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Brewery Business
  Red Truck Brewing Co., an arm of the Mark  James Group, which also owns Yaletown Brewing Co., is building a $15-million facil-ity on First Avenue, just off Main Street in Vancouver. Significant expansions are already underway or slated for Howe Sound Inn and Brewing Co. in Squamish, Lighthouse Brewing Co. and Driftwood Brewing Co. in Victoria and Nelson Brew-ing Co. Ltd. in the Kootenays, which cel-ebrated its 20th anniversary last year. Even Steamworks Brewing Ltd. in Gastown is planning to grow, first by having its prod-ucts bottled by a contract brewer, then by expanding its own brewing facilities. Opening a new brewery follows a stan-dard template: lease or purchase a space with industrial zoning; apply for a devel-opment permit with the local government; apply for a brewing licence from the pro-vincial government; order the brewing equipment; endure numerous inspections and hurdles as the space is prepared for use as a brewery; install brewing equipment (and undergo more inspections); apply to June 2012  BCBusiness 63 BCBUSINESSONLINE.CA cannot afford to put her on the payroll yet. Maybe in a year or two, if things go well, but, for now, the brewery has three employees: Dauchot, Skadsheim and Michelle Zutz, who handles sales.For Townsite Brewing, the next few months will be crucial: summer is beer sea-son, so it represents the greatest oppor-tunity to sign up restaurants and bars and get its products out to the consumer. In addition to its Zunga (which is Powell River-ese for a rope swing over water) and IPA , the brewery will also produce Pow-town Porter and Sun Coast Pale Ale, which will only be available on draft, and only on the Sunshine Coast. t  ownsite is only one of more than a dozen new microbrew-eries or significant brewery expansions in B.C. this year, all part of the boom that craft brewing has been enjoying here for more than five years. B.C.’s microbreweries have enjoyed sustained growth of more than 20 per cent a year since 2006, with an amaz-ing 142-per-cent increase over the past five years (from $53.6 million for 16.8 mil-lion litres in 2006, to $130 million for 35 million litres last year).Four breweries have opened in the past year alone: Tofino Brewing Co. last spring; followed by Hoyne Brewing Co. in Victoria in December; Coal Harbour Brewing Co. in Vancouver, in January; and Parallel 49 Brewing Co., also in Vancouver, last month. Two “nanobreweries” are aiming to open this summer – North Vancouver’s Bridge Brewing Co. and Powell Street Craft Brew-ery Inc. in east Vancouver – and three other new breweries are in the planning stage in Vancouver alone, including one as part of the new student union building at UBC , purportedly the first on-campus brewery in North America.Surrey’s Central City Brewing Co. is building a new $20-million production brewery on city land close to the Pattullo Bridge, slated to open in 2013. Similarly, 62   BCBusiness   June 2012 Karen Skadsheim can’t refrain from hopping up and down and letting out a whoop. For the brewery’s founder, the launch has been a long time coming. “Bad Karen,” as her friends affectionately call her, is so well-known and well-connected in Powtown that you’d assume she’s a local, born and bred. But in fact, she’s a transplant from North Vancouver, part of a wave of urban ex-pats who have fled the bustle and real estate prices of Greater Vancouver for the artsy-outdoorsy vibe that Powell River now offers – along with well-maintained houses with ocean views that can be had for less than $200,000.Skadsheim landed in Powell River in 2007 after a year spent travelling abroad, temporarily crashing with her brother (who lives in a Townsite church he bought for $17,000, but that’s another story). She kept her things in storage while she sorted out her future, but after a year she finally realized that her future lay in Powell River, so she moved into the former rectory next door. The only thing missing for her was craft beer. “This brewery is all about me and my needs,” she explains with a laugh. While rumours of new microbreweries opening on the Sunshine Coast came and went, she and her friends often talked about the perfect building for such a brewery: an architectural treasure that had sat empty for a long time, it had been built in the Streamline Moderne style by the federal government in 1939, to house the post and customs offices. One night, probably after a couple of beers, she emailed the address on the For Lease sign, saying she was look-ing into setting up a microbrewery in town and wondered what the rent would be.To her surprise, she received a response immediately, and an enthusiastic one at that. “Oh my God, a brewery would be per-fect,” the landlord wrote. “Do you need a business plan? Do you need some money? Because I have a business plan and I have money.”Skadsheim formed a partnership with the building’s landlord and incorporated the brewery in May 2010. Money was the main challenge she faced, but the fact that her partner could make the federal build-ing available at an extremely low lease rate – and leave it empty until they were ready to go – was crucial. It was already zoned for industrial use, which is a must for pro-duction breweries. (A fish-packing plant had previously operated at the site.)Without any entrepreneurial experi-ence herself, she enrolled in the federal government’s Community Futures pro-gram, which provided her with training in setting up the business plan, and then supported her with a modest salary during the crucial startup phase when there are many expenses but no revenue. The brew-ing equipment and necessary renovations to the building cost about $500,000, and the only other real hurdle she encountered was when the brewer she intended to hire took another job in Victoria. But in the end, that challenge had a positive result, too.Cédric Dauchot, Townsite’s brewer, grew up in Belgium, where he graduated from L’Institut Meurice in Brussels in 2004 with an engineering degree in the science of brewing. He took a job with the French chain Les Trois Brasseurs, which sent him to Montreal to set up several brewpubs in Quebec. There, he met and eventually married Chloe Smith, a brewmaster herself. After learning everything there is to know about setting up breweries, they moved to her hometown of Saskatoon with the inten-tion of starting their own. But after “chasing our own tail for a year and a half,” Dauchot saw Townsite’s advertisement for a head brewer and jumped at the opportunity.Skadsheim was nervous about bring-ing the couple – who were expecting their first baby – all the way to the remote northern end of the Sunshine Coast. But she needn’t have worried; as Dauchot puts it succinctly in accented but perfect Eng-lish: “Saskatoon to Powell River is less far than Belgium to Canada.” To seal the deal, Skadsheim’s business partner offered the couple a beautifully restored apartment in the old Bank of Montreal building across from the brewery at a discounted rate.Most importantly, Dauchot says, “I had the freedom to put the brewery together the way I wanted.” Smith also hopes to brew at Townsite, although the brewery From Mash to Market  Unlike wine, beer is ready to drink within weeks T he brewing process typically takes two to four weeks, but can be longer, depending on the style of beer. Lagers take longer than ales because they ferment more slowly at a cooler temperature, but some high-gravity (higher alcohol) ales can also take longer. One of the big-gest challenges craft breweries face is the bottleneck caused by the fer-mentation process: you can brew a batch of beer every day (or two or three if you work around the clock), but each batch will spend a few weeks in a fermentation tank, so the brewing process is limited by how many fermen-tation and bright tanks you have. The flipside is starting with a large facility, in which case you might have too much beer on your hands, which can lead to spoilage or dumping a whole batch. BUILT TO LAST: Karen Skadsheim caps reusable growlers; Townsite Brewing’s historic locationCédric Dauchot   June 2012  BCBusiness 65 BCBUSINESSONLINE.CA critical perspectives on Joyce’s Ulysses , he found his true calling when he responded to an ad seeking a brewer at Victoria’s newly opened Swans Brewpub in 1989. Hoyne brought a six-pack of his home-brew to the interview with Frank Apple-ton, who designed and built the brewery. Hoyne says he and Appleton sampled his homebrews and chatted, and by the time the bottles were empty, he’d been offered the job. He spent several years at Swans before moving on to the Canoe Brewpub  just down the street, where he worked for the next 13 years. The recent craft-beer boom in B.C. played a part in Hoyne’s decision to finally open his own operation. “If the market-place was showing signs of the reverse, where craft breweries were struggling and people weren’t supporting them, would I have started up a microbrewery?” Hoyne asks rhetorically as he leans on a pallet of his just-bottled beer. “I would definitely have thought twice about it. But it does seem like a great time.”The people behind Vancouver’s new-est brewery, Parallel 49, definitely agree that the time is right for microbrewing in B.C. The more-than-$1-million operation is owned by the same team of business-people as St. Augustine’s, the Commercial Drive restaurant specializing in craft beer. Co-owner Anthony Frustagli says that St. Augustine’s was srcinally intended to be a brewpub: “We went to City Hall to find out what we needed to do to open one. When the clerk answered, ‘What the hell is a brewpub?’ I knew it wasn’t going to happen.” The owners settled for opening St. Augustine’s as a restaurant instead, but focused on serving the best beer they could find. With more than 40 taps pouring craft beer from B.C., the U.S. and Belgium, the pub has become a hub for craft-beer lovers in Vancouver, along with the Alibi Room in Gastown. “St. Augustine’s is like R&D  for Parallel 49,” Frustagli says. “We know what people like to drink.” Ironically, due to the arcane provin-cial “Tied Houses” laws, Frustagli and his partners will not be allowed to serve Par-allel 49 products at St. Augustine’s. The consensus among industry insiders is that the rule will be changed soon, and while Frustagli hopes it will, he shrugs and says, “Our business model requires us to sell our beer to a lot more places than St. Augustine’s anyway.”Parallel 49 is on Triumph Street in east Vancouver, across from the city’s other newest brewery, Coal Harbour Brewing. But while Coal Harbour took two years to open, Parallel 49 has managed to do it in nine months. “We’re pushing the limits of how quickly you can open a brewery in B.C.,” says brewmaster Graham With, who trained as a chemical and biologi-cal engineer at UBC  while perfecting his brewing skills as a DIY  home brewer. “Basi-cally, whatever the engineers recommend, we do. That way we avoid delays,” With emphasizes. “The sooner we get product out, the better, because no money is com-ing in until then.”One big decision Frustagli and his partners made to avoid delays was to order their brewhouse equipment from a manufacturer in China in order to cir-cumvent a backlog of orders for North American-made brewing systems. While part of that decision was cost-based, they also knew they could get the equipment much more quickly, even factoring the extra four weeks it would take to ship it from China. 64   BCBusiness   June 2012 the Liquor Distribution Branch for listings for your beers once the brewery has been fully approved; and, finally, begin brew-ing beer and hope that the listings will be approved and, thus, that you will be able to sell the beer when it is ready. Once the beer is ready, the biggest challenge is to sell it, either to restaurants and bars will-ing to serve your beer to their clients or to individual customers who are ready to fork over their cash at a liquor store or at the brewery.The permit-appli-cation system is a bureaucratic obstacle course. Brewers complain that municipal development offices rarely seem prepared to handle applications from breweries, or that municipalities have limiting rules that make operating a brewery especially dif-ficult. Local officials often react as if the brewer were applying to build a chemical plant or smelter. The modern craft-brew-ing process is a very green operation, with little pollution or odour other than perhaps the sweet, malty smell of the beer being boiled during the fermentation process. None of the tourists on Granville Island seem to mind when brewer Vern Lam-bourne is boiling a batch of his Pumpkin Ale or Fresh-Hopped ESB .Brewpubs, in which beer is brewed and sold in the same building along with food, are notoriously difficult to open because unlike normal restaurants, which only require a “food-primary” liquor licence, brewpubs require a “liquor-primary” licence. The multi-step application pro-cess includes posting site signage, dis-tributing flyers in the neighbourhood and, likely, a public meeting where local residents can voice concerns. Sometimes an expensive telephone survey may even be required. Each of these stages has a price tag: the City of Vancouver, for instance, charges from $801 to a maxi-mum of $4,327, depending on how many steps are required.The provincial government adds fur-ther layers of regulation through the Liquor Control and Licensing Branch, and the Liquor Distribution Branch, through which all alcohol sales in B.C. flow. A com-mon complaint from new breweries is that they can’t begin to sell their products until they have been completely approved, even if they have customers who are interested in pre-ordering. It can take weeks for a listing to be approved by the LDB , even though the process could be as simple as submitting the beer’s name and informa-tion through an online database.Even once a brewery is allowed to sell its own beer, all the money that comes in – whether from a keg delivered to a local res-taurant or a bottle sold in its own tasting room – must be sent to the Liquor Distribu-tion Branch. There, the larg-est portion is retained as taxes and “distribution fees” and, a month or two later, the brewery will finally receive its portion of the sale, which is well less than half of the sale price. At Hoyne Brewing, Victoria’s newest craft brewery, owner and brewer Sean Hoyne explains that though he started selling 650 ml “bomber” bottles and “growlers” (two-litre refillable jugs) at the brewery in December, the revenue was  just starting to trickle in by mid-March. As well, in February, Hoyne Brewing applied for approval to sell its beer in gov-ernment liquor stores, but it would not receive that approval until mid-April and, even then, only for one of its four core brands, Hoyner Pilsner. Another brand, Down Easy Pale Ale, was given a seasonal brew listing only, which means it will not be sold year-round. The other two brands will only be available at the brewery or from private liquor stores.These are the facts of doing business with the B.C. Liquor Distribution Branch. Most brewers complain about the LDB  – off the record – but few will say anything negative publicly for fear of encountering problems in the future. Hoyne won’t go on the record about the LDB  either. Still, it’s easy to understand how an entrepreneur who has spent at least half a million dollars to open his brewery might be frustrated at being stalled just as he’s finally ready to sell his beer to an eager market. But Hoyne isn’t complaining. Quite the opposite; he couldn’t be happier. Open-ing his own brewery has been his dream going back more than 20 years. Although he studied graduate-level literature at UVic and still likes to bone up on the latest n  Grain Mill: grinds the malted barley grains prior to mashing n  Mash Tun: a large kettle that heats and stirs the grains to a precise temperature, which converts starch into the sugars nec-essary for the brewing process n  Lauter Tun: sometimes combined with the mash tun, this is where the grains are removed from the liquid (now called wort) after the mashing process n  Brew Kettle: the vessel where the wort is boiled for a certain amount of time, with hops added at various stages of the process n  Wort Chiller/Heat Exchanger: cools the wort quickly to the right temperature for fer-menting, keeping it sterile at the same time n  Fermentation Tank: yeast is added to the cooled wort in this tank and fermentation begins n  Aging Tank: once the fermentation is complete, the beer is moved to this tank, where it ages for a couple of weeks or more, usually at a cold temperature n  Bright Tank: the beer is then moved (sometimes through a filter) to this tank where it sits until it is kegged or bottled n  Kegs and Kegging System n  Canning/Bottling Line and Cans/Bottles: some breweries only keg their beer, but most like to sell their products in cans or bottles n  Delivery Vehicle: to deliver kegs to restau-rants and bars, as well as bottles/cans to the LDB  warehouse or private liquor stores Last fall, the owners and With flew to China and visited the factory, where they were impressed with the professionalism of the staff and the quality of the equip-ment. The brewing equipment arrived on  January 31 – With’s 30th birthday – but, unfortunately, the two Chinese engineers that the company sent over to help set it up were denied entry by Immigration Canada. Frustagli enlisted local MP Libby Davies’s assistance in writing a letter on their behalf, citing that these men are professional engineers with families and mortgages in China. Eventually, they were approved entry.Overall, With says the most important choice he and his partners made had to do with the floor. Having worked at a couple of other breweries, he knew how impor-tant it was to have a proper, slanted floor so that spilled liquids flow naturally to drains (there is a reason why brewers tend to wear rubber boots). It also needed to be reinforced to support the heavy brew-ing equipment. The pre-existing floor was completely dug up and re-poured, with a high-tech environmental buffering system installed to handle the chemicals used for cleaning the tanks or in case of a large spill of yeasty beer, which can be hard on the sewer system. The price tag for the floor alone was about $200,000. Parallel 49 intends to open a public tast-ing room at the brewery in 2013, and with Coal Harbour Brewing across the street and another long-standing city brewery, Storm Brewing Ltd., a couple of blocks away, the area is on the way to becoming Vancouver’s brewery district. The way the craft beer business is booming in B.C. right now, there might be a few more before too long. It’s not quite Portland of the north, but it’s getting closer.  What do you need to start a brewery? Shopping List  The srcins of B.C.’s microbrew movement Frank Appleton and John Mitchell are widely credited with kick-starting B.C.’s modern craft-brewing movement when they founded the Horseshoe Bay Brewery in 1982. Although that operation did not survive, several of the B.C.’s oldest breweries and brew-pubs have a direct connection to either Appleton or Mitchell, including Spinnakers in Victoria, which was Canada’s first modern-day brewpub when it opened in 1984. Many of the brewers Appleton and Mitchell trained have gone on to open their own operations. The Godfathers  { ONLINE EXCLUSIVE  Is there a new brewery near you? Check out our map of breweries around B.C. bcbusinessonline.ca/ bcbreweries Townsite’sDauchot
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