B.C. Beer Blog

The who, what, where, when, why, and how of B.C. craft beer

SYWTOABP: Minimum Viable Market Size

with 15 comments

The So You Want To Open A Brew Pub series ended many moons ago, but people still read it and it has become a valuable resource for entrepreneurs and beer aficionados. Sometimes folks leave comments and questions and sometimes they find my personal email address and write me directly. The most common question is, do I think [insert small Canadian town name] is a good spot to open a brew pub?

I don’t like to rain on people’s parades but the example I always give is Tofino. A know keeners amongst our readership will say, but Tofino has a brewery now. Yes but for years there was talk of Tofino having a brew pub. There was a location, there were supposedly investors, there were 200,000 tourists in the summer, but a brew pub was never opened in Tofino.

Long Beach Tofino Canada

Tofino is a very small town, that just happens to be on the edge of a national park with a world famous beach and hiking trail. Most small towns in Canada do not have 100,000’s of extra visitors for a few short months. Yet even with this seasonal increase in market size,  a brew pub never opened in Tofino despite the idea being popular with locals.

A small micro-brewery costs less money to open, less money to staff, and use all their start up capital towards the production of beer. They don’t need to buy a commercial kitchen, a bar, an audio video system, etc. etc. The biggest problem facing small breweries is distribution, getting their product on shelves and in restaurants and bars. If you can solve that problem, you can open a brewery anywhere within a few hours drive of Vancouver. That is why Tofino has a brewery. That is also why Powell River has a breweryDuncan however does have a brew pub, but sadly Duncan has become basically a suburb of Victoria with a mountain in the way. It is a lot different than the town I remember growing up in.

Whistler does have a brew pub, but Whistler is a world famous resort, see a little thing called the 2010 Winter Olympics. I still remember John Montgomery enjoying some beer after winning his gold medal. That 15 second clip sold a lot of beer in BC that day. Far more than 200,000 tourists visit Whistler during ski season and all year round people visit Whistler to golf or mountain bike or hike. There are few towns the size of Whistler that have the corporate dollars and investment in real estate by the wealthy that Whistler has.

So if Tofino is too small and Duncan is large enough, what size of town do you need to support a brew pub? That requires some research and some math. I was able to find 25 brew pubs open in British Columbia in November of 2013, that is a good sample size. The city with the smallest population that supports a brew pub is Osoyoos with a population according to the 2011 Canadian census of just 4,845 people. It is another resort town like Tofino but I think the highway system in and out of Osoyoos is smoother and their proximity to the US border is also advantageous. According to the town’s website:

“Osoyoos is one of the fastest growing communities in British Columbia and is accessible to as many as 14 million consumers within a day’s drive.”

14 million is a considerably larger market than 4,845 people. The other smallest towns in BC supporting a brew pub are:

The average sized city supporting a brew pub in BC is 191,701, but realistically the average population number needed is closer to 80,943. The second number takes into account the fact larger cities in BC support multiple brew pubs. I’d be hesitant to open a brew pub in a town with less than 80,000 people unless it had a large number of seasonal visitors or the town itself was between or near larger population centres which is the case with Duncan and apparently Osoyoos. Tourists are seasonal customers, businesses that rely on summer tourism often have very lean winter months.  The wealth of the local citizenry is also a factor. Whistlers attracts some very wealthy visitors and part time residents. Your ability to demand a premium for craft beer from loggers, fishermen, and miners is not a given, tourists have a higher willingness to pay than many local BC residents.

The retirement and relocation of wealthy boomers to the coast is a trend that probably helps BC’s craft beer industry. I still think the Comox Valley is a good place to open a brew pub in BC. Lots of people are retiring to the valley and it has an air force base, golf courses, mountain biking, and a ski resort. The Comox Valley is apparently Canada’s 59th largest metropolitan area, i.e. a lot bigger than Osoyoos.

So before you get too far into planning your brew pub grand opening, take a look at the local demographics both population size and disposable income. Bigger is better when it comes to market size.

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Written by Muskie

December 1, 2013 at 12:33 pm

15 Responses

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  1. Very interesting read thanks for doing the research.

    mikescraftbeer

    December 1, 2013 at 12:58 pm

    • No worries, it only took an afternoon. The brew pub in Osoyoos is part of a hotel so presumably guests go there frequently, it isn’t a stand alone business. I think 80,000 is a good number to look at, most towns in BC are smaller than 80,000 yet we have 25 brew pubs. You can probably open one in a smaller town but it will be hard and your profits will be lower unless you can sell beer offsite, i.e. in the lower mainland.

      Muskie

      December 1, 2013 at 3:11 pm

      • I would say that if it wasn’t for Metro Vancouver at least a third of BC’s breweries would close.

        mikescraftbeer

        December 1, 2013 at 3:14 pm

  2. It would be interesting to see what towns in Washington can support a brew pub. Every little place there seems to have a brewery and I’m betting a lot of them have fewer than 80,000 people – like Anacortes and Mount Vernon. Metro Bellingham has 200,000 people and I read recently that the 6th and 7th breweries in the area are now under construction. It could be argued that the US market is different from ours, though.

    I also wouldn’t necessarily say that a bigger market is better. People in a smaller community can be fiercely loyal to their local brewery. Loyalty counts for less in a big city where you have more breweries to choose from.

    Arrowhead in Invermere (population 3000) seems to be doing okay, and Townsite in Powell River (population of the entire northern Sunshine coast = 20,000) is absolutely booming, but these are breweries, not brewpubs, and as you said, the economics probably work out better on a smaller scale.

    bencoli

    December 3, 2013 at 12:38 pm

    • BC is a hotbed for Craft Beer in Canada especially Vancouver and Victoria. Some brewpubs are operating in markets with as few as 5000 residents, but the average is closer to 80,000 people in the town. The metro area or so many hours drive is perhaps a better number, but pubs can count less and less on people driving to their establishments.

      All of Cascadia is a hotbed for Craft Beer, that is one thing our three soccer teams apparently share. Rain, soccer, and beer consumption are apparently the foundation of the Cascadia Cup. Any city of comparable size in Cascadia can probably support a brew pub. It is easier but not easy to start a brewery. The licensing is still complicated, the equipment is still expensive, the competition still fierce, but I do think a local brewery like Powell River will win a lot of local business and you can find their beer in Vancouver, they are not as popular as Phillips or Lighthouse but they’ve been in business for fewer years. Both Phillips and Lighthouse are very popular at craft beer hotspots in Vancouver. As long as a brewery is within so many hours drive of the big three of Portland, Seattle, and Vancouver they should be competitive. They might pay slightly more in delivery cost, but those markets are thirsty for craft beer.

      I do think the time to enter the industry was a few years ago. There has to be a limit to how many breweries can be profitable in Cascadia. Just like I think one brew pub per 80,000 residents is a good heuristic.

      Thanks for commenting.

      Muskie

      December 4, 2013 at 12:52 pm

  3. Hi there,
    Just wondering what your thoughts are regarding selling beer in Grocery stores is. I see it as this;
    They (The Government) are proposing a store inside a store model of liquor store.– Two checkouts is not very convenient.
    They are also saying that most stores in a store will be approx 500sq ft. Not a lot of room for various product (Liquor stores are from 500sq ft to 8000 sq ft). They will probably then only sell the top sellers of beer. Which unfortunately is not craft beer, it’s Budweiser, Old Milwaukee and the likes.
    Also, apparently only 20% of all products now sold in LRS stores actually make a profit and cover the costs of operating that store which then allows them to sell craft beer. If Grocery stores sell that 20% of the available products because of space issues and takes those dollars from the LRS stores the LRS’s will be closing rapidly. Where will the craft beers be sold? How do you get them to market if they are not profitable for the grocery chains to carry.
    I see selling beer and wine in Grocery stores and a huge blow to the B.C. craft beer industry.
    Just wondering what you think?
    Norm – Cheers!

    Norm Cheers

    December 4, 2013 at 1:24 pm

    • I was actually in a local specialty liquor store when news of the decision broke. They were definitely unhappy. It makes their business more challenging. I don’t think it will have a negative impact on the craft beer industry at all. Consider Oregon, Oregon is perhaps the craft beer hotbed in North America, yet as long as I remember i.e. 25 years or more they’ve sold beer not only in convenience stores but also grocery stores. I don’t go to Oregon as often as my mother, but I seem to recall you could buy beer and go through the regular checkout. Yet despite this, the number of breweries in Oregon has only increased as I’ve gotten older.

      I think the breweries in BC will benefit. I’m not going to switch to Bud Light just because Super Value carries Bud Light. I’m going to take the extra time and effort and buy Old Rasputin because I actually like Old Rasputin a lot. So a craft brewery in BC that made a beer like Old Rasputin would get my money, if Super Value on Commercial Drive started carrying this mythical BC brewed Imperial Russian Stout, I would buy it. The BC Craft Brewery gets my money, but the local specialty store is the one who loses out in all this. Making the product more available i.e. increasing distribution channels is a good thing for the manufacturer.

      Grocery stores do a lot of deals you don’t know about, the big chains put certain brands at eye level and other brands are either too high or too low on the shelf, this isn’t accidental. They feature certain brands in their flyers etc. etc. So it is possible a brewery like Molson might try to get preferential product positioning in store but there may be laws against this when it comes to the sale of alcohol. I think this change will not hurt manufacturers at all. They will sell more beer both the Molsons and say the Phillips of the world. It certainly won’t hurt consumers they’ll get more options and possibly even increased price competition. The businesses that will be hurt is the local specialty store, because all of a sudden that big grocery store two doors down is a competitor.

      Many times I’ll go to the grocery store for groceries and also pick up a six pack or a couple bottles at Brewery Creek. I think Brewery Creek will be fine because they have such a large selection and a good reputation, but smaller stores that rely on the local grocery store to draw traffic to their mini-mall location may suffer. The other factor is grocery stores are already crowded, they don’t have a spare 500 sq ft or 1000 sq ft of unused retail space. So to open a store within a store will cost them revenue from some other products plus the cost of remodelling if security / age limits is an issue.

      So in the immediate term I don’t think there will be much change, but long term I think it will be good for consumers and manufacturers, but bad for specialty stores that relied on grocery stores to be anchor tenants, the former anchor tenant may now put them out of business. Specialty stores worthy of the name, that provide superior selection and service will still be in business, but little tiny cold beer and wine stores next to a mega grocery store may well go out of business.

      They most definitely sell craft beer in Oregon supermarkets. If customers demand it stores will stock BC Craft Beer. Margins are generally better on higher end items, so selling premium products is good business. Supermarkets will probably hit a variety of price points but leave the real high end wine for instance to the cork dork specialty shops. Craft beer is much more proletarian than the wine industry.

      Muskie

      December 4, 2013 at 10:17 pm

  4. I love the idea of a community brewery rather than simply thinking micro, nano etc. When you look at some of the more recent additions to the Craft Beer Market this is the approach. By becoming a part of the community rather than just another business the population necessary shrinks drastically!!!

    Beer Me BC

    December 22, 2013 at 2:51 pm

    • When I lived in Germany, there were pubs that served just beer from one local brewery. So you ordered by type, Dunkel, Weizen, etc. There was no brand, just order by type at these small Bavarian pubs and restaurants.

      Muskie

      December 22, 2013 at 4:11 pm

  5. The Comox Valley has already had both a Brewpub and a Commercial Brewery in it. Neither proved viable and closed their doors. Too many “Lucky” drinkers there I suppose ?!

    douglasrae

    January 20, 2014 at 11:17 am

    • What you say is indeed true, I don’t remember a Brewpub ever being in Comox… However the demographics are changing, less loggers more retirees in the Comox Valley. Lots of folks for whom their Comox Valley home is a second home, that come from say Alberta on that Westjet flight. A number of specialty liquor stores have opened in the last 2 years, big stores with 100s of different beers. They are selling a lot more than Lucky, even the Waverly sells more than just Lucky. More affluent people with more refined tastes, the math doesn’t lie either, the Comox Valley keeps getting more populous, new schools and hospitals don’t accidentally get built, the demographic trend is favourable, it is too bad they haven’t had more snow this winter…

      Muskie

      January 20, 2014 at 12:26 pm

    • Gotta say that brewery (Surgenor) was super cheesy. They may have been trying to make good beer (but I’m not even sure of that) but they kept having scantily clad women in their marketing tactics and was never going to resonate with the craft beer crowd. The Comox Valley is UNDOUBTEDLY ready for craft beer. The focus on local food etc helped bring about the craft beer revolution in Vancouver and the same trend with young families and people who care about where their food comes from is happening in the Valley. It’s just a matter of time…

      VanBeerGuy

      March 10, 2014 at 10:15 pm

  6. Leeward Pub was a brewing beer when I moved to Comox in 1989. It seems to not be remembered by most people. I had a flight of 4 nice beers there. They removed the brew equipment and put a liquor store in the building at some point.

    Clell

    January 22, 2014 at 11:17 pm

    • The store in the pub is very profitable on a per square foot basis. Craft beer had to prove it was profitable and a differentiator. Craft beer is more work and takes more skill than just selling cold Lucky to go.

      I remember Comox in 1989 barely, but I wasn’t in any pubs back then.

      Muskie

      January 23, 2014 at 12:36 pm

  7. […] and service matter, so here is a cautionary tale of a brewpub that did not succeed. Location and market size matter, my speculation that the Comox Valley would prove sufficient to support craft beer done on […]


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