Escolar Documentos
Profissional Documentos
Cultura Documentos
Industry at a Glance
Breweries in 2017
2
% change
% change
Anheuser-Busch 0
InBev SA/NV 1
26.8% -5
0
-10 -1
Year 09 11 13 15 17 19 21 23 Year 10 12 14 16 18 20 22
Revenue Employment
SOURCE: IBISWORLD
p. 25
Products and services segmentation (2017)
Canadian-dollar effective
exchange rate index
58.8%
Canned beer
p. 5
SOURCE: IBISWORLD
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 5
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive Over the five years to 2017, the Breweries alongside Molson Coors. These large
Summary industry in Canada benefited from growth international brewers have been
in the popularity of craft beer. While this significantly pressured as they depend on
resulted in revenue and enterprise growth high-volume sales of their respective
from a range of new small-scale breweries, flagship value products; Budweiser,
consumers have shifted away from the brewed by AB InBev, and Molson
traditional light and premium beer brands Canadian, brewed by the Canadian
that currently represent the majority of division of Molson Coors, are two brands
sales for the industry’s largest brewers. that have been affected by the growing
Consumers are increasingly buying less popularity of craft beer. As industry
beer in exchange for higher-quality brands players continue to innovate and market
or reducing purchases of alcohol new products, profit is expected to
altogether. Although industry revenue is account for 8.4% of revenue in 2017.
expected to grow at an annualized rate of IBISWorld projects that the price of
0.4% to $5.6 billion over the five years to wheat will continue to decline over the
next five years, including a 2.1% decline
over 2017, after double-digit declines
Due
to changing preferences, consumers over the previous two years. Brewers may
have shifted away from traditional light and lose some profit due to increasing
price-based competition and a projected
premium beer brands 1.7% annualized increase in the cost of
aluminum over the five years to 2022.
2017, growth in the number of new The Canadian dollar has struggled
breweries has stabilized. Consequently, compared with its largest trading
industry revenue is projected to grow a partners. While the growing strength of
healthy 2.0% over 2017. the US dollar has made Canadian beer
Major industry players Anheuser- relatively more affordable for US
Busch InBev SA/NV (AB InBev) and the consumers, beer drinkers in the US have
Molson Coors Brewing Company (Molson increasingly turned their focus inward,
Coors) are expected to generate the bulk with local brewpubs and craft
of industry’s revenue in 2017. The microbrewers dominating recent beer
planned merger between AB InBev and sales. Consequently, export growth as a
rival brewer SABMiller PLC will likely share of revenue over the next five years
result in SABMiller relinquishing its will likely be limited, and industry revenue
majority stake in the North American is forecast to expand at a slow 2.0%
MillerCoors joint venture that it operates annualized rate to $6.2 billion by 2022.
Key External Drivers Per capita disposable income Per capita alcohol consumption
Disposable income growth is an The average consumer’s alcohol
important indicator of industry consumption patterns can serve as an
growth because greater purchasing indicator of demand for industry
power bolsters consumers’ products. Consumers’ cultural and taste
discretionary alcoholic beverage preferences can reduce drinking
purchases. Per capita disposable frequency and affect sales of beer. For
income is expected to increase over example, many people drink occasionally
2017, representing a potential due to personal preference or for health
opportunity for the industry. reasons, which reduces alcohol
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 6
Industry Performance
Key External Drivers consumption and, therefore, total sales limiting the beer’s exposure to flavor-
continued volume. Per capita alcohol consumption damaging UV rays. An increase in the
is expected to grow slowly over 2017. world price of aluminum will lead to higher
costs for brewers who predominantly ship
World price of wheat their products in aluminum cans instead of
Malted cereal grains such as barley, rye glass bottles. Consequently, rising
and wheat are the primary ingredients aluminum prices hamper industry
required to produce beer. Therefore, profitability. Over 2017, the world price of
sudden increases in the price of wheat aluminum is projected to increase.
and barley will impose a significant cost
burden on industry brewers; increases in Canadian-dollar effective
the global price of grain erode industry exchange rate index
profit margins. The world price of wheat The Canadian-dollar effective exchange
is expected to grow over 2017. rate index (CERI) is a weighted average of
bilateral exchange rates comparing the
World price of aluminum Canadian dollar with the currencies of the
Aluminum canning is a very popular country’s largest trading partners. The
method of packaging beer. Aluminum cans Canadian dollar and the CERI are expected
have historically been the most cost- to decline over 2017, but any future growth
effective container for holding beer and could pose a potential threat.
4 106
3 104
102
2
% change
Litres
100
1
98
0 96
-1 94
Year 10 12 14 16 18 20 22 Year 08 10 12 14 16 18 20 22
SOURCE: IBISWORLD
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 7
Industry Performance
% change
breweries has driven the industry in
recent years. IBISWorld expects industry 0
An evolving industry The entire North American market for Company (Molson Coors) have
beer has experienced drastic change over traditionally boasted profit margins that
the past five years. Major international substantially exceed this average. Due to
brewing companies such as Anheuser the economies of scale that come with
Busch InBev SA/NV (AB InBev) and major brewing operations across the
SABMiller PLC have either acquired or country, the industry’s largest players hold
merged with large North American tremendous market share in the industry,
brewers that historically represent a large despite concerns that the popularity of
group of domestically owned and operated standard premium beer is waning.
brands. In recent years, however, many As a result of these structural changes
small-scale, independently owned to the industry, the number of breweries
breweries have entered the industry. in Canada has increased steadily. The total
Although this has not resulted in any number of brewing enterprises is
significant industry decline, a disparity is projected to increase at an annualized rate
emerging between large international of 0.7% to 246 over the five years to 2017.
brewers and their smaller domestic Industry employment is expected to grow
competitors. Profit, which is measured as an annualized 0.3% over the same period
earnings before interest and taxes, is to 9,216 workers in 2017, indicating that
projected to represent 8.4% of revenue for the vast majority of the industry’s new
the average brewery in 2017. However, enterprises are small-scale breweries with
both AB InBev and Molson Coors Brewing very few employees.
Uncertain input prices Industry profitability has historically been cost for industry operators. Since cereal
erratic. Due to both the fickle nature of grains such as barley, rye, wheat and other
consumers’ drinking patterns and the adjuncts are significant expenses for
significant price volatility of the industry’s brewers, increases in the cost of these
key inputs, industry profit is prone to grains will severely erode profit margins.
sudden fluctuations. The world price of Large brewers mostly compete on the basis
wheat, for example, represents a crucial of price, thus an increase in the bulk price
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 8
Industry Performance
Uncertain input prices of cereal grains will likely translate to a an annualized rate of 1.8%. Although the
continued reduction in the brewer’s profit margin. For industry has benefited from declines in
small-scale brewers of craft beer, increases the price of raw aluminum, breweries are
in the price of ingredient inputs could lead continually prone to sudden shocks in
the brewer to increase the price of their input prices that, although temporary,
product, although this poses a challenge for can have significant consequences
breweries that already charge a premium regardless of the production scale of the
on beers that use costly ingredients. The brewery. Input price uncertainty creates
world price of wheat has declined at an significant fluctuations in industry profit
annualized rate of 12.2% over the five years margins. The industry’s profit margin
to 2017, which has benefited both small declined to 6.0% in 2015, despite
and large brewers alike. reaching 10.9% just prior to the period.
The world price of aluminum also In 2017, industry profit is expected to
poses a threat to breweries that primarily account for 8.4% of total revenue,
package their products in aluminum representing a gradual improvement in
cans. Over the five years to 2017, the the years since the industry’s sudden
world price of aluminum has declined by price hikes.
Industry Performance
Slow and steady With input prices stabilizing and the industry will likely remain in a holding
industry’s largest companies slowing their pattern in the years to come. IBISWorld
merger and acquisition activity, the projects that the number of industry
industry is not expected to undergo a enterprises will increase at an annualized
structural overhaul similar to that of rate of 2.0% to 272, while total industry
previous years. The world price of wheat, employment will grow an annualized 1.8%
which has been steadily declining since its rate to 10,063 workers. Barring significant
massive spike prior to the period, will likely input price changes, average profit in the
grow steadily over the next five years. The industry is anticipated to remain at 8.4% of
world price of aluminum is projected to revenue in 2022. The gradual influx of
increase over the next five years, but at a smaller breweries will limit average
manageable 1.7% annualized rate. The industry profit growth.
Industry Performance
Craft brewing and metropolitan areas in Canada capable of The Breweries industry in Canada is
foreign competition sustaining small breweries, and the also projected to experience growth in
transportation costs associated with total exports. IBISWorld projects industry
continued
delivering small-scale batches of beer to exports to increase at an annualized rate
remote locations across Canada are of 7.6% over the next five years to $267.0
prohibitive. Although small-scale million in 2022. Industry imports, which
breweries will continue to play a large improved over the past five years, are
role in shaping the Breweries industry in expected to pick up further in response to
Canada for years to come, a resurgence stronger consumer demand for foreign
in local breweries akin to the craft beer brands. Total imports are expected to
renaissance currently emerging in the increase at an annualized rate of 3.4% to
United States is unlikely. $870.3 million over the five years to 2022.
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 11
Industry Performance
Life Cycle Stage Per capita alcohol consumption has
shown steady signs of decline
The industry’s largest companies are
consolidating to achieve greater market share
The brewing process has experienced
little technological change
10
Quantity Growth
Many new companies;
minor growth in economic
importance; substantial
5 technology change
Sawmills & Wood Production
-5 Decline
Shrinking economic
importance
-10
-10 -5 0 5 10 15 20
% Growth in number of establishments
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 12
Industry Performance
Industry Life Cycle Consumer shifts toward craft beverages Light, despite recent declines in
and away from traditional light beer is a popularity, currently represent more than
major factor behind the industry’s half the company’s domestic beer sales.
Thisindustry performance over the past five years. Declining volume has led to higher
is M
ature With consumers trading up in their per-unit production costs. Breweries are
alcoholic beverage choices, they are raising their prices as a result, and these
reaching for higher-priced beer as well as price increases are also taking into account
substitutes like wine and spirits. volatile input prices for wheat, hops and
Although this has enabled brewers to packaging materials. Consequently,
boost prices for their higher-end industry value added (IVA), which
products, overall sales volumes have measures the industry’s contribution to the
stagnated and in some cases declined. economy, is expected to increase at a steady
Lower sales volumes and substitution 1.7% annualized rate over the 10 years to
toward high-end products is posing a 2022, while GDP rises at a projected 1.8%
challenge for major companies like annualized rate over the same period. This
Molson Coors, since their operations are rate of IVA growth suggests that the
largely based on heavily marketing value industry is currently in the mature stage of
brands. Molson Canadian and Coors its life cycle.
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 13
Products & Services According to the latest industry data a far lighter material than glass that
collected by Beer Canada, the industry has reduces the overall bulk and
experienced a sharp increase in the transportation costs associated with
number of licensed breweries as well as shipping bottled beer. Additionally,
higher production volumes. Over the past compared with glass, aluminum is
five years, canned beer surpassed beer relatively inexpensive to purchase from
bottled in glass for the first time, metal manufacturers.
representing a surprising change for an Consumers have also taken to canned
industry that has typically benefited from beer over the past five years. Although
significant glass bottle recycling programs. beer packaged in cans may once have
been perceived as being exclusively light,
Canned beer subpremium and bottom-shelf in terms
An estimated 58.8% of industry products of quality, canned alternatives of many
are packaged in aluminum cans, premium craft beers have entered the
representing a robust increase over the market in recent years. Since canned beer
past five years. There are many reasons is more cost-effective for producers to
for the sudden surge in popularity of manufacture, they can pass along some of
canned beer. For producers, aluminum is the cost savings to consumers. Aluminum
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 14
33.7%
Bottled beer
58.8%
Canned beer
cans have given consumers far greater relative heaviness of glass ultimately adds
exposure to higher-priced brands without to their transportations costs. As a result,
any negative consequences to flavor. In some brewers have replaced some bottled
fact, craft beer producers regard beer production with forms of canned
aluminum containers as a much better beer packaging. This has caused bottled
packaging material than glass. Although beer to decline as a share of the industry’s
dark amber glass bottles significantly products over the past five years,
reduce the likelihood of UV light representing an estimated 33.7% in 2017.
exposure and the potential “skunking”
effects it can have on beers, aluminum Draught beer
cans block virtually all possibility of the Beer Canada reports that a slim 7.5% of
product’s taste being compromised due the beer produced in Canada is packaged
to UV exposure. Many breweries have and distributed in bulk. Draught beer
also used aluminum cans as an production includes beer that is served
opportunity to create elaborate product from barrels, such as standard
labels and designs, since cans provide pressurized kegs or more traditional
greater surface area for printed labels casks. Kegs are commonly constructed
than traditional glass bottles. from aluminum or steel, are force-
carbonated using nitrogen or carbon
Bottled beer dioxide and are sold in bulk sizes ranging
Bottled beer has for decades been the from 20.0 to 58.6 litres. Conversely,
standard packaging for the industry’s casks are constructed using metal or
products. Beer bottles are made of glass wooden housing and carry beer that is
and often come in brown or green hues. neither carbonated nor pasteurized.
Clear bottles are rare, due to their Draught beer is most commonly sold to
susceptibility to flavour-spoiling UV light. private drinking establishments and
Although glass bottles are the standard individual consumers hosting events and
packaging material for most brewers, the private functions.
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 15
2.1%
9.3%
Women aged 65 and older 4.4%
Women aged 50 to 64 Men aged 65 and older
9.5%
Women aged 35 to 49
24.4%
Men aged 18 to 34
15.7% 17.9%
Men aged 50 to 64 Women aged 18 to 34
16.7%
Total $5.6bn Men aged 35 to 49
SOURCE: IBISWORLD
Major Markets domestically in 2017, because they are Beer consumption among women
continued more likely to purchase beer in high Since women consume beer less
quantities and buy a variety of craft frequently than men, they represent a
brews to sample. Men in this age range smaller market for the Breweries
are not only the most likely to drink industry. Although consumption by
beer, but also typically drink a greater women has increased over the past five
volume of beer than other age groups. years, women are estimated to drink only
This is especially true among younger 38.8% of the beer sold in Canada.
drinkers between the ages of 19 to 24. Breweries are introducing new products
Men between the ages of 35 and 49 that have performed well with female test
consume 16.7% of the industry’s groups, such as sweetened beers like
products. This demographic represents a Molson Sublime or Labatt Blue Light
broad range of alcoholic beverage Lime. Low-calorie products are also
consumers who hold disparate product increasingly marketed toward women as
preferences and consumption habits. The brewers seek to tap this growing market.
increasing popularity of craft and local Women aged 18 to 34 are estimated to
beer styles has played a significant role in drink 17.9% of the beer sold in Canada in
broadening the consumption preferences 2017, surpassing all other female age
of this demographic. groups as they try newer products. This
Meanwhile, men aged 50 to 64 are demographic has been particularly
expected to drink 15.7% of the beer receptive to new types of local and craft
produced in 2017, as many in this beer. Women aged 35 to 49 are expected
segment substitute purchases of beer to consume 9.5% of the beer produced in
with wine or spirits due to higher 2017. Beer consumption among older
disposable incomes and shifting health- women is generally low, as substitute
oriented attitudes. Similarly, men aged beverages such as wine and mixed
65 and older are estimated to drink just beverages are often more popular within
4.4% of the beer produced in 2017 and this age range. Women aged 50 to 64
generally do not represent a significant consume an estimated 9.3% of the
share of the industry’s targeted industry’s products, and women aged 65
marketing activities. or older are anticipated to drink 2.1%.
$ million
the past five years, although a growing
number of Canadian craft breweries has -300
4.2% 1.4%
Ireland 2.9%
32.2%
United States
5.4% Other
Mexico
Vietnam
14.5%
Mexico
15.0%
Netherlands
86.1%
United States
26.9%
Other
Establishments (%)
Less than 5%
5% to less than 20%
20% to less than 40%
40% or more
NT
YT NU
NORTHERN TERRITORIES
0.0
BC AB SK MB
22.3 7.6 2.2 1.5
QC NL
1.4
ON 17.6
38.9
PE
NB 1.0
2.7 NS
4.6
SOURCE: IBISWORLD
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 19
%
Columbia and Quebec. Ontario holds a
leading 38.9% of industry establishments 10
due to high demand for beer from
Toronto and surrounding suburban 0
areas, and even from US distributors
Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland
NW Territories
Nova Scotia
Ontario
Prince Edward Island
Quebec
Saskatchewan
across the border that may wish to
import Canadian brands for US
consumers. British Columbia holds
22.3% of industry breweries despite
Establishments
representing only 13.3% of the Canadian
Population
population. This is largely due to the SOURCE: IBISWORLD
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share The three largest breweries in Canada are variety of advertising channels and
Concentration expected to generate 62.4% of industry generate operating margins that are
revenue over 2017. Foreign investment significantly higher than the margins of
over the past decade has led to the industry’s independent, regional
Level
fundamental restructuring of the brewers. Consequently, the industry
Concentration in this industry in the form of intense continues to be represented by both an
industry is M
edium consolidation and rising market share for increasingly high number of small
international beverage behemoths. Major brewers and a select few major
international brewers have developed international brewers. As these major
significant market share through international brewers continue to acquire
economies of scale in production, which the production facilities of popular
enable these companies to produce large Canadian and foreign brands, industry
quantities of beer at a low per-unit cost, concentration is anticipated to increase
heavily market these products through a over the next five years.
Competitive Landscape
Average Costs of
all Industries in Industry Costs
sector (2017) (2017)
100 n Profit
8.3 8.4 n Wages
12.7 10.1 n Purchases
80 n Depreciation
n Marketing
n Rent & Utilities
n Other
Percentage of revenue
60
37.9
56.2
40 5.7
4.4
7.2
2.5
20 1.2 3.9
26.3
15.2
0
SOURCE: IBISWORLD
WWW.IBISWORLD.CA Breweries in Canada June 2017 22
Competitive Landscape
Cost Structure spirit and soft drink manufacturers. government licensing, have been stable
Benchmarks Other costs, such as rent, utilities, and will continue to represent a
taxes, fees, administrative expenses and significant component of revenue.
continued
Basis of Competition A recent influx of small, local breweries efforts toward celebrity endorsements
into the industry has created additional and primetime TV spots.
competition for the few major breweries Consumers show significant brand
Level & Trend that have dominated the Canadian beer loyalty, making it difficult for new
ompetition
C in market in recent decades. The industry entrants to capture market share from
this industry is consists of a small number of major established brands. Competition for
Highand the trend international alcoholic beverage brand loyalty has intensified on a
producers, many domestic and regional regional level and, as a result, many
is I ncreasing
brewers and a new class of upstart regional players have sought to expand
brewers throughout the country. Major their geographic market reach.
imported brands, such as Heineken, Competition has also increased with the
present the largest source of competition rise of the craft brewing over the past
to all of the industry’s domestic brewers. five years. Internal competition is
anticipated to continue growing over the
Internal competition next five years.
Since the Breweries industry produces
many types of beer that cater to a wide External competition
range of customer taste preferences, Competition from other beverages and
many small-scale breweries emphasize foreign producers is escalating. Imports
seasonal flavours, limited-edition styles increased over the five years to 2017, as
and new brands rather than compete consolidation among the industry’s
exclusively on price. Conversely, the largest beer brands compelled consumers
industry’s larger beer brands, such as to increase purchases of major foreign
Molson, Moosehead and Sleeman, are brands. Continued merger and
produced and marketed with the brands’ acquisition activity among international
cost-effectiveness in mind, and beverage manufacturers has made it
competition from major beer easier than ever for consumers to have
manufacturers is of little concern to local access to popular alcoholic beverage
microbrewers whose products are geared styles that had once been obtainable only
toward connoisseurs and those who in their country of origin.
prefer more intricate styles of beer. Other beverage industries are also
Therefore, industry competition is based posing a major threat to the industry,
primarily on brand, quality and retail offering drinks that compete directly with
pricing. In general, marketing efforts beer. Not only is wine becoming
typically focus on male consumers aged increasingly popular among 18- to
19 to 25 years, because this demographic 35-year-olds, but there are also new adult
represents the market in which drink categories emerging that are aimed
consumers are most likely to try new beer at consumers in this age range. These
products. Alternative marketing include low-sugar sodas that are marketed
techniques like beer tastings and brewery as healthy alternatives, relaxation drinks
tours have become common among both and exotic juices that retailers, restaurants
small and large brewers, while major and other establishments are increasingly
brewers tend to focus their advertising selling alongside beer.
WWW.IBISWORLD.CA Breweries in Canada June 2017 23
Competitive Landscape
Level & Trend the Breweries industry as a small local Competition High
brewer or as a large regional producer. Concentration Medium
arriers to Entry
B Entry for craft brewers, for example, can Life Cycle Stage Mature
in this industry are be facilitated by the option to purchase Capital Intensity High
Highand S teady turnkey facilities, but starting a large- Technology Change Low
scale production facility will require Regulation & Policy Heavy
significant cash investments and Industry Assistance Low
substantial purchases of capital
equipment. Before a new brewer can even SOURCE: IBISWORLD
Competitive Landscape
Industry Both of the industry’s largest companies Canadian beer brands in response to
Globalization are foreign-owned and engage in a unfavourable exchange rates and waning
significant amount of international trade. consumer interest in Canadian brands.
Level & Trend Anheuser-Busch InBev, headquartered in Exports have fallen as a percentage of
Belgium, is the largest brewing company revenue from 4.2% in 2012 to an
lobalization
G in this in the world and Molson Coors, the estimated 3.3% in 2017.
industry is H
ighand world’s seventh-largest brewer, is a Imports are projected to grow slowly
the trend is S teady US-based brewer, which in 2016 over the next five years, although
completed a full acquisition of the imports as a percentage of domestic
MillerCoors brand portfolio following a demand for beer have historically been
joint venture agreement which featured low. In 2017, the value of imports will
both holding a financial stake in many of reach a projected $735.5 million, which
the country’s Beer Store retail locations. represents 11.9% of domestic demand
However, exports have declined as a for beer. With total imports projected
percentage of industry revenue over the to increase over the next five years,
past decade. The United States, which is IBISWorld anticipates imports to
the leading purchaser of Canadian beer, satisfy 12.8% of domestic demand for
has reduced overall purchases of beer by 2022.
Major Companies
Molson Coors Brewing Company | Anheuser-Busch InBev SA/NV | Other Companies
Major players
Anheuser-Busch InBev SA/NV 26.8%
(Market share)
41.5%
Other
Player Performance Molson Coors Brewing Company is the consolidation of its disparate Ireland, UK
product of mergers and acquisitions and Central European operations. In
(M&A) among several major North Canada, Molson Coors’ portfolio of
Molson Coors American breweries. Originally founded brands includes Coors Light, Molson
Brewing Company in 1786 in Montreal, the Molson Brewery Canadian, Molson Export, Molson
Market share: 31.7% is the oldest in North America and still Canadian 67, Molson Dry, Molson
produces beer at its original location on Canadian Cider, Carling, Keystone Light,
Industry Brand Names
the St. Lawrence River in Montreal. To Creemore Springs and the Rickard’s
Molson Canadian
keep up with the industry’s growing trend family of brands. The company also holds
Coors Light
of M&A, Molson Brewery merged with major joint venture agreements with
Rickard’s
US-based Coors Brewing Company to British beer manufacturer SABMiller PLC
Carling
create the Molson Coors Brewing and Mexican brewer Grupo Modelo, both
Keystone Light
Company, a partnership that has turned of which grant limited rights to distribute
Pilsner
the company into one of the largest and bottle the other’s brands.
Black Label
breweries in the world. The Molson Much like Anheuser-Busch InBev (AB
Molson Export
brand is still owned and operated by the InBev), Molson Coors’ M&A activity
Molson Dry
Molson family and the company has represents a continual trend in the
Molson M
expanded its operations throughout Canadian beer market toward major
Canada, the United States and Europe. market share concentration among the
The company restructured its position in industry’s largest companies. The company
the European market in 2012 with the has continued to consolidate within the
purchase of StarBev LP, which has Canadian market. Most recently, Molson
resulted in both the expansion and acquired microbrewery Granville Island
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 26
Major Companies
Player Performance Brewing in response to growing consumer billion. The company’s limited growth is
continued interest in craft beer styles. Facing largely due to sales woes among
weakening demand for the company’s core consumers of traditional premium beer,
brands of light beer, Molson Coors is brands that have historically represented
expected to raise over $2.0 billion in the company’s most heavily produced
capital to complete a takeover of products. The Molson Canadian and
SABMiller’s share of the MillerCoors joint Coors Light brands, for example,
venture. SABMiller agreed in July 2016 to represent more than half the company’s
sell its share of the venture to Molson sales domestically and have been
Coors to facilitate a planned merger with negatively affected by consumer
AB InBev in 2016, both of which were substitution toward other alcoholic
finalized in October 2016. beverages. Although the company’s
massive size continues to yield operating
Financial performance margins that are far greater than the
Molson Coors’ revenue in Canada is industry average, both company revenue
estimated to decline at an annualized rate and operating income have struggled
of 1.0% over the five years to 2017, to $1.8 over the past five years.
Player Performance Anheuser-Busch InBev SA/NV (AB InBev) brewers have been absorbed by foreign
is the result of a merger between Anheuser- beverage manufacturing operators in a
Busch (AB) and InBev. InBev already similar fashion.
Anheuser-Busch represented the culmination of numerous The merger of Anheuser-Busch and
InBev SA/NV mergers and acquisitions (M&A) of major InBev marked a significant change in the
Market share: 26.8% brewers over the past decade. The market share concentration of the
company’s continual growth has facilitated Breweries industry in Canada, and gave
Industry Brand Names
the takeover of many leading Canadian the company a clear leading position in
Budweiser
brands and, although AB InBev lets these the global brewing industry. Prior to the
Labatt
brands operate with relative autonomy in merger, InBev had a strong global
Beck’s
terms of production and marketing, many presence in its own right and was the
Stella Artois
of Canada’s most popular independent primary operator in the Breweries
Alexander Keith’s
Bass
Lakeport
Lucky Anheuser-Busch InBev SA/NV (industry-relevant operations) - financial
Oland performance*
Revenue Operating profit
Year ($ million) (% change) ($ million) (% change)
2012 1,359.7 N/C 318.9 N/C
2013 1,477.3 8.6 564.9 77.1
2014 1,609.6 9.0 386.5 -31.6
2015 1,561.0 -3.0 353.2 -8.6
2016 1,570.3 0.6 93.9 -73.4
2017* 1,507.5 -4.0 100.5 7.0
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 27
Major Companies
Player Performance industry as the owner of Labatt Brewing aggressive M&A activity. A scheduled
continued Company. Meanwhile, Anheuser-Busch merger between AB InBev and SABMiller
had already distributed InBev’s global was finalized in October 2016; the
brands in the United States, and the resulting company is the largest beer
company was previously the largest manufacturer in the world.
brewer by volume in North America. Additionally, the company’s massive
AB’s businesses included brewing, size has provided many of its major
packaging, theme parks and real estate. brewing facilities tremendous economies
As part of the merger agreement, AB of scale. The company’s operating income
sold its Busch Gardens theme park is typically far greater than that of the
business to recover debt generated by Breweries industry in Canada as a whole,
the merger and to gear operations and AB InBev’s brewing units
exclusively toward beer production. consistently boast the highest profit
margins in the industry. However, due
Financial performance largely to M&A costs, operating income
AB InBev’s industry-specific revenue is among its Canadian brewing facilities is
expected to grow at an annualized rate of estimated to decrease an annualized
2.1% over the five years to 2017 to $1.5 20.6% to $100.5 million in 2017,
billion. Although recent declines in representing a profit margin of 6.7%
revenue negatively affected the company’s among AB InBev’s Canadian brewing
performance, recent trends suggest that activities. This is slightly lower than the
AB InBev will experience steady revenue Breweries in Canada industry’s average
growth moving forward as it continues its profit margin of 8.4%.
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensive
Labour Intensive
Operating Conditions
Capital Intensity capital expenditures for every dollar however, have a significant global
continued dedicated to labour. presence with multiple factories and
The majority of the beer production large corporate offices that hold massive
process is mechanized, limiting the need executive and marketing departments.
for labour to brewing functions such as The need for administrative employment
sanitizing, hydrometer readings, quality drives up labour costs considerably
control and other miscellaneous when taking into account the additional
administrative functions. As a result, wages that are paid for administrative
wages in the industry are relatively low. staff, sales, marketing, accounting and
Some of the industry’s largest breweries, other employees.
Technology & Systems Although the standard process of making brewing processes, which have expanded
beer has experienced essentially no major to serve parts of Quebec and the state of
Level change throughout history, technological New York.
advancements have made brewing Technologies used to distribute, store,
The level
of processes larger, less expensive and more package and keep track of beer products
Technology efficient than ever before. Quality-control are also constantly evolving, giving an
Change is L ow improvements through computer indirect boost to the industry by
automation throughout the brewing decreasing middleman costs and thus
process are fast-growing trends. Modern lowering final sale prices. From electric
brewing plants are increasingly using and hybrid fleet vehicles adopted by
brewing, fermenting and conditioning distributors to inventory management
processes that are monitored by software used by warehouses, technology
computers capable of assessing helps the industry provide consumers
temperature changes, yeast activity and with lower-cost beer.
fluctuations in the pH of the initial beer A range of brewing methods exist and
mash. Increased automation lets brewers vary depending on the type of beer that is
more precisely control variables during manufactured. Barrel aging is a common
the critical phases of brewing (i.e., practice for manufacturers of sour beers.
lautering, boiling and fermenting). Much like the process used to ferment
Technological improvements in wine, oak barrels may be used in tandem
monitoring equipment also enables with yeast fermentation to produce a
operators to have better quality control desired result. Different ranges of
and a more consistent finished product. brewing styles are regularly tested and
The use of renewable energy to power modified over time to produce slightly
brewing plants is also a growing trend. different look and taste to specific beers.
For example, Beau’s All Natural Brewing Craft brewers have adopted popular
Company announced in 2014 that it English beer styles and developed new
intends to become Canada’s first brewery twists on traditional styles. American-
to use 100.0% green natural gas captured style IPA beers, for example, represent a
through landfill emissions and biogas. new interpretation by increasing the hop
Additionally, the company has installed aroma, bitterness and alcohol content of
solar panels to assist with day-to-day classic English IPA flavor profiles.
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 30
Operating Conditions
Revenue Volatility Unlike the US Breweries industry, industry revenue over the five-year
where changing distribution laws and period to 2017, is moderate and currently
rapidly expanding craft brewing stands at 5.1%. Although state-by-state
Level
facilities have created a very volatile dismantling of government-operated
The level of climate for brewers, the Breweries alcohol distribution has created a frenzy
Volatility is M
edium industry in Canada has been mostly among small-scale brewers to open new
stable over the past five years. Much of facilities across the United States,
this is due to the rigid structure of the provincial regulations for small-scale
country’s alcoholic beverage microbreweries is likely to remain stable
distribution system, which has been over the next several years. The growing
almost entirely operated by provincial popularity of craft beer has increased the
governments for decades. This number of industry establishments
inherent stability in downstream significantly since 2012; industry revenue
distribution has contributed to mostly expanded 4.4% over 2015, its strongest
stable growth in brewers’ revenue over year of revenue growth. Sustained
the past five years. periods of massive revenue growth
Industry revenue volatility, measured among domestic breweries over the next
as the average absolute change in five years, however, is unlikely.
Operating Conditions
Regulation & Policy Inputs bottles are recycled, with each bottle
continued The Canadian Wheat Board had been the being sterilized and reused on average 15
price setter and exclusive seller of malted to 20 times.
barley on behalf of producers in western
Canada until August 2012, when its Retail
monopoly ended. This change introduced Regulations limit the sale of beer by
volatility into the pricing and availability retailers and set minimum prices for
of these key industry inputs. In turn, alcoholic beverages, which reduces
breweries developed relationships with price-based competition for value
suppliers and established contracts to products. The existing system favours the
mitigate risk. Imports of barley and industry’s major companies, which have
wheat are subject to tariffs, although each established a significant network of
imported corn, oats, rye and other grains proprietary stores. If a brewery wants its
may be freely traded. products to be sold by these stores, they
must pay these stores a fee to carry their
Manufacturing merchandise. Although this fee is set by
Other policies regulate the industry’s federal and provincial laws, it favours
manufacturing facilities. For example, breweries that own a network of stores
breweries must meet all laws with regard because they ultimately control the
to zoning and environmental in-store exposure of each product.
requirements, such as those included in Each provincial liquor board
the Canadian Environmental Protection establishes appropriate retail practices
Act and the Canadian Environmental within its borders, with each state
Assessment Act. If a brewery wishes to holding a varying degree of control over
expand the size of their facility, municipal the private sale of alcohol. Ontario
bodies may choose to assess the represents one of the most stringent
environmental affects of this expansion provinces and only permits the sale of
before construction can begin. Provincial beer at its sanctioned Beer Store
regulations can also apply: Prince locations. Government-owned stores also
Edward Island mandates reusable beer are mandated to carry a variety of
containers like glass to reduce or products. However, there are fewer such
eliminate waste from packaging. The stores and beer sales are a fraction of
country’s environmental policies have their revenue. As a result, brewers
extended the circulation of each beer significantly limit their market reach if
bottle. According to the Brewers they choose not to sell their products
Association of Canada, roughly 97.0% of through their competitors’ outlets.
Industry Assistance The Agreement on Internal Trade is Provincial and federal sales and excise
responsible for the regulatory system that taxes are due upon receipt at the retail
limits provinces from impeding level. These costs are typically passed along
Level & Trend interprovincial alcoholic beverage to consumers in the form of higher prices.
he level of
T transactions. As a result, most of the trade Canadian breweries are heavily
Industry Assistance barriers between provinces have been supported by provincial government
is L owand the slashed for domestic brewers. This assistance. Canadian provinces and
effectively protects brewers from new or territories operate their own liquor
trend is S teady
existing regulations that would deter boards, which monitor the production,
shipments of beer within Canada. distribution and sale of alcoholic
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 32
Operating Conditions
Key Statistics
Industry Data Industry Per capita alcohol
Revenue Value Added Establish- Exports Imports Wages Domestic consumption
($m) ($m) ments Enterprises Employment ($m) ($m) ($m) Demand (Litres)
2008 5,187.0 1,064.7 198 190 7,998 374.7 643.4 520.0 5,455.7 115.6
2009 5,529.6 1,268.0 208 201 8,571 273.7 731.1 565.8 5,987.0 118.4
2010 5,156.6 1,258.7 206 199 8,692 271.2 709.1 547.0 5,594.5 111.6
2011 5,373.4 1,332.8 222 217 8,758 241.3 613.0 537.6 5,745.1 108.6
2012 5,494.5 1,245.2 242 237 9,081 230.8 635.6 547.4 5,899.3 105.1
2013 5,305.0 1,212.2 238 235 8,945 236.2 684.0 527.8 5,752.8 101.3
2014 5,426.1 1,265.9 235 231 8,801 220.3 687.1 538.7 5,892.9 99.4
2015 5,664.8 1,232.5 246 242 9,233 227.3 748.8 569.8 6,186.3 97.6
2016 5,507.8 1,289.2 243 240 9,036 181.5 782.7 555.3 6,109.0 97.1
2017 5,616.9 1,356.1 249 246 9,216 185.5 735.5 567.5 6,166.9 95.1
2018 5,794.4 1,379.6 252 249 9,386 271.2 786.5 581.2 6,309.7 95.3
2019 5,920.1 1,409.7 260 257 9,616 267.9 808.9 596.4 6,461.1 95.5
2020 6,022.9 1,435.3 264 260 9,735 265.3 820.7 605.4 6,578.3 95.6
2021 6,084.5 1,465.6 271 267 9,896 267.5 838.8 615.3 6,655.8 95.7
2022 6,208.0 1,469.9 275 272 10,063 267.0 870.3 627.3 6,811.3 95.7
Industry Jargon ADJUNCTSNonessential beer ingredients such as rice LAUTERINGThe process of soaking malted grains in
or corn that are often included in the mash to alter hot water and then draining the water to create a liquid
flavor or reduce ingredient purchase costs. that contains fermentable sugars.
CRAFT BEERBeer broadly defined as having annual NANOBREWERYA very small commercial microbrewery
production of less than two million barrels made by an that is often operated by a single owner and produces
independent brewer. very small batches for local distribution.
HYDROMETERAn instrument used to determine
specific gravity of liquid. For brewers, hydrometers are
used before and after fermentation to determine if
yeast has properly converted fermentable sugars to
alcohol.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY CONCENTRATIONAn indicator of the
new companies struggle to enter an industry, while low dominance of the top four players in an industry.
barriers mean it is easy for new companies to enter an Concentration is considered high if the top players
industry. account for more than 70% of industry revenue.
CAPITAL INTENSITYCompares the amount of money Medium is 40% to 70% of industry revenue. Low is less
spent on capital (plant, machinery and equipment) with than 40%.
that spent on labour. IBISWorld uses the ratio of INDUSTRY REVENUEThe total sales of industry goods
depreciation to wages as a proxy for capital intensity. and services (exclusive of excise and sales tax); subsidies
High capital intensity is more than $0.333 of capital to on production; all other operating income from outside
$1 of labour; medium is $0.125 to $0.333 of capital to the firm (such as commission income, repair and service
$1 of labour; low is less than $0.125 of capital for every income, and rent, leasing and hiring income); and
$1 of labour. capital work done by rental or lease. Receipts from
CONSTANT PRICESThe dollar figures in the Key interest royalties, dividends and the sale of fixed
Statistics table, including forecasts, are adjusted for tangible assets are excluded.
inflation using the current year (i.e. year published) as INDUSTRY VALUE ADDEDThe market value of goods
the base year. This removes the impact of changes in and services produced by the industry minus the cost of
the purchasing power of the dollar, leaving only the goods and services used in production. IVA is also
“real” growth or decline in industry metrics. The inflation described as the industry’s contribution to GDP, or profit
adjustments in IBISWorld’s reports are made using plus wages and depreciation.
Statistics Canada’s implicit GDP price deflator. INTERNATIONAL TRADEThe level of international
DOMESTIC DEMANDSpending on industry goods and trade is determined by ratios of exports to revenue and
services within Canada, regardless of their country of imports to domestic demand. For exports/revenue: low is
origin. It is derived by adding imports to industry less than 5%; medium is 5% to 20%; and high is more
revenue, and then subtracting exports. than 20%. Imports/domestic demand: low is less than
EMPLOYMENTThe number of permanent, part-time, 5%; medium is 5% to 35%; and high is more than
temporary and casual employees, working proprietors, 35%.
partners, managers and executives within the industry. LIFE CYCLEAll industries go through periods of growth,
ENTERPRISEA division that is separately managed and maturity and decline. IBISWorld determines an
keeps management accounts. Each enterprise consists industry’s life cycle by considering its growth rate
of one or more establishments that are under common (measured by IVA) compared with GDP; the growth rate
ownership or control. of the number of establishments; the amount of change
the industry’s products are undergoing; the rate of
ESTABLISHMENTThe smallest type of accounting unit
technological change; and the level of customer
within an enterprise, an establishment is a single
acceptance of industry products and services.
physical location where business is conducted or where
services or industrial operations are performed. Multiple NONEMPLOYING ESTABLISHMENTBusinesses with
establishments under common control make up an no paid employment or payroll, also known as
enterprise. nonemployers. These are mostly set up by self-employed
individuals.
EXPORTSTotal value of industry goods and services sold
by Canadian companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in Canada.
WWW.IBISWORLD.CA Breweries in CanadaJune 2017 35
IBISWorld Glossary PROFITIBISWorld uses earnings before interest and tax WAGESThe gross total wages and salaries of all
(EBIT) as an indicator of a company’s profitability. It is employees in the industry. Benefits and on-costs are
continued calculated as revenue minus expenses, excluding included in this figure.
interest and tax.
VOLATILITYThe level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.
www.ibisworld.ca | 1-800-330-3772 | info @ibisworld.ca
Who is IBISWorld?
We are strategists, analysts, researchers, and marketers. We provide
answers to information-hungry, time-poor businesses. Our goal is to
provide real world answers that matter to your business in our 400
Canadian industry reports. When tough strategy, budget, sales and
marketing decisions need to be made, our suite of industry and Risk
intelligence products give you deeply-researched answers quickly.
IBISWorld Membership
IBISWorld offers tailored membership packages to meet your needs.
Disclaimer
This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use the use of, or reliance upon, the data or information contained herein.
by its authorized licensees strictly in accordance with their license Copyright in this publication is owned by IBISWorld Inc. The publication is
agreements with IBISWorld. IBISWorld makes no representation to any sold on the basis that the purchaser agrees not to copy the material
other person with regard to the completeness or accuracy of the data or contained within it for other than the purchasers own purposes. In the event
information contained herein, and it accepts no responsibility and disclaims that the purchaser uses or quotes from the material in this publication – in
all liability (save for liability which cannot be lawfully disclaimed) for loss or papers, reports, or opinions prepared for any other person – it is agreed that
damage whatsoever suffered or incurred by any other person resulting from it will be sourced to: IBISWorld Inc.