Craft Beer Q&A: Canada Rising, Buyouts & Independence By Design With Beau’s Steve Beauchesne

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‘You don’t always know who owns the shares behind a company that you believe in.’

One of the most respected craft breweries in Eastern Canada is Beau’s All Natural. With humble beginnings in 2006, the father and son team of Tim and Steve Beauchesne started one of the most influential breweries in the country an hour outside of Ottawa (the nation’s capital) in Vankleek Hill, Ontario, and it quickly turned into a national brand with their Kölsch lagered ale Lug Tread leading the charge.

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I managed to catch Steve on a rare occasion when he had a bit of time to chat, and he’s as cool as he came across during his keynote speech at the recent Canadian Brewing Awards in Ottawa. We got into some juicy subjects, including the recent AB InBev buyouts. So, let’s get into it.

Cee: Hey Steve, loved the keynote at the Canadian Brewing Awards. How did you enjoy the event? Looks like the guys from BC almost swept the whole thing!

Steve: The CBAs were great, it was really interesting that they were in Ottawa. I mentioned in my keynote that when we started selling beer in the Ottawa area in 2006, there was a myth that you just couldn’t sell craft beer in this city, so seeing the way that it’s grown and developed to the point where it can actually host the Canadian Brewing Awards is a real point of pride for me. The way the whole scene got together to host everybody, between the event we co-hosted with Beyond The Pale, the really cool event Big Rig put on, and just all the Ottawa craft breweries out here representing, I think it really highlighted how quickly a scene can form — because really, the Ottawa scene is only between three and give years old.

Cee: How important is an event like the CBAs for the Canadian brewing scene?

Steve: It’s super important, and I’d say especially right now because Canada doesn’t have a national brewing association, so the CBAs tends to be the surrogate for the industry. It’s the only Canadian opportunity to talk on a national level with other breweries, and that’s obviously something that I feel strongly needs to be changed in this country. We need more opportunities to work together. But having the CBAs around, and because it’s been consistently there for so many years, it’s given us a real opportunity to get together once a year and remember that we’re part of a bigger movement.

Cee: Beau’s collaborated with Side Launch for the official beer of the CBAs, Slideway, a Rauch Maibock. What was the inspiration behind the beer?

Steve: Side Launch won the award for Brewery of the Year last year, and because the CBAs were going to be in Ottawa, we thought we’d get together with them and the TAPS guys, who put on the Canadian Brewing Awards, reached out to us and asked if the two of us would want to put something together for the event.

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Side Launch (Rauch Maibock, 7%)

That was kind of half the story — it was a way for us to celebrate with last year’s winner, but the other side of it came from the fact that this year we’ve been putting together collaborative beers with breweries from across the country as part of our involvement in Canada’s 150th birthday celebration. We’re the official brewery for Ottawa, and as part of that we’ve been creating these collaborative beers and we’ve really been trying to interpret Canada through beer goggles, I guess you’d say [laughs].

So what we did was line up those two things, between the Canadian Brewing Awards and the cross-Canada collaborations, and by working with Side Launch we were able to put that all together. The beer was also a real special moment for Matthew [O’Hara], our brewmaster, because he apprenticed under Side Launch’s brewmaster like 25 years ago. So it was a bit of a reunion for Matthew and Michael Hancock, which made the whole thing that much more special.

Cee: I hadn’t heard about the cross-Canada collaborations. It sounds awesome — what’s that all about?

Steve: For us, it’s part of the larger initiative. Lug Tread is the official beer for Ottawa this year, but we also wanted to create brand new beers as part of our involvement with the celebrations. So, we’ve been brewing primarily with other brewers but also with organizations and cool people across the country. For example, in January we collaborated with the Fogo Island Inn, and our current collaboration is with the David Suzuki Foundation. We’re also releasing a different version of the same beer from the Central City Across The Nation mixer pack, and we’re collaborating with Half Pints in Winnipeg, Crannog in BC, Unfiltered in Halifax. So, we’re trying to not be too single minded about it because we want to try to represent not just different breweries from Canada, but all things Canadiana.

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Cee: You made comments about AB InBev’s recent purchases (including a great shout to Brew Studs) — what are your thoughts about all the buyouts?

Steve: I didn’t know you were in the audience so that wasn’t paid or anything [laughs].

The best indicator of my viewpoint on this is, last year, because of the buyouts in the industry, Beau’s made the conscious decision to start selling our brewery to our employees. To me, craft beer needs to be independent. I still take exception to large breweries calling what they’re producing “craft beer.” The whole point of this was that under the stewardship of the large breweries, beer became terrible. If we allow these large breweries to be successful in their strategy to co-opt and buyout the gains that we’ve made, I feel like we’re going to lose all the momentum that we’ve had. At the same time, as many would have read on the guide on selling a business, there are several factors that a business can also benefit from if sold to a smaller company, and i’m not against that happening to other breweries in the industry.

As I mentioned in my keynote, if you’re 22 years old right now, you’ve never had to go through a period of time in your legal drinking life where you’ve had to suffer through terrible beer. It’s easy for people to imagine that it could never get that bad again, and for some people it’s hard for them to imagine that it was as bad as it was. I think that’s a real risk that we’re facing, because what it leads to is commoditization. If what we call “craft beer” becomes just another commodity, if there’s nothing special about it, then it just becomes lowest common denominator. Whoever’s got the cheapest price or the easiest access will be what people choose. And what made craft so important is that you go out of your way, that sense of discovery, that sense that it’s special. The large breweries are systematically trying to destroy everything that makes craft beer special, and they’re doing it strategically.

Cee: In comparison to the U.S., Canada has relatively few breweries being bought up by the big guys. Do you think that pattern could change north of the border?

Steve: I think the danger is ever-increasing but I think it’s important to recognize that Canada’s got one tenth the people of the States so there’s one tenth the number of breweries. To me, it seems like if you start looking at the number of breweries in Canada that have been bought out recently, between Archibald in Quebec, Mill Street in Ontario, Granville Island and Creemore, one of the things that worries me is — Are there more that we might have forgotten about?

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Up until very recently, when a brewery sold to a larger brewery there just wasn’t as much reaction as there was in the States, which was really scary for me. But I like to think that Canadians have their consciousness woken up to this as well, now. The large brewers, their strategy is to dominate distribution so they’re only going to buy as many smaller breweries as they need to do that. So, if you’re a major brewery and you own a former West Coast brewery, a former Ontario brewery and a former Quebec brewery, you can probably do that. That’s why you don’t see as much as you do in the States — down there, you just need to be able to own more breweries to be able to dominate; whereas in Canada, you don’t need quite as many. That being said, I think if you look in any area where there’s not at least one craft brewery owned by a major, there’s a good chance you’re going to hear about one being bought out.

Cee: What is the general vibe you’ve personally noticed from breweries in relation to buyouts? Do you know anyone (without naming names) you think would be open to it? Or are the Canadian guys fairly staunchly independent?

Steve: It’s one of those things where when you hear that someone got bought out, you’re initially shocked but then you start thinking about it and you’re like “Ah, I was missing the writing on the wall.” It’s not like I have any inside intel on that, and accusing someone of wanting to sell out is about the meanest thing I can say about someone, so I’m not going to do that [laughs].

I don’t know if Canada’s any different from the States in that regard. There are lots of us who started breweries for the right reason, and we’re not independent because no one has offered us money; we’re independent by design. But that risk is definitely out there and there’s obviously a lot of breweries where the brewmaster might be totally into it, but the ownership behind it maybe is not. And that’s where you can get shocked by the buyouts, because you don’t always know who owns the shares behind a company that you believe in.

Cee: How do you feel about selling or receiving investment from other sources aside from companies who actively try to crush the industry? Is there a difference or should it be independence at all costs?

Steve: It’s a great question, and as the craft brewing industry has grown so much and so quickly, I would suspect that it might be the elephant in the room. The ownership behind a lot of these companies, whether it’s 20%, 40% or over 50%, being controlled by people who don’t care about craft beer and only care about profit, it has an incremental impact on the industry. There’s no way that it couldn’t. There’s a difference between a brewery that’s owned by people who started a brewery because they love craft beer and they love what it stands for, and then a brewery that’s there because they see a market opportunity and they want to exploit it.

Last year, on its 10th birthday, Beau’s began selling the brewery to its employees.

That being said, there’s still a difference with the AB InBev stuff, because they have the clout and the power to dominate the industry, and they’re purchasing breweries for the sole purpose of destroying craft beer. They want nothing more than the rest of us to just go away [laughs]. That’s part of their strategy here, they want to dominate the distribution so that we don’t have access to customers, and they want to use their political influence to make it harder for us to compete fairly. With an investment firm, they maybe don’t have craft beer at their core in the way that some of us do, but it’s not in their best interests to destroy the craft beer industry; it’s in their best interests to see the craft beer industry thrive. In that respect, we’re still in good alignment with the investment firms, and that’s why there is a difference between a venture capital controlled brewery and a beer board brewery.

I can go on on this topic, and it’s a topic that’s really important to me, but the risk with venture capital firms is that if we start to see a market downturn in craft beer, it can have a real dramatic impact on breweries. The venture capitalists that are in there are looking for their 30-50% YOY returns, and if they don’t get them they’re going to take their losses and move on. If there is as much venture capital in the craft beer industry as I suspect there might be, and if we see this downturn that we’re worried might be coming, it could actually be similar to what happened in the housing market when all the banks started pulling mortgages. If all these venture capital firms start trying to sell off their share of breweries, you could see a lot of breweries go bankrupt pretty quick.

Cee: There’s a lot of positive talk about the Halcyon Barrel House project joining the Beau’s family. Congrats, we’ve heard amazing things about the beer! What was the thinking behind the decision to bring Halcyon under Beau’s?

Steve: Bryce [McBain] told me what he was planning on doing, and his concept was along the lines of a Cascade barrel house; he didn’t want to own the brewhouse, he just wanted to make all the magic happen in the fermentation and the aging and blending of barrels, so I thought that was really cool. While he was getting set up, I was offering him all the support that I could, helping him with his business plan, giving some advice on things to avoid that we’d learned in our early days at Beau’s, and through that process the model that he developed was to have a significant amount of the sales of his beer through an onsite store located in the Ottawa area.

Bryce McBain at the Halcyon Barrel House

The AGCO has a rule that says, “you can’t sell beer out of your location if you don’t do all the brewing processes in house,” and they’ve got it listed down to mashing, lautering, the whole thing. What that meant was he wouldn’t be able to actually sell beer out of his establishment if he didn’t have his own brewhouse. So, long story short, he had to go back to his potential investors and tell them that the cost to do this has gone up fairly dramatically. At that point, his investors got cold feet, and because I’d spent so much time talking to him about it, I’d kind of hit the point where I’d fallen in love with the whole thing.

So, when I heard that his investors pulled out, I told him, “If it’s the brewhouse that’s your big issue, why don’t you consider running this as a separate entity within Beau’s?” He loved the idea, we talked it through and here we are. It’s still entirely a Beau’s venture, but it’s a completely different brewmaster and approach to making beer. In a lot of ways, this is a startup within an established brewery which makes it really fun.

Cee: Would Beau’s have ever dabbled into the sour and wild styles of beers if the Halcyon opportunity didn’t come along?

Steve: We’d really been struggling with this question because we’re all big fans of mixed fermentation, sours, Bretts and wonderful beers like that, but on a practical side, we’re also not really interested in risking a Lug Tread infection for the sake of it [laughs]. We keep having this ongoing back and forth about how are we ever going to get into this style of beer when the majority of our beer is clean, and maybe we would have eventually figured out a way to do that but it wasn’t part of the plan for us to go that route.

Sometimes beers go sour when it’s unintended.

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Because of Halcyon, we really get to benefit from Bryce’s business plan and the model he developed, so it’s a real win-win. He gets to see his dream coming to life in a really structured way with a lot of support that he wouldn’t have had otherwise, and we get the benefit of the time and effort he put into his thinking behind the project — we’re really happy to be able to have the Halcyon beer as part of our lineup.

Cee: What’s the next exciting project in the works for Beau’s?

Steve: We’ve always got a whole pile of projects on the go in different stages of development. It’s one of the things some people love about us, but other people can’t wrap their heads around it [laughs]. I think a lot of people think that breweries start one project, see it through to completion, and then say “What’s next?”

With Beau’s, we’ve got a process where we’re in continual development so at any point in time we’ve got one project that’s nearing completion, one that’s about mid-way through and one that’s just starting up. There’s lots of stuff in the works for us — we’re just launching Lug Tread into cans, we’ve just released our Full Time IPA — so they’re big projects we’ve recently completed alongside the Halcyon Barrel House.

There’s lots more behind the scenes that we’re still working on. Just yesterday, we released our Tom Green Summer Stout, which was really fun. We switched up the Milk Stout so it’s a blonde Summer Stout. A lot of stuff happening.

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Aussie Cee and Canuck Scott 'Beer' Cole are just a couple blokes helping you understand and enjoy craft beer, one pour at a time. Together they host BAOS Podcast, a fun podcast and video series aimed at the newcomers to craft beer, interviewing everyone from brewers, brewery owners, DJs, musicians, comedians, entrepreneurs and everyone in between. Based between Toronto and Montreal, they cover beers from around the planet, bringing an educated novice perspective to those newer to beer without all the pretension and beard-stroking. Though they do enjoy stroking their beards from time to time.

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