Day 491

More business-oriented courses today, starting with Beer Sales and Promotion. Our instructor is Whitney Rorison, who has been involved in a number of start-ups in the Niagara region, including Oast House Brewery in Niagara-on-the-Lake and Dillon’s Small Batch Distillers in Beamsville. Although part of this class will deal with developing sales and marketing plans, some or most of us  will be dealing with the banal yet evil provincial bureaucracy that plagues the Ontario craft brewing  industry, so today we worked our way through some of the myriad laws and regulations that govern alcohol and its associated advertising and promotions.

Firstly, if you don’t live in Ontario, you must understand that, according to the provincial government, the consumption of alcohol is a social evil and must be discouraged. Hence the mysterious bureaucratic maze you have to negotiate in order to open a brewery. For instance, you need a Manufacturer’s Permit in order to legally manufacture beer, but as part of the application for the permit, you must provide a sample of your beer to be tested despite the fact that you don’t have a Manufacturer’s Permit to legally manufacture the beer to be tested.

That is only one of several permits you need to obtain. You also need a federal Excise License, a provincial Retail Authorization Permit (allowing you to sell the beer you brew), a provincial Appointment of Agent Permit (to allow a representative to promote and sell your product to bars and restaurants), and a provincial Direct Delivery Authorization (to allow you to sell your product directly to bars and the public without going through the Liquor Control Board of Ontario). The entire application process can take anywhere from three months (rare) to a year (not so rare).

(I feel sorry for the several American students who are taking this course–when they return home they will have to deal with a different bureaucracy and a different set of rules, but in the meantime, they still have to take this very Ontario-centric course. But I digress.)

Then there are the many many advertising guidelines, all meant to discourage over-consumption of alcohol. Among the hundreds of rules:

  • There is a “floor price” for alcohol. You can’t sell a 341 mL (12 oz) bottle of beer for less than $2. (This scales up in direct proportion to the amount of beer, so the minimum price for a 20-oz pint is $3.33.)
  • A bar can’t offer different drink prices to a specific segment of customers such as women or university students–everyone in the bar has to pay the same price for a specific drink. However, you can have different prices for drinks in separate and distinct areas of your establishment; for instance, you can offer cheaper drinks to all customers on the patio.
  • You can’t offer a special price based on the purchase of other drinks, such as a 2-for-1 special.
  • You can’t advertise or promote “Happy Hour” or “Cheap Drinks” since it might promote “immoderate consumption”.
  • You can’t target underage drinkers–and that includes using popular music in advertising that might appeal to underage drinkers. So no Justin Bieber tunes for the foreseeable future.
  • Advertising can’t promote excessive drinking, or give the iompression that drinking makes you more popular, sexier, smarter, happier, etc.
  • Advertising can’t portray anyone actually taking a drink
  • Advertising can’t promote drinking in general–you have to specifically promote your product.
  • In a twist, you can place an ad for your beer on a racing car, but you can’t use the image of the racing car (or any car) in your beer advertising or on your beer label.

And although brewers are allowed to provide beer mats, a few branded beer glasses, branded patio umbrellas or other small amounts of promotional material to a bar or restaurant, the regulations specifically prohibit brewers from offering financial or material incentives to carry their products. Yet, as recently reported in Toronto Life, and as shared anecdotally by several students who have worked in bars, incentives provided by the big players in the Ontario beer industry are a way of life. (Apparently some bars are starting to turn the tables and ask brewers for incentives–usually free equipment or a few free kegs–before agreeing to carry their product.)

If The Toronto Life article and students’ anecdotes are accurate, these laws are being more honoured in the breach than in the observance, to the detriment of small-budget craft brewers.

On to Brewery Management with Mike Arnold. Mike founded Trafalgar Brewery in Oakville 20 years ago,as well as Elora Brewery in 1999 (since folded into the Trafalgar operation), and Black Creek Brewery in 2010. Mike also branched into mead production in 2000, and operated a tied house coupled to the Oakville brewery for a couple of years.

The first thing Mike showed us was a list of all the craft breweries that opened in Ontario from 1984 to 2009. Unfortunately, most of them have closed, especially those that opened during the 1990s. Although it’s possible that some of those closing were unavoidable, it’s also possible that better planning could have made a difference. This course will be all about planning, including the reasons for making a proper business plan, financial statement and marketing plan, building the brewery, developing management, planning for the inevitable catastrophes, planning expansions, moving the brewery, and even how to sell your brewery.

Before we can start planning, we have to decide why we are opening the brewery. Is it to make money? To make good beer? (Mike believes these first two are mutually exclusive.) To satisfy your ego? To get involved in an enjoyable career where you can meet enjoyable people?

Once you have decided why you are opening a brewery, you can now answer the “four P’s”: Product, Place, Price and Promotion.

  • Product: What kind of beer are you going to make, and how will it be packaged?
  • Place: Where your brewery will be located–in an industrial strip mall by the airport, in the city core, or elsewhere?
  • Price: How much will your beer cost–are you going for large volumes of low profit beer, or low volumes of high profit beer–and where will you sell it–through the LCBO, the Beer Store, to bars or in your own brewery retail store?
  • Promotion: how will you promote your product? Is this the best use of your money? Can the benefits be measured?

You plan should also include S.W.O.T.:

  • Strengths: What is the best potential part of your plan that you believe cannot fail?
  • Weaknesses: What is the weakest part of your plan?
  • Opportunities: Where will your beer sell well?
  • Threats: Who’s your competition? Can your product be easily replicated by a competitor?

And that’s just the introduction to the planning process. Goodness.

 

 

 

 

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One Comment on “Day 491”

  1. Dan Says:

    Thanks for the link to that article! Great read, a real eye opener


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