'What have we gotten ourselves into?' Can Ontario craft brewers survive COVID-19?

With another provincewide lockdown on the horizon, trouble is brewing for Ontario’s craft-beer producers — but, so far, they’ve tapped creativity to get through the pandemic
By Josh Sherman - Published on Dec 23, 2020
Because of the second provincewide lockdown, Flux Brewing Company will only be selling takeaway beer. (Photo by Melissa Barlow)

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While some have seen work dry up under pandemic lockdowns, Sarabeth Holden and her husband, Sean, have been pulling 18-hour days. The couple launched Red Tape Brewery, in Toronto’s east end, earlier this month, and they’ve had to clock serious overtime to overhaul brewing plans in response to the public-health crisis. “It’s been frustrating,” Sarabeth says with a heavy sigh. “I think it was around April: I looked at Sean and said, ‘What have we gotten ourselves into?’”

The Holdens want to work with customers to brew custom beers for corporate events and personal milestones, such as birthdays and weddings. They’d also like their brewery to function as an intimate event venue. “We thought we were going to be a taproom,” says Sarabeth. “And then we were like, ‘Oh’…” With Toronto already under lockdown — and a provincewide shutdown looming on Boxing Day — they’ve temporarily shifted their focus to retail. Alcohol retail was only meant to make up a small portion of the couple’s business, but because it’s considered an essential service under the shutdown framework, they’ve had to pivot completely.

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red tape
Sean and Sarabeth Holden launched their Toronto brewery during lockdown and had to radically change their business plan. (Courtesy Red Tape Brewery)

The move meant the Holdens had to scramble to learn how to operate their own beer-canning line and produce much higher volumes of canned beer than anticipated. “We were told that it was a plug-and-play machine; we thought we were just gonna hook up the beer, put in a can, and it would do the work,” explains Sarabeth. But the process — which the Holdens have now figured out — wasn’t nearly so simple. It’s just one of the ways in which Ontario’s craft brewers are trying to keep the lights on during the coronavirus pandemic.

Change is nothing new for the industry: 79 per cent of the country’s approximately 1,000 craft brewers didn’t exist before 2015, according to the Canadian Craft Brewers Association’s first Effects of COVID-19 on Craft Breweries survey. “Maybe part of the reason why we are so resilient is this constant change has become a fact of life for breweries for many years now —  new breweries all the time,  new styles and techniques, and new consumer trends,” says Steve Beauchesne, CEO of Beau's All Natural Brewing Co., in Vankleek Hill, east of Ottawa.

After Ontario declared a state of emergency in March, shuttering non-essential businesses across the province, Beau's was one of a number of brewers and distillers to begin producing hand sanitizer. Beauchesne remembers hospitals cold-calling producers, desperate to secure the stuff. “In the early days of the pandemic this was really a big issue,” he says. “It’s not making a huge impact in breweries anymore because the demand for it’s not nearly as severe as it was … in April or May,” he adds, noting supply chains have normalized.

beau's all natural brewing sign
Earlier in the pandemic, Beau’s was able to convert its parking lot to an all-season patio. (Photo by Christopher Skinner)

When Beau’s had to close its taproom earlier this year due to indoor dining restrictions, it found a way to continue serving customers on-site. “We turned the parking lot into a kind of a ski chalet environment, and we’ve got fires lit and things like that encouraging people to enjoy the outdoors through the winter with a beer,” says Beauchesne. The space will be closing on December 24 in response to the imminent lockdown, but Beauchesne notes that Beau’s, whose sales are down 30 per cent annually, is still in a better position than some. “It will be hard on many breweries, including Beau's, but having strong sales in the LCBO, grocery stores, and The Beer Store certainly provide a buffer,” he says in a follow-up email.

In Brant County, Flux Brewing Company had been using a reservation-only model for its taproom until this past Sunday, but the owners decided to close after the province announced that the area was entering the red zone. “I’m more concerned for smaller local businesses around us than I am for us. I know we can survive,” says Jeremy Hansen, who co-owns the brewery with Braden Cronmiller, his brother-in-law.

Flux opened in late August and so missed the first provincial lockdown, and the reservation-only model then used for indoor dining made it easier to ensure they weren’t over or understaffed — but it came at a cost. “That now requires more staff to manage incoming reservations and more staff to manage the constant sanitization of your brew house,” says Hansen. With upwards of 3,000 litres of beer sitting in kegs, Hansen is shopping for a special counter-pressure faucet that can be used to extract the beer and bottle it for retail. In what he considers a “silver lining,” the shutdown has led Flux to prepare to launch online sales.

flux staff
Flux Brewing Company team members, from the left: Tara Barlow (brand manager), Braden Cronmiller (co-owner), Jeremy Hansen (co-owner and brewer, Kelsey Desnoyers (brewer). (Photo by Melissa Barlow)

Beauchesne, who is a board member for the Canadian Craft Brewers Association, suggests that creativity only goes so far; without further government action, he warns, businesses will go down the drain — especially with a second lockdown. “I’m not confident without some additional [government] support that we won’t see a few losses in the industry,” he says. “It could become significant, depending on the severity of the impact.”

In particular, the CCBA is calling on the federal government to eliminate the excise tax — a per-litre tax that increases with the amount of beer produced — on the smallest breweries, or those producing less than 10,000 hectolitres of beer annually.

“The federal government’s top priority is supporting Canadians and businesses as the country weathers the COVID-19 pandemic,” reads an email statement attributed to a Department of Finance official. The official notes wage and rent subsidies are in place for businesses and that “Canadian brewers have reduced excise duty rates for their first 75,000 hectolitres of beer produced each year.”

Already, breweries have seen a widespread decline in revenue. When the CCBA polled member breweries in April for its COVID survey, almost half the respondents reported drops of 50 per cent or greater, and a quarter saw losses of 25 per cent or more. “Some of the numbers are pretty scary,” says Beauchesne, noting a follow-up survey is due out in the New Year.

While Red Tape’s canning plan will float the business until at least the summer of 2021, it falls well short of original expectations. Asked how the retail-only numbers compare to their initial model, Sarabeth just laughs. “The margins are much lower on cans than they are on the taproom, like, if people were just to come in and have a draught beer,” she adds. The labour required to operate a canning line, as well as materials such as cans, lids, trays, and labels all eat away at profits, she explains. (The Holdens initially purchased the line to produce custom cans mostly as party favours.)

Still, the Holdens are determined to make sure Red Tape survives. “We’re in it to win it,” says Sarabeth. During construction, they even made adjustments for the day when they can hopefully open their taproom: at the suggestion of their architect, Hello Architecture, they installed a garage door at the front of their sub-1,000-square-foot space. The hope is that an airier venue will put customers more at ease when they’re allowed to head to bars and restaurants again. “The beer tents that people have where you have the three walls — it’s basically turning the whole space into that,” Sean explains.

In Brant, Hansen and company also remain optimistic. “We feel like if we can do it now, if we can get through this, there’s nothing that we can’t get through in the future.”

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