Microbreweries: Small brewers, good fighters

Squeezed for shelf space and targeted by lawsuits, microbrewers aren't going away.

What is it about lawsuits and microbreweries? For a bunch of tiny beer makers that collectively account for less than 10% of all the beer sold in Canada, the country’s 100 or so craft brewers — every beer maker not owned by multinational giants Molson Coors Brewing, Anheuser-Busch InBev or Sapporo Breweries — sure produce their fair share of legal action.

The latest case: On Aug. 31, Brick Brewing of Waterloo, Ont., one of the country’s larger independents, announced it had been sued by Anheuser-Busch and Labatt Brewing over Brick’s new Red Baron Lime product, which debuted two weeks earlier. Anheuser-Busch and Labatt, which rolled out Bud Light Lime in May, claim the packaging and some marketing materials for Brick’s lime beer are too similar to their own — “copycat marketing” according to Labatt’s vice-president of public affairs, Charlie Angelakos.

It’s the second such suit Labatt has filed against Brick this year. In the prior case, Brick settled out of court and agreed to modify one of its packaging designs. But not this time, says George Croft, Brick’s president and CEO. He insists Labatt’s claims are without merit, that the suit is “a standard tactic used by large breweries worldwide to eradicate all competition,” and that in the face of such powerful competition, “craft brewers are in the fight of their lives.”

Days later, Brick announced it had earned almost $900,000 in net income for the first six months of fiscal 2010, on revenue of about $35 million. While hardly spectacular numbers, they do suggest that under Croft, who took over at Brick last year after running the larger Lakeport Brewing until Labatt bought it in 2007, the company isn’t quite teetering on the brink.

Cynics might even argue that while lawsuits like the one fromAnheuser-Busch and Labatt can be costly and distracting, they also play right into the independents’ core marketing strategy — positioning themselves as plucky underdogs fighting multinationals for the right to offer beer to consumers that is either better, cheaper or just plain different from mass market brews.

It might be a strategy born more out of necessity than design, but in the “fight for their lives,” many of Canada’s microbrewers appear to be winning. Ontario craft brewery sales have grown 30% per year in provincially owned LCBO liquor stores over the past five years, and revenue via the main retail channel, the Beer Store, has increased too. In Quebec, Laura Urtnowski, the president of Les Brasseurs du Nord, a Quebec microbrewery, and also vice-president of the Microbreweries Association of Quebec, says the majority of her members are performing well, and their collective share of 5% of the provincial beer market could grow to 12% in seven years. In British Columbia, craft brewers are expanding their market share by riding the organic food and “buy local” trends. Provincial and federal subsidies help cushion the microbrewers’ bottom lines, as well.

This isn’t to say the underdogs don’t still face significant obstacles, most notably in the fight for retail space. In Ontario, the three majors own the major distributor Beer Store, a ridiculous conflict that hinders craft brands’ exposure. And in Quebec, where beer is sold through grocery and corner stores, the majors leverage their buying power to lock up most of the fridge and shelf space. “There’s no way we can play that game,” says Urtnowski.

Still, these “dogs” have their days. Last year, for example, Quebec’s microbrewers ran a series of TV ads that went straight after the giants.In one commercial, a spokesperson for the province’s small brewers explained her members’ products didn’t need a label that changed colours with temperature (an obvious jab at Coors Light) since people have hands and can tell whether a beer is cold through touch. Urtnowski says her organization received some nasty lawyer letters in response to the ads, demanding that the spots be pulled. In the end, it didn’t matter. By the time the lawyers came calling, her limited media budget had already run out.