Day 588

Exam Week.

First up was Human Resources. Relatively straightforward and short, just 40 multiple choice questions.

Next was Beer Industry. This exam featured a mix of multiple choice, short answer and long answer, and was “open book”–we could bring in notes, reference books, a laptop connected to the internet, a smartphone Angry Birds exam app–anything we wanted. As always with an open book exam, you’ll generally do well if you know the material well enough that you only have to fact-check an item or two and you have relatively well-organized notes. Open-book exams are big trouble for the people who have to look up all the answers.

Two more exams tomorrow, so time to get studying! No time to even have a beer or write a blog entry. (As you can see, I lied about at least 50% of the last sentence. And possibly more.)

Day 584

I shed a tear/For I have no beer/What a wretched fate/To cogitate

As you may have guessed, the last day of lectures started in Creative Writing with a brief look at poetry.

In Human Resources, we ended the semester with the process of union-labour contract negotiations and the collective agreement. (I thought it was highly symbolic that my pen ran out of ink near the end of the lecture. I went through almost a dozen pen refills over the past two years while taking notes.)

And in Sensory, my group presented the slide show of our taste results that I had put together yesterday; we then listened to the presentations of other groups.

And that was it. Done. Completed. Finished. Nothin’ left.

Oh, except for five exams next week.

(Cue ominous music)

duh Duh DUHHHH!

Day 583

Last Friday a team of six of us presented two beers to the Sensory Evaluation class and gathered data on what they tasted. Tomorrow we have to hand in a report outlining our results and make a class presentation.

Today I received the finished report from one member of the team and used its data to make up a basic PowerPoint slide show. I then emailed the file to another member of the team to make it look nice and professional.

Woo hoo! No more homework!

Day 582

The second-last day of lectures.

As usual, Mike Arnold started Brewery Management with a warm-up discussion: Cans versus bottles. Cans are lighter, and give the beer better protection from light. Bottles can have lower environmental taxes in Ontario (if they are refillable), are cheaper per unit, have labelling flexibility, and give expensive beers a higher pereceived value than cans. However, one possible issue with cans is the presence of BPA, an estrogen mimic, in the inner liner. At the moment in North America, contact with BPA is allowed for food products that are pH neutral or acidic, but not for foods that are alkaline. (Beer is acidic.) However, who knows if this will change, and if it does, how quickly that change will be made.

On to today’s main topic. You’ve started up a brewery, you’ve made some beer, and now, for whatever reason, you decide it’s time to get out of the game. What is your exit strategy?

The first step is to get a valuation of your company. The easiest (and most expensive) way is to get a professional evaluation. However, there are a number of cheaper ways of estimating how much your brewery is worth.

• If your brewery is a publicly traded company, simply multiply the number of shares by their worth. If your company has 2.8 million shares worth $1.60 each, that would be a valuation of $4.4 million.
• A useful rule of thumb is to simply multiply the last year of production by $200/hL. If you produce  22,500 hL per year, that would give a valuation of $200/hL x 22,5000 = $4.5 million
• Another rule of thumb is to multiply your brewery’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) by 5. If your EBITDA was $3.7 million, your company would be worth  $18 million.
• Another rule of thumb is simply to calculate 60% of your gross sales.
• Or you can compare your brewery to other similar-sized breweries that have recently been sold.

Okay, you have an idea of what your brewery is worth. Now you need to find a buyer.

• You can use a business broker–they exist for the express purpose of matching sellers to buyers, but they will charge a hefty commission.
• Some real estate brokers are also taking on this role.
• You may be able to find a buyer through your local trade association
• You may be able to track down someone who isn’t interested in buying a brewery and then putting thir own name and brands into it, but rather wants to take over your operation as it is (including personnel, trademarks, recipes, etc.).
• Your staff may be interested in buying you out and taking over operations
• Or, if you can’t find a buyer, you may be forced to simply liquidate the operation.

So, let’s assume you’ve sold your brewery. Now what? (Assuming you’re not retiring to a Caribbean island with your  money.) If you’re still interested in brewing, you may not be able to re-enter the market immediately if you signed a non-compete agreement with whoever bought you out. Those usually last 3-4 years, and usually only apply to the marketplace your old brewery services; if you are interested in starting over an don’t want to wait, you could move to a new market and start fresh.

Or you could become a paid advisor–the consultant who arrives, solves a problem and then moves on.

Hmmm, is there any way of skipping right from school to the Caribbean retirement with scads of money?

 

 

Day 581

Third-last day of lectures.

In Human Resources, the process of union certification, and other things you need to know if you work in or will be a manager at a union shop.

In Beer Industry, Jason Fisher reviewed the semester. Key metrics. The AGCO. How to get a beer on the LCBO shelves. Compare and contrast the LCBO and TBS. Key trends in craft brewing. What type of beers I should be making (or not making) if I’m a brewpub, a contract brewery or a bricks & mortar brewery.

And like so many courses before this, another entire class spent thinking “Wha…? Did we really talk about that?”

Day 577

I try to keep my competitive instinct under control, but it tends to surface for things like trivia contests and Rock Band... and chocolate. Our Creative Writing teacher had no idea what she was unleashing when she announced the prize for a quick in-class competition would be chocolate bars.

My vision turned red. MUST EAT CHOCOLATE!

The contest really was quite simple: working in groups of five, we had ten minutes to write the opening lines to a piece of bad genre fiction.

Here’s the thing: I am a grandmaster of bad genre fiction.

Western: The hard sun blazed from the big sky as Dusty rode his deep-chested dun into the small, nameless town in the Sierra Madres, his namesake trail of dust settling on the listless men lounging on benches in front of the saloon as he dismounted. The sheriff stepped out of his office and looked Dusty over with hard eyes, but the cowboy, dog-tired from days on the trail, didn’t stop to talk. Pushing back his white ten-gallon and settling his six-shot hawgs more firmly in their holsters, he strode through the batwing doors of the saloon into the dim interior. Seconds later, shots rang out…

Detective: I looked at the clock on the stained office wall. Although it only read nine a.m., it was probably eleven o’clock somewhere, so I poured myself an eyeopener, then settled back to either read the pile of bills on my desk or contemplate life as a lousy joke. I had just settled on the latter when my next client walked in, a tall cool blonde poured into a tight red dress. “Are you Jimmy Drake the private eye?” she purred, not batting an eye at the open bottle of whiskey. “That’s what the sign on the door says, sister. Drag up a seat and I’ll pour you some breakfast…”

Fantasy: Argalain the Pirate paused as he crested the mountain pass, bewonderment crossing his face at the terrible sight before him. A giant serpent, fangs glistening with black venom, hissed in anger at the unwanted intrusion, the fainting maiden caught within its coils forgotten for the moment. With a cry, Argalain loosed his magical sword Madralin, honed by elvish smiths in the fires of Nithond, and swung it about his head as he charged into battle…

Science Fiction: Argalain the Space Pirate paused as he teleported into the mountain pass, bewonderment crossing his face at the terrible sight before him. A giant serpent, fangs glistening with black venom, hissed in anger at the unwanted intrusion, the fainting fembot caught within its coils forgotten for the moment. With a cry, Argalain activated his laser sword, honed by elvish technicians on the planet Nithond, and swung it about his head as he charged into battle…

You see what I mean. When it comes to bad writing, I can write with the worst of them. The contest was pretty well over before it had begun. Mmmmm, chocolate.

On to Human Resources, where we are finishing up the last few classes with some consideration of union labour laws in Canada.

In Sensory, the various groups presented beers as if the class represented a tasting panel, and gathered information about the various beers tasted. We have a week to collate the results and make a presentation to the class as well as a written report.

Unfortunately the tastings took so long that I had to discard my plan for the evening. Mark Murphy, who graduated from the first Brewmaster class a year ago, has become the very first graduate of the course to start his own brewery. He recently joined forces with his wife to form Left Field Brewing, a contract brewery with cleverly baseball-themed beers like 6-4-3 IPA. Alas, the launch party was in Toronto, and by the time we got out of our final class, it was far too late to make the 150-km trek around Lake Ontario during rush hour.

I’ll just have to wait for another Left Field event and buy two of Mark’s beers.

Day 575

I am happy to report that 50 years after entering primary school, I still feel a frisson of glee upon hearing “field trip”. And today was no ordinary field trip, being “The Day of Three Breweries”–a visit to three breweries in three hours. (Or at least that was the original plan. As Field Marshall Moltke the Elder is reported to have said, “No plan for battle survives contact with the enemy.”)

Steam Whistle, showcase brewery in downtown Toironto

First up was Steam Whistle. As previously mentioned in this blog, Steam Whistle was formed in 2000 by three guys who had been working for Upper Canada Brewing and were subsequently fired (along with everyone else in the company) when it was taken over by Sleeman.

(Full disclosure: When I tasted a bottle of Upper Canada Dark in 1985, the heavens parted, the glory shone down and the Choir Celestial sang. Every beer before that day had been bland and lifeless. It was like seeing in colour for the first time. O, how I wept bitter tears when Upper Canada was taken over by Sleeman. But I digress…)

We had the pleasure of talking to Greg & Sybil Taylor–Greg is one of the original “3 Fired Guys”; his wife Sybil actually worked at Upper Canada longer than Greg, and is now the Director of Communications at Steam Whistle.

What they did 13 years ago now seems like a simple recipe for success–form a company that only makes one beer, then market the heck out of it. This year, Steam Whistle will likely produce about 70,000 hL of their single label, Steam Whistle Pilsner. However, it wasn’t a straight line from then to now. It took two years just to develop a business plan for the new brewery. Once opened, there were a series of problems, crises and emergencies that threatened the very existence of the brewery. Equipment that was supposed to last a decade gave out after two years. The rise of craft breweries in Ontario also coincided with the rising popularity of good quality but cheap imported pilsners from Germany and Eastern Europe. And the large national breweries were no friends of the craft industry either. In Greg’s words, the macros have attempted to drive new breweries out of business with the philosophy of “drown them while they’re young.”

However, Steam Whistle has survived and prospered, likely due to their positive attitude towards employees–the company has won several awards for positive management practices such as flexible work hours, profit sharing, employee share purchase plans and trips for long service employees. With over 160 employees today, Steam Whistle’s biggest day-to-day challenge is human resources management–exactly what we have been hearing in our Human Resources classes. Sybil also mentioned the importance of excellent accounting software to keep track of inventory and taxes. And Greg talked about the camaraderie in the craft industry right now, the feeling of esprit de corps and cooperation among the various small breweries.

During Q & A, I asked about the reasoning behind the apparent move from their iconic green glass bottle to cans. Don’t worry, the bottles will still be around (in Ontario at least). It turns out that apparently cans sell better than bottles out in Alberta and B.C., where Steam Whistle is starting to gain a foothold, hence the move to package some of their product in cans.

Time for a tour. We were given a beer–yay!–and headed out on a tour led by a guide who was used to answering questions from the general public. Alas, she was somewhat flustered by questions about external calandria, hopping systems, and decoction mashes. Luckily a member of the on-shift brew team happened by to help her out.

Ken & Sonja await us (with beer!) at Black Oak

On to our next brewery. No wait, I’m lying. During our Steam Whistle tour, the bus developed a mechanical issue, and we had to wait nearly an hour for a replacement bus to take us to our second stop, Black Oak Brewing.

I have a confession to make: Black Oak is the brewery that employed me during the summer time. (The reason I didn’t name Black Oak is that when I was writing about my summer job, I didn’t want to focus on where I was working, but rather what I was doing. But I digress…)

There are several similarities between Black Oak and Steam Whistle–both were opened in 2000, and both have a small number of labels–Steam Whistle, of course, only has one beer, while Black Oak for many years only had two–a  Pale Ale and a Nut Brown Ale. But where Steam Whistle set out to become a “showcase” brewery, moving into an old Canadian National Rail locomotive roundhouse beside the Skydome, where they now welcome thousands of visitors a year and employ 160 people, Black Oak set up shop  in an industrial mall in Oakville, later moved to another industrial mall in southwest Toronto, and stayed relatively small, with only 5 people on staff. Several years ago, Black Oak jumped on the seasonal wagon, and now produce several each year in addition to their two flagship brands. They have also recently started packaging a portion of their beer in 650 mL bottles, again a trend in craft brewing. In addition, Black Oak is also the place where a number of contract brewers make their product, including Cheshire Valley, Radical Road, Snowman and Sawdust City.

The Bouncing Bomb, Trafalgar’s brewpub

Back on the bus for our final destination, Trafalgar Brewing. Like Black Oak, Trafalgar started in an industrial mall on the west side of Oakville, then picked up and moved a few years later… to the east side of Oakville. Then they reversed course and came back to the west side of town. Like Black Oak, Trafalgar has a very small staff, and a similar-sized brewhouse, but whereas Black Oak’s equipment is in a very large warehouse, Trafalgar’s building is small, and feels a bit cramped. Unlike Black Oak and Steam Whistle, Trafalgar has always made a lot of different beers, and also moved into mead production a few years ago.

Trafalgar also has a brewpub , the Bouncing Bomb. Needless to say, that is where we gathered at the end of the day.

Day 573

I started the third-last week of the semester by heading back to my summer brewery, where a mere ten days ago some classmates and I brewed up a pale ale for a Sensory class assignment. The beer was giving off a lot of sulphury notes, an indication that the yeast wasn’t quite finished its work yet. However, the class tasting is this Friday, so ready or not, it was time to package the beer. First decision: keg it or cask it?

Kegging involves transferring the beer from fermenter to keg via a filter. Since we hadn’t had time to crash the fermenter (that is, lower the temperature of the fermenter so as to induce the yeast to fall asleep and drift down to the bottom of the fermenter), there would still be a lot of yeast swimming around, which would require a lot of filtration. In addition, I would also have to carbonate the beer. Once in class, we would have to use CO2 or a pump to get it out of the keg.

Casking involves transferring the beer from the fermenter to the cask, adding some sugar, and hammering a shive into the bung hole to seal the entire thing up. Having yeast swimming around is actually a good thing, since they will be able to chow down on the sugar and carbonate the cask all on their own. Once in class, we would simply hammer a tap into the cask, then open the tap.

Hmm. Let’s review.

Kegging: Filter (and filter and filter and filter) and then carbonate. Lots of work. Arrange for CO2 or find a pump to get the beer out of the keg. More work.

Casking: Hammer home a shive to seal it. Easy. Hammer in a tap to unseal it. Dead easy.

Really no contest, was it?

Day 567

Rick Mercer’s visit to the Teaching Brewery was aired on CBC last night, and yours truly was a star, dahling. Yes, I was on camera for at least 8 seconds! And Rick chugged my Blackheart IBA straight from the bottle while I stood watching. Amazing.

Alas, my agent failed to return my calls this morning, so it was back down the QEW in time for Promotion & Sales. We had a special guest: Phil Kerwin of Chimpanzee, a marketing and communications firm. Chimpanzee actually started in the Niagara region in 2003, but over the past decade, they have expanded to places as disparate as Sturgeon Falls (Northern Ontario), the UK, New York, and Serbia. They count among their clients Pimm’s, Archer’s, Guinness, Smirnoff (Black Ice) and Fielding Estate Winery.

They were also the marketing agency chosen by Niagara College to brand and market the college beer when the Brewmaster program started up two years ago. Apparently they were given permission to go “edgy”–dangerous words for a marketing agency, and judging by some of the, uhhh…. interesting…. ideas Phil showed us, they certainly were skating close to the edge. However, what they didn’t realize is that the people who told them to go edgy were not the people who would be approving their ideas. In the end, all of the innuendo was replaced by the relatively tame “First Draft”, “Certified Originals” and “Brewmaster” series of college beers.

We Brewmaster students can certainly commiserate with Phil–when we create our own beers in the Teaching Brewery, we also name them. However, when the beer hits the campus store, more than a few racy names and clever double entendres have been arbitrarily replaced with something a bit tamer. Even my own Vice Populi–which I thought was pretty innocuous—was renamed something fairly gormless.

To avoid this problem at a professional level, Phil did suggest that a valuable strategy for a marketing team–and a great way to reduce wasted time and energy–would be to sit down with the actual decision-makers right from the start of the creative process and find out how far they want to push the envelope.

In Brewery Management, it was all about planning a brewery expansion. This project can break a brewery into very small pieces if done wrong, or if done for the wrong reasons, so the first step is to establish a need for expansion.

The most obvious one is sales demand–people want to buy more beer than you can make. There may be other reasons, though: lack of space in the brewery, equipment limitations, keeping up with the Joneses, customer demand for new styles, and a belief that future trends are pointing towards a need for greater production.

Those are all good reasons on the surface, but before you start getting quotes on a new brewhouse, do a bit of cost-benefit analysis. This is going to be the biggest project since you opened the brewery, so make sure your reasons are long-term (more than 2-3 years). Remember that increased production may trigger higher taxes–how will that affect your bottom line? In addition, will all the ancillary equipment play nicely with your new equipment, or will you find yourself replacing steam and water lines, buying larger diameter hoses or replacing the brewery electrical? What about storage–do you have a place to keep all your new beer? Will you have to hire more people? Do you have the logistics in place to deliver all your new beer? Do you have proper quality control in place to make sure your new beer has shelf stability? Can your current ingredient suppliers keep up with your increased needs? Will the municipality be happy with the increased Biological Oxygen Demand (BOD) going down the drain?

Mike Arnold raised an interesting strategy. You want to delay expansion for as long as possible due to the cost, so instead of simply increasing supply by expansion or contract brewing some of your beer elsewhere, why not try to dampen demand? If you have a popular beer that isn’t very profitable, and a much more profitable beer that sells less well, make more of the profitable beer at the expense of the cheaper beer–sales will drop off, but you will probably make as much or more money because of the higher profit margins.

As a matter of fact, don’t expand because of demand for a cheap, low-profit beer–it will take too long to see any cost-benefit. Do expand because of demand for an expensive, high-profit beer.

The bottom line seems to be: expand only if absolutely necessary, and only expand to your planned needs.

Day 563

I’m not usually on campus on a Saturday, but today was the college Open House. As part of our Sales & Promotion class, we have been in charge of planning how we would present the Teaching Brewery. A couple of months ago, we split into four committees–Tours, Education, Food and Logisitics–and seperately made plans for the day. Today all those plans got brought back together.

Visitors to the brewery first entered a tent with an educational display about the various ingredients we use. From there, they got a 5-minute tour of the brewery–we had set up a sample mash, vorlauff and boil on the three pilot systems to demonstrate the brewing system, and two 1st-year volunteers were bottling college beer. Our guests were then ushered into the hospitality tent set up behind the brewery, where we had 15 different student beers on tap (including the mostly full cask of Blackheart, which had survived its blown bung in fine form). We also offered fresh-cooked beer sausages, as well as waffles with hop-infused syrup.

I had the opportunity to meet several incoming Brewmaster students, as well as some students who were still a year away from applying, and had an enjoyable time talking to them about the program in between tours.

The only improvement we could have made was to arrange for warmer weather. On the other hand, the cold March day with a frigid wind out of the north encouraged guests to hang out in the hospitality tent longer–no reason to waste all that beer, right?