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Havin’ a Beer. It’s Complicated.

Something odd is going on in the beer industry in Ontario, or somewhere near me. Over the past few years, ok decades, craft beers and microbreweries have erupted in every abandoned warehouse, waterfront, log cabin, or vacation spot. All to the beer lover’s delight. Or to this beer lover’s dismay, because it’s confused a previously mature industry.

What’s not to love about the new infinite variety of constantly changing ales, lagers, blonde, brunette and red beers, aleing pilsnered lagers, and stouts? Here’s what the micro-brew industry has to offer:

  • Creative brew-masters have added all manner of interesting flavours to their beers – marshmallow, pumpkin spice, boggy pirate feet etc. 
  • To complement these brewing innovations, products have taken on jaunty names, like thieving squirrel, your neighbour’s lawn-chair, and radioactive buzzzz. 
  • Artists have been hired to design flamboyant labels, with colours like zany orange and tarty lime green, to associate with the soothing amber beverage.
  • To complete the experience, many microbreweries offer tours of their brewing facility, a patio and snacks to consume on the premises with samples of their wares, and of course, sales through their online store. 

This is an industry within an industry. We have been drinking beer in Ontario for centuries.1 It started off localized, with individual pubs and inns making their own brew for a local clientele. Stopped for prohibition (so they say), then later amalgamated into a few big brewers. In my childhood, there were three large corporations that dominated the industry: Labatt’s, Molson’s and Carling O’Keefe. Each made a selection of beverages, providing dozens of choices of variously branded beers. At the time, most beer drinkers had a favourite brand, but weren’t sure about the difference between an ale and a lager and mostly didn’t care.

Along came microbrews, splitting the industry into two main divisions: providing for those who consumed beer on a regular basis (beer drinkers) and those who made the consumption of beer an experience (beer connoisseurs). While there is crossover between the groups, the breweries delivering to these two groups have different business models. 

Those that serve beer drinkers often have a low-priced product, for the cost conscious. The 2-4 (case of 24 bottles) is a preferred packaging option. Loyal customers, repeat buyers, are the target market. We in the biz of business strategy would identify key success factors, or what buyer wants, in this category as consistency in product, brand image and wide availability. Beer drinkers want to pick up their fav. product, in quantity, somewhere convenient, for a good price. 

On the other hand, beer connoisseurs are looking for something different, and are served by a different, differentiated business model. Key success factors for beer connoisseurs are new flavours at every turn, a tasting experience available with a tour of the brewery, lots of character to the beverage, like the strain of yeast, degree of carmelization, or cool label on the can. Price is less important, and products are purchased singly, or may be in a four pack if beer connoisseur friends were along for the tour. 

Consistency, reasonable price, and availability, 
uniqueness, novelty and experience?

And the distribution channels differ. 

In Ontario, a few major channels supply beer consumers: The Beer Store, The LBCO (Liquor Control Board of Ontario), and grocery stores. Another channel is the microbrewery itself, serviced in-person or online. This is a minor channel industry wide, although a major one for the entrepreneur whose goal is to make small batches of beer and a living. 

Beer drinkers go to the Beer Store. Beer connoisseurs frequent the LCBO and the microbreweries. Who buys beer at the grocery store? Likely folks from both market segments, but not often as their primary destination for such a purchase. Grocery stores sell beer as a convenience for shoppers picking up groceries, with different market dynamics than retailing beer.

Based on recent observations, this neatly organized assessment of the industry needs updating. That is the subject of Part 2 of beer being complicated. Or more complicated.

1 This is where I read about the history:

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