Wednesday, July 6, 2011

Why Are Craft Beers Found in Restaurants More Often Than Pubs?

This post was first published at as a part of their BeerFile series last week. Check out the other great articles and posts on OpenFile Vancouver by clicking on the link above.

Traditionally, “going out for a pint or two” means meeting at a local pub with friends, but that is not necessarily so for Vancouver’s craft beer aficionados. There is a small but vibrant craft beer culture in the city, and a surprising majority of Vancouver’s discerning beer drinkers gravitate, more often than not, to one of the many craft beer-focused restaurants when going out for a night on the town.
Arguably, the two major “go-to” craft beer establishments in Vancouver are the not-to-be-missed Alibi Room, located on the eastern edge of Gastown, and Commercial Drive’s St. Augustine’s Craft Brew House and Kitchen. Both establishments have world-class craft beer selections and are operating with a food-primary license, more commonly known as a restaurant license, which indicates the licensee’s primary focus is food.
Although these two eateries (both of which have great menus that complement their beer lists brilliantly) are the dominant two craft beer spots in town, they are relative newcomers to the scene. The Alibi Room began to focus on craft beer in 2006, followed by St. Augustine’s, who opened their doors in 2008 but who did not begin to expand their tap list beyond a few until July 2009. Both have taken the concept of craft beer in restaurants to the extreme, and judging by their near-capacity crowds most nights, it is a concept that has caught on.

In fact, it caught on long before these two restaurants arrived on the local craft beer scene. Even then, with the exception of brew pubs who brew and sell their own beers, restaurants had been the main supporters of the local craft beer industry. Craft beers from both local microbreweries and beyond can be found in exclusive, fine-dining establishments and local caf├ęs alike. And where you find craft beer, you will no doubt find those knowledgeable and loyal craft-beer lovers who make up the colourful Vancouver craft beer community.

In the 1980s, the early days of Vancouver's commercial craft beer scene, nearly all the beers brewed were only available as draft. This limited their sales to either pubs or restaurants. Brew pubs did not enter the Vancouver craft beer market until the mid-1990s and as mentioned before, existed mainly to promote and serve their own products.
Before then, BC beer drinkers had been limited to the bland, mass-produced, lager-style brews produced by the three major breweries in Canada. These three companies -- Molson Canadian, Labatt and Carling-O’Keefe -- had a stranglehold on the Canadian beer market.

Selling restaurants and pubs on the idea of serving beers that were unique, full of flavour, made with quality ingredients and brewed in small batches seemed next to impossible in the beginning. Other than the brewers and a few astute and forward-thinking restaurant owners, no one believed that Vancouver beer drinkers were ready for IPAs, porters, lambics and the like.
James Walton, owner and head brewer of East Vancouver’s Storm Brewing remembers how hard it was in the beginning to get his beer on tap.

“There was a lot of rejection at first,” says Walton, whose brewery’s licensee sales have consistently been over 90% to restaurants. “I was told by a lot of people at first that I could not sell my beers."
Established in 1994, Storm was part of the second wave of microbreweries to hit the market in Vancouver. They followed in the footsteps of Granville Island Brewery and Shaftesbury Brewery, who led the local charge against the big three.
“I found that the [restaurant] owners and chefs were more open to my beers and in tune with the tastes. They had a taste for variety,” says Walton.

He believes that many restaurant owners were "kindred spirits" in relation to the owners of microbreweries, since they both owned small businesses with focused concepts.
“Usually [a restaurant's concept] is one person with a vision, so they can relate to small brewery owners. They get it. They care more about what they were putting in their [customers’] glasses and realize people will come back if you give them quality,” Walton says.

Nigel Springthorpe, co-owner of the Alibi Room and Anthony Frustagli, co-owner of St. Augustine’s, both support Walton's views. Their establishments feature a staggering array of craft beers and only craft beers – the Alibi has 44 taps and three permanent beer engines to pour cask-conditioned beers, and St. Augustine’s has 40 taps.

Despite running very different restaurants, Springthorpe and Frustagli share a commitment -- to a vision and to quality -- that has been unwavering from the start, even when they met with criticism and resistance. And like Walton, they stuck to their guns, stayed the course and are now successful. This similarity in attitude between many small brewery owners and independent restaurant owners may have indeed played a big part in coupling craft beer with local eateries.

“Consistency, sticktoitiveness and no compromise,” Springthorpe says, listing the key elements that made his restaurant so successful. “I think if you try to please everybody, all of the time, you end up with a watered down concept," he says.
“At the Alibi it was a big step for us to get rid of the (great-selling) mega-beer brands. At first people were outraged if they couldn't get the ubiquitous brands they were used to seeing everywhere without even having to engage a beer list. But, we stuck to it. Through staff education we were able to guide people in other directions to product we thought they might like.”

St. Augustine’s also met resistance when they dared to offer craft beer in a sports-oriented environment.

“I can't tell you how many reviews of our place I've read online, by people who claim to be enlightened craft beer drinkers, that say something along the lines of ‘they can't decide if they want to sell good beer to the craft beer drinkers or Molson Canadian to the sports crowd’,” says Frustagli.
In spite of the critical reviews and pressure to turn off the sports on their televisions, St. Augustine’s stuck to the idea that some craft beer drinkers also were sports fans. Now the restaurant is packed almost every night, whether it's game night or not.

Apart from similarities as small business owners, Walton, Springthorpe and Frustagli also agree that cost considerations play a role in the link between eateries and craft beer. Although there has been a local craft beer explosion over the past five years or so, craft beer drinkers are still the minority and are considered a fringe or niche market. According to the latest statistics from the BC Liquor Distribution Branch Quarterly Market Review (BCLDB QMR), sales for domestic craft breweries have more than doubled since 2007, but these breweries still hold only a 15 per cent market share. That leaves 85 per cent of domestic beer sales going to the bigger, national and multi-national macrobreweries who still produce mostly alike-tasting lagers.

“Because pubs cost a million dollars or more they are often owned by corporations or other large interests, and those types of businesses generally don't play on the fringe,” says Frustagli. “They have investors that need to be paid back, profits that need to be made...they play it safe and offer what they know 90 per cent of the population will drink.”

Springthorpe echoes those thoughts about why pubs are more likely to stick with the bigger breweries.
“I think a lot of pub owners don’t just own one place, but have a lot of liquor primary licensed pubs under the same corporate entity,” he explains.
“There may be some economies of scale to be had by representing some bigger brands in not one, but several of your places. This would also put you in a position to be quite demanding with suppliers. A lot of the smaller breweries and agents can't afford and/or are not ethically willing to bend over backwards for big accounts who make all kinds of demands in order for them to carry a particular brand,” says Springthorpe.

At Storm Brewing, Walton is now leery of doing business with pubs. He has been successful many times in getting his beers on tap only to see them replaced by beers from the bigger breweries. These breweries usually offer a better deal for pubs, often breaching the law by giving pub owners free products or financial enticements to carry their brands.

“I don’t even bother anymore,” says Walton about trying to interest bars in his product. “My beer has been dropped too many times in bars because of kickbacks. It’s not worth the effort.”
Despite statistics that show total domestic beer sales to be down 9.2 per cent over the last year, sales are up for smaller breweries producing fewer than 150,000 HL (their draft sales increased by 7 per cent, while bottle and can sales are up a whopping 30.42 per cent). This has the bars sitting up and taking notice. Some bar owners are seeing the success of places like the Alibi Room and St. Augustine’s and are trying to jump on the craft beer bandwagon to lure in new customers.

“Only when craft beer proves itself as a money maker and a differentiator will the corporations jump on board, which is what we're beginning to see,” explains Frugstagli.
“As craft beer begins to take a bigger chunk of the market and further proves its profitability we'll see more and more corporations jump on board, and that will lead to more people drinking craft beer which will further prove its profitability, etc. It's a self-fuelling fire,” he says.

“I think we're already seeing changes,” agrees Springthorpe. “[It's] mostly because some pub owners or multiple location restaurant owners are seeing dollar signs when it comes to the question of selling craft beer. The big boys are seeing craft beer as a gateway to another market. I don’t think the majority will ever switch to all craft product. Right now it’s a way to get more dollars rolling in.”
Whether this new trend will continue is yet to be seen. For now, restaurants are still the prime places to enjoy local and imported craft beer. But one thing is certain: if the current trend of increased sales for craft beer continues, it's a win-win situation for local breweries and consumers.

Increased sales means increased opportunities for craft beer lovers to drink their favourite brews, and more potential for new customers to be exposed to those beers. This in turn could result in increased sales for local breweries, encouraging others to open small breweries.
And for those who had the foresight and vision to support craft beer from the start, like Springthorpe and Frustagli, it will mean continued success and sense of satisfaction that their visions and “sticktoitiveness” has paid off.

1 comment:

  1. This is a good post. I've done my share of research on the topic and in Vancouver a few "companies" own a lot of liquor licenses, large well located liquor licenses. On the other end you have establishments that want to sell the cheapest beer they can get, as that is what their patrons want, cheap, strong drinks. These two trends combined with the inability to easily get a new liquor primary license inside Vancouver is maybe why the breweries you talked to had more success getting served in restaurants. I also think it is education, everyone has seen a Labatts or Stella commercial now. 10 years ago Stella would have been extremely rare in Vancouver, now it is at every second bar it seems. The smaller breweries have advertised in things like the Straight and through promotions and social media, this has likely helped them with a younger, hipper crowd to some degree. They'll likely never get into Roger's Arena, which is odd as some sports stadiums down South serve regional breweries, and they'll have a hard time producing the cheapest product per volume, so differentiation and niche markets are the obvious strategies and opportunities to pursue.