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Boom, Bust and Bee

Whistler Brewing is the latest acquisition in a trend where small breweries are merging, buying in or selling out to survive

"It’s sad. Almost too sad. Next week will be the last week we brew in Whistler," says Li, the brewmeister of the Whistler Brewing Company.

After almost 12 years in operation on Alpha Lake Road, the stakeholders in the company have signed a letter of intent to sell all the shares and assets of Whistler Brewing to Alberta’s Big Rock Brewery.

The name will live on, but instead of being brewed in Whistler, Whistler Brewing beers will be brewed at the Bear Brewing Company facility in Kamloops under a licensing agreement with Big Rock. The same goes for Bowen Island beers, which Whistler Brewing has been making for the past two years since the two companies merged.

"We have no choice," says Li. "Big Rock is a public company, it’s a good company. We have a hard time here surviving – everything is so expensive. If we make beer in Kamloops with Bear then according to the management team we should be able to save some money."

It’s a reality pill that the whole micro-brew industry is having to swallow under today’s economic pressures. In the late ’80s and early ’90s microbreweries sprang up all over the map, and seemed poised to steal significant market share from Canada’s big two breweries, Molson and Labatt – tastes had changed, people were drinking less and willing to spend a little more on something different.

The next generation of beer drinkers was shaping up to be a promising herd of consumers. They were well-educated, well-travelled, more adventurous, and somewhat revolutionary – drinking an established brand was akin to conformity. They sought out little known bands, decorated their rooms with rare memorabilia, ate at exotic restaurants, and brought microbrew beers to the party.

The big breweries actually lost market share during this period, and attempted to recapture lost consumers by launching a selection of utterly forgettable microbrew-style beers that you would have to go to a museum to find. Do the names Molson Copper and Red Dog ring a bell?

After those ploys failed, the companies reinvested in sales and marketing to build customer loyalty and bought out their biggest competitors. In the West, Labatt owns Kootenay and Kokanee labels. In the East, Molson owns Moosehead.

Sleeman Breweries of Guelph, Ontario recently became the number three brewery in Canada with their acquisition of Upper Canada Brewing, and Okanagan Springs (which had previously taken over the Shaftebury label). In B.C. alone, prior to Whistler Brewing’s takeover by Big Rock, 17 emerging microbreweries and brew pubs have been forced to close, join forces with other companies, or sell out.

The bottom line is pure economics: a bigger company buys more ingredients, more packaging, more bottles and gets a lower rate. Every piece of equipment, whether it’s for brewing, storing, bottling or transport, is in constant use. There’s more money for advertising and promotion when you have a wider market, and a wider market when you have advertising and promotion.

Because it costs more to put a microbrew on the shelf than a generic brand, you have to charge more for your product, which in turn may turn off some customers.

While Whistler Brewing may be moving, no jobs will be lost as a result of the Big Rock buyout. Li and his staff will go to Kamloops, taking about 70 per cent of the equipment with them.

"We’ve been brewing Bowen Island for two years and it still hasn’t benefited us, we still found it difficult to survive" says Li. "That’s why the owners were looking to merge with a bigger company.

"So far it looks really good. The salaries and wages will be higher, and according to their standards, which are higher than ours. And because they are a public company, it will be easy to get new investors. The sales team is very aggressive and very good and will take over our sales. The cost is also lower, which will benefit all parties."

While he is concerned whether he can duplicate the quality that he and his team have started to generate working out of Whistler, Li is confident that the quality will stay the same.

"The water quality is close, it’s almost the same. The opacity is close. It’s only the machinery that is different. There is more automation here, and I will have to move all that stuff, like our computers, to Kamploops. What I have heard is that their facility is more in the classical style," says Li.

Li has a four-year fermentation degree from the Hubei Institute of Technology in Wuhan, China, and spent two years under the masters at the prestigious Doemens Brewing Academy in Munich. He wears a lab coat to work, and constantly has one eye to the lens of his microscope.

When Big Rock toured the Whistler facility a few months ago, they took one look at the technology and considered brewing some of their beer here. At the end of the day, however, Kamloops was the better economic choice.

"My job is to keep all the procedures the same, the same strict standards and everything. I’ll have to adjust a bit, but in the end we should be able to make all the beer exactly the same as here."

For their part, Big Rock has been looking for an opportunity to break into the B.C. market for a while. Whistler Brewing is their first acquisition.

"There is a general consolidation of the micro-brewery business right now," says Big Rock spokesman Tim Duffin. "It’s the economics of scale. Competition is fierce and getting more into mass production."

They don’t really consider Molson and Labatt to be their competition – these two companies own 95 per cent of the market in Canada, and over 85 per cent in B.C.

"We would consider Sleeman to be our competition in craft brewing, and Granville Island."

Whistler Brewing was a good fit, and the Whistler name is a good calling card for expansion into B.C. and other markets.

Big Rock is also playing with the idea of opening up a brewery in Vancouver if things continue to go well for Big Rock and its acquisitions in the province, "but not in the near future – not until we’ve seen the results."

Sales are already "good" in B.C., with several of the most popular Big Rock brands already available on tap and at the liquor store.

Big Rock Chairman and CEO Ed McNally, who founded the company in 1985, is confident that Big Rock is heading in the right direction. "We believe Whistler Brewing Company… and Bear Brewing… by combining their brands production, distribution, marketing and sales programs will achieve economies of scale and steady sales growth. Kamloops is strategically located and will play a growing role in the new B.C. economy.

"It is apparent that British Columbia appreciates and has a growing interest in craft-brewed beers."

Because the Whistler Brewing was privately owned, it won’t be known how much Big Rock had to shell out for the acquisition until the Calgary, Alberta-based company publishes its annual report for shareholders.

Whistler Brewing’s building will be renovated and become warehouse space.