Day 497

In Human Resources, we covered some generic global challenges facing businesses, and their effect on employees.

One item that I think was quickly glossed over was the changing demographic of employees. The difference in attitude and work habits between the getting-close-to-retirement Baby Boomers and the fun-loving Millennials could not be more pronounced, and the motivators that have been used by employers for the past thirty years are not going to work with the new generation. I would have been interested in spending a bit more time exploring what some of those motivational strategies might be, but perhaps those will be covered in a future class.

We moved on to the necessary but dry subject of employment law. There is both federal and provicinal legislation covering employment in Canada. Federal laws cover areas like the Canada Labour Code, the Human Rights Act, and PIPEDA (privacy laws). And of course, all laws, federal and provincial, derive from the Charter of Rights and Freedoms. But the bulk of employment laws are the responsibility of provincial governments, and therefore vary from province to province.

In Ontario, in order to avoid clogging up the civil courts with suits and countersuits, employment disputes are first handled by a variety of goverment bodies. Once the government body has made a decision, the losing party can take the matter to court if they believe there has been an error of law or of fact.

Time for Brewing Industry with Jason Fisher.

(I should say here that Jason’s use of the word “amazing” always makes me laugh. He uses it constantly, but in so many different ways. For example, he counselled us last week to sign up on the ProBrewers website. This week, when he asked how many had, nobody raised a hand. “Amazing.”

But I digress…)

Just in case there were still some people in the class who thought they could just walk out in April and open their own brewery, Jason gave us a grim reality check: it takes a million dollars and a lot of tears and sweat to open a small microbrewery today. So we need to confront this reality, but retain some vision of the possibilities as well. In other words, dream big, but keep your feet on the ground.

So what were we planning  to open–a brewery, contract brewery or brewpub? Each requires a different set of skills. For instance, a brewpub requires knowledge of the kitchen and restaurant, but not packaging, while running a brewery requires a great deal of knowledge about packaging.

On top of this, each has a number of pros and cons. For instance, if you own a brewery:

  • You have complete control over the price of your beer, what to brew, and your ingredients (although economic realities may limit your choices–you may want to create a beer using Patagonian barley hand-picked stalk by stalk and rowed to North America in small boats, but will you be able to sell it at $385 per bottle?)
  • You may be large enough that you can realize economies of scale.
  • Your business is scalable: if you want to make more money, you can add more employees and/or more tanks in order to make more beer.

The disadvantages of a brewery are that you are completely responsible for making decisions about distribution of your beer, marketing, location, cost structure, when to expand, and health & safety issues. Badly thought out choices about these have been responsible for the demise of many small breweries.

“So,” you think, “I’ll become a contract brewer. I won’t have to worry about rent or utility bills–I just arrive, make my beer, package it and leave.”

There is some truth to that. You have no overhead or start-up costs, no employees needed for maintenance, etc. Your entire focus can be on production and sales. However:

  • You are like the single golfer, who has no rights on the course and has to give way to the foursome playing behind him. Likewise, a contract brewer can only brew when the host brewer has equipment available. If there’s limited time and it’s a choice between the host brewer and you, you lose.
  • In the same way, your beer may be given limited time in the fermention tank, say 2-3 weeks before you are required to empty the tank to make way for someone else’s beer. That is going to put a crimp in your plan to produce a high-test imperial stout that needs six months of maturation.
  • In some cases, the host brewer may put limits on what ingredients are brought into his brewery, which may mean you may not be able to make the totally amazing unique beers you were planning. For instance, your host may only allow you to use the strains of yeast already in use in the brewery, in order to avoid infecting the host’s yeast with new strains. If this is the case and your host doesn’t use Brettanomyces, don’t plan on making any sour Brett. beers.
  • If the volume of beer you want to brew raises the home brewer’s overall volume to a point where it triggers more expensive excise taxes, that cost will be added to your contract.
  • You may be limited in storage space at the host brewery, or there may not be any storage space at all–you may be required to move your beer out of the brewery as soon as it has been packaged.
  • Without a fixed retail location to draw customers, you need someone dedicated to selling and marketing your product.
  • You may run into a cash flow crunch if you have to pay your host brewer before you receive payment for your beer (and we have heard from several instructors that bar and restaurant owners are notorious for not paying their bills promptly.)

So as a contract brewer, there may be a lot of factors beyond your control that may limit the type and amount of beer you can brew. On top of this, despite the fact that you lack a permanent physical home, you still have to apply for all the usual federal and provincial brewing and excise permits (and pay the various very expensive fees for them).

Well, what about a brewpub? It’s usually smaller than a craft brewery, but you still have control over what you make and when you make it. However, beware: the restaurant business has its whole new set of rules, regulations and permits, as well as health & safety issues. You need staff with skills in food prep, serving and customer relations. Also, your business isn’t scalable. Once you reach your maximum capacity of customers, you can’t increase your profits without moving to a larger location.

So, given the above, what should each of us be doing? First, we need to sort out what we like to do, what we want to do and what we don’t want to do. We need to ask, “What’s my passion? What am I good at? How can I make money with this passion and these skills?” Honest answers to those questions–especially in light of the hard economic realities facing us in opening a new brewing operation–will go a long way to answering what role we will fill in the brewing industry in the coming years.

This is turning out to be an enormously informative class, but it’s perhaps the first course we should have taken back in first semester, rather than one of the final courses in the last semester.

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