What does the LCBO strike mean for Ontario’s hospitality and home-grown alcohol businesses? In a new series of articles, TVO Today is talking to these businesses about their industries and what the strike has meant for them. Today: Richard Wood, president and co-founder of Bobcaygeon Brewing Co., a craft brewery in cottage country.
Matt Gurney: We’ll talk about the company in a minute, but let’s talk about you for a minute. How does one get the idea to start a small craft brewery?
Richard Wood: My co-founder and I, we’re very passionate about beer. I’ve had a lifelong connection to the area with a family cottage just outside Bobcaygeon. My co-founder and I were at the cottage one day, and we thought it would be great if there was a local craft brewery in the area. At the time, there wasn’t. Craft beer wasn’t as predominant as it is now. So we thought, well, hey, let’s do this ourselves.
Gurney: You said a moment ago that it wasn’t that common when you were thinking about it. Now, today, there are craft brewers everywhere. What changed?
Wood: I think there’s been a shift in consumer habits. I’m talking specifically sort of in the late 2010s. We started our business in 2015. At that point, there were more and more breweries opening up, but it definitely accelerated even after that point.
Gurney: I spend some time in Bobcaygeon, too, and I’m asking you this almost more out of personal curiosity, but I know you guys obtained a location in the little downtown core in Bobcaygeon, but your operation is in Peterborough, about 40 minutes away. What’s up with that?
Wood: We leased the old post-office building from Parks Canada, actually. At 17 Bolton Street. We’ve had a lease in place for a number of years now. We’ve faced a number of red-tape issues. So that’s been the main reason for the delay. And then, obviously, COVID also was not kind to businesses such as ours. So that’s further set us back. But we have started doing some work in the building. Our drawings are completed. There was a lot of asbestos in the building. So we’ve remediated all of that. And we’re excited to be starting construction this fall.
Gurney: That is exciting. I know the building in question. It’s not huge. It’s actually quite small! Would it be a retail location? Or could you move all your production there as well?
Wood: We won’t be moving all our production. We plan on keeping our location in Peterborough just to serve the whole Kawartha Lakes community. And as you pointed out, that building in Bobcaygeon is small and right downtown. It’s not really conducive to receiving 18-wheelers or anything like that, large trucks. We are shipping a lot of beer out of Peterborough right now. We will be brewing on site in Bobcaygeon. And we will also have a retail store and a brew pub with a limited food menu. We’re really excited for that and for a patio overlooking the locks out back of the building, overlooking Lock 32.
Gurney: I want to ask you a very basic question now, and I want you to explain it to me like I’m an idiot. You mentioned trucks a minute ago. Let’s talk operational details like that. Tell me what a craft brewer does, what your daily operations look like.
Wood: We have a small team. I think we’re roughly 12 employees right now. We have production employees who are brewing, managing fermentation in the cellar, and packaging the beer. Packaging days are generally all hands on deck and a team effort because they are fairly long days. That’s what I was doing yesterday. We are also responsible for selling our beer into stores. We deal with the LCBO head office, but at the end of the day, every store makes its own purchasing decisions. So it’s still on us to call and reach out to all the stores. It’s also standard in our industry for the supplier to deliver the products. So we’re delivering to LCBOs, grocery stores, bars, and restaurants. Additionally, marketing our product is crucial. We want to get our product into people’s hands and make them aware of it, demonstrating why the consumer should spend their hard-earned money on our quality craft beers.
Gurney: You mentioned starting in 2015. What did COVID mean for your business?
Wood: Yeah, we pivoted pretty quickly to a home-delivery model. We were doing same-day delivery throughout the Kawartha Lakes and Peterborough County, including the city. We also expanded that service with a rotating schedule, doing deliveries to Toronto, Ottawa, York, and Durham Region. Given that people were not supposed to be leaving their homes, we were able to bring our product to them, making it easier for them to enjoy a craft beer while they were stuck at home.
Gurney: What about your actual daily operations during that time? How did work continue?
Wood: We definitely made some changes to reduce the chance of exposure among our employees. We were fortunate that we didn’t have any incidents of COVID until toward the end — to be honest, I don’t think anyone here got COVID until the end, when things were open. We tried to isolate where we could, grouping employees together to minimize mixing. This way, if someone were to get sick and bring it into the workplace, it wouldn’t take out the whole organization. Being a small organization, we were down to a bare-bones staff of only four or five of us, at one point. We were really just focused on getting our beer into customers’ hands and keeping our customers happy.
Gurney: What was the post-COVID period like? There’s been a lot going on since then — inflation being an obvious example.
Wood: The big thing we’ve seen is inflation and the rising cost of living. Our input costs have gone up, and our overhead costs have increased. We don’t have the economies of scale that large breweries like Molson or Labatt or even some of our larger craft competitors might have. It’s tough for us to absorb those price increases, because we can’t spread them out over as many units. We either have to eat the costs or, unfortunately, pass them on to our customers, which we try to avoid doing as much as we can.
However, our customers are also experiencing the same issues. We have a high-quality craft product, and we’re not competing with value-brand pricing. As wallets tighten, it becomes harder for our customers to enjoy our product, because they want to get better bang for their buck.
Also, we serve bars and restaurants, and there’s a knock-on effect. Customers might not be able to afford products at the LCBO and aren’t going out as much. This means our bar and restaurant customers aren’t doing as well. We’ve had some long-time customers close or make changes due to shifting customer dynamics. So inflation and the rising cost of living have definitely been significant factors affecting our business over the past couple of years.
Gurney: I’ve been doing a series of these interviews, and some of the companies I’ve spoken to have multiple streams of revenue. Is that true for you guys? You mentioned you’d be opening a pub in Bobcaygeon, but what about now and in that post-COVID period?
Wood: We’re definitely much more focused on making and selling beer. There are two sides to our business. We have the wholesale or B2B side, where we sell to the LCBO, bars, restaurants, and grocery stores. The other half is the direct-to-consumer side. We have a taproom in Peterborough. While we don’t do a ton of events, we do host some. It’s not a massive part of our business; we’re not hosting 100- or 200-person weddings. But we do have a retail store there as well. Additionally, we participate in various external events, selling at farmers’ markets, such as the one in Bobcaygeon, beer festivals, and similar events.
Gurney: Let’s start talking a bit about the ongoing LCBO strike. Your last answer kind of brings us there. You’ve mentioned all the places that you can sell your product, and the LCBO is included in that. There’s a bar in Toronto I know that stocks one of your beers, the Common Loon, on tap. How do all these sales channels compare for you? How important is the LCBO for your distribution?
Wood: They’re our biggest customer, hands down.
Gurney: What about the Beer Store — can you pivot more to them?
Wood: The thing with the Beer Store is that a lot of the reason craft beer has grown in the LCBO is because there are no fees to get your product on the shelf, such as listing fees or slotting fees. At the Beer Store, you have to pay to list your product: It costs roughly $3,500 just to have your product available, and then anywhere from another $250 to $500 per store per product.
So if you want to be in 10 stores, you’re talking over five grand, which is not feasible for a small business like ours for every product. Our product sells very well locally and in other parts of the province, but we do face more competition because everyone wants to support their local brewery. In the Beer Store, we definitely focus on our local area. That’s how we manage that channel.
Gurney: So for a company like yours, when the LCBO goes on strike, what do you do? You’re still making product. Are you going to be able to sell it? Do you need to maybe throttle back production?
Wood: We’re just evaluating things day by day and week by week. On the one hand, we have products that we plan on bringing to the LCBO over the next couple of months. None of us knows how long this strike will last — it could be over tomorrow, in a couple of weeks or even months. Right now, given that we’re only about a week and a half into this, we’re taking it day by day, seeing where we’re at, and revisiting our production plans. We’re ensuring we have some flexibility and will be ready when the stores reopen.
We have seen an increase in sales in other channels. Our Beer Store sales are up, and we’ve definitely had a lot more people coming by the brewery than we normally would, which has been great to see. We love it. We love seeing our customers face to face, having conversations with them, and finding out which of our beers they like and which other beers they enjoy. Getting that touch-point has been awesome. But as you pointed out, a batch of beer takes anywhere from two to four weeks for us to brew. Anything that’s in the tanks right now was brewed before the strike. We’re just taking it day by day and seeing what changes we need to make. That’s all we can really do at this point.
The other thing I would say is that, while we’d like the strike to end, we respect the LCBO employees’ right to strike and understand their position. We just hope that this can come to an end sooner rather than later.
Gurney: You mentioned a couple of things there. The good news: customers coming in, getting some face time with them. The bad news: the LCBO is your biggest client. So are you guys viewing this as a setback? As an opportunity? Both? Something else entirely?
Wood: I see it as both an opportunity and a setback. When it comes to the bar and restaurant side, beer is not as impacted as spirits or wine. The vast majority of beer that bars and restaurants buy is delivered through the Beer Store or directly by the breweries they purchase from, and that process hasn’t changed. They can still place their orders through the Beer Store or directly with us. The major changes affect products like imported wines, vodkas, gins, and whiskies, which typically come through the LCBO. For craft distilleries, there might be more of an opportunity there, but for us, the opportunity lies in customers still looking for beer and considering different options due to disruptions in their normal routines.
In terms of setbacks, it’s clear that the LCBO is our largest customer, and those sales are significant. While we’re seeing increased demand in other sales channels, whether we can fully make up for the lost sales from the LCBO remains to be seen.
Agenda segment, June 6, 2023: Trouble brewing for Ontario craft brewing?
Gurney: I don’t want you to reveal any corporate secrets, but is the LCBO such a huge percentage of your sales that it’s impossible for the other channels to increase enough to offset it? Is that even feasible?
Wood: It is our busiest season right now. So it’s tough to see it coming back. But if we can sell someone a can of beer out of our store, we don’t have to pay to ship out to the store; we are not giving up margin to the LCBO. So there are opportunities there.
Gurney: Speaking of other opportunities, since the LCBO strike was telegraphed in advance, have you explored marketing or outreach strategies? Did you engage with local bars, wedding venues, or concert venues in advance to prepare for this? What proactive measures have you taken?
Wood: We’ve focused more on consumer-facing marketing. For bars, restaurants, and wedding venues, their beer supply isn’t impacted by the LCBO strike, so existing relationships are maintained. Our sales team continues to meet with potential new customers regularly, but our main opportunity lies in consumer marketing. This includes billboard and digital ads, as well as social-media campaigns. In terms of logistics, without the LCBO, we handle delivery differently depending on the customer. For bars with our beer on tap or for direct-to-consumer sales, we typically deliver ourselves or arrange shipping. This allows us to get our product where it needs to go efficiently, even without relying on the LCBO’s distribution network.
Gurney: That’s interesting. I hadn’t thought about the distribution. The LCBO is a massive distributor; it has warehouses and its own logistics fleet and all that stuff. How do you normally get your product to customers, and how are you doing that during the strike?
Wood: We don’t use the LCBO for any distribution. When someone orders from LCBO.com, the product goes from an LCBO warehouse to the customer, but we get our product to that warehouse ourselves. For kegs at venues like restaurants and golf courses, for example, we handle delivery directly. Our delivery driver ensures the kegs are delivered on our behalf, getting the beer into the customers’ hands.
Gurney: We only have a few minutes left, but I want to circle back to a question we touched on above. You told me earlier how many more brewers are operating now. There has been a lot of liberalization of alcohol in Ontario years. I’m given to understand that that has made it a lot easier for people like you to open up. What has your experience been?
Wood: There have been both positives and negatives on that front. On the positive side, we see an opportunity with the expansion of beer sales into other channels, such as grocery stores, convenience outlets, and potentially more retail options. It’s exciting to have more places where people can find our product.
However, on the downside, we pay provincial taxes on all the beer we sell, and in Ontario, these taxes are among the highest in Canada. Breweries in provinces like Alberta or B.C. pay significantly less, often less than half of what we pay for a brewery of our size. There have been discussions with the government, and they’ve indicated they will look into this issue. Lowering these taxes would greatly benefit smaller breweries like ours, allowing us to reinvest more in our local area and our facility and to support community initiatives. For example, we have partnerships such as our community brew series with a local bar in Peterborough called Mcthirsty’s Pint, where we brew a special batch of beer to support a local charity. We also partner with the Peterborough Petes and the Peterborough Lakers, enhancing our ability to give back to our community. We’d love to be able to do more like that.
This interview has been condensed and edited for length and clarity.
Donate