Structured as a grower cooperative, 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’s 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 cooperative.

This includes the ability for the cooperative 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 cooperative to focus more on quality specs of the crop throughout the growing season, rather than just overall yields.

The idea for Maker’s Malt grew partially out of Enns’ observation that in areas of the U.S. where the craft scene developed more rapidly, craft maltsters were not far behind. It also grew out of his belief that the demand for local value-added products will continue to grow.

“In Western Canada, we’ve become very good at being efficient producers and producing a lot of grain for export, but we’ve really got away from using most of our supply locally,” he says.

“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. This shift has really paved the way for the craft brewing and distilling movement and Makers Malt is a natural progression, having the same philosophy towards malting as the craft brewer does toward brewing.”

Watts estimates there are approximately 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 for the industry is that several Saskatchewan breweries are looking at new ways to get their 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 per cent is sold in bottles and cans and 10 per cent is sold as draft so we’re actually only playing in 10 per cent 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’re already been able to build some great relationships,” he says.

And despite the overall small size of Saskatchewan’s craft beer industry, Heise is optimistic about the future. With relaxing government regulations, a growing market for the product, and breweries finding new and innovative ways to get the product to consumers, the sky’s the limit for this exciting new industry, he says.

“There’s so much more to discover there,” Heise says.

30 October, 2017