An Overview Of The Beer Industry In Canada

Beer is made up of different ingredients but the main component is water (90%), malted grain, a herb or spice for the flavor and everything is fermented with yeast. Brewing in Canada began with the first settlers and traders. It started as a cottage industry, but in 1668 Canada’s first commercial brewery was built by the Intendant Jean Talon at Quebec City.

Beer is the most consumed alcoholic beverage in Canada. People are moving towards imported beers. Most of the Canadian Beer companies have either been bought out by bigger international firms (Molson-Coors) or have moved their headquarters elsewhere. Domestic beer is still in demand according to IBISWorld approximately 24 percent beer was consumed by people aged between 19 and 34.

Largest manufacture of beer in Canada is Anheuser-Busch InBev which covers 35 percent of the Canadian market. The company generated 2. 1 Billion U. S. dollars revenue in Canada. It's more than the Molson did the same year. There are two types of beers commonly consumed and available in Canada Lager and Ale, but Canadians prefer Lager (56%) over Ale (34%) and the other 10% is Pilsner.

The beer industry is one of the most heavily regulated in Canada. Brewers have to obtain a license from the Federal and the Provincial government. Canada ranks with Norway as having the highest tax of 23 industrialized countries. Canada has three times higher tax on beer as compared to the United States.

Some facts about Canada beer industry:

1. In 2016, an average Canadian bought an equivalent of 223 bottles individually.
2. Brewing industry created a total of 149,000 jobs across the country in the year 2016.
3. Sales of beer created $5. 7 billion in annual taxes.
4. Canadian beer is actually older than Canada. In fact, beer production in the Great White North Pre-Dates Confederation by a good 200 years.

Current Situation

Today Canada's brewing industry consists of two national companies:

• Labatt Breweries of Canada (8 plants)
• Molson Breweries (8 plants)

And 40 (forty) microbreweries in every area of Canada except New Brunswick, Nova Scotia, Prince Edward Island and the Yukon and Northwest Territories.

Even though Brewing industry in Canada is old, the popularity and the demand of this industry’s products has been increasing specially in craft beers which means high revenues and enterprise growth. Canada produces different types of beer, also nonalcoholic beers and malt liquor among others.

Over the five years to 2018, industry revenue is expected to grow at an annualized rate of 3. 5% to $6. 4 billion, including growth of 4. 2% in 2018 alone.

Nowadays due to the craft beer expansion and increasing, international beers popularity in a long term could stop being one of the peoples’ options. For instance, “Budweiser, brewed by Anheuser-Busch InBev SA/NV (AB InBev), and Molson Canadian, brewed by the Canadian division of Molson Coors Brewing Company are two brands that have been affected by the growing popularity of craft beer. ”

Another point it is happening nowadays with craft beer and its popularity is that customers due to the higher prices are reducing the quantity of the alcohol either in buying and drinking.

PESTEL Analysis

Beer is one of the most consumed alcoholic beverages in the world. The beer industry which includes the process of production, advertisements, branding of products, promotions and packaging is always affected by the internal as well as external environment in which they operate.

Political factors: The brewing industry is highly dependent upon the taxation and government regulations. Federal government, local government and provincial governments state the rules and regulations for the production and distribution of alcohol in the country. Each and every step from the production to distribution of beer must be accepted by the Government. There may fluctuations in the sales due to the political involvement. If one country is having more strict taxation rules, they will earn high profits and other who have high taxation policies will get lower profits. According to a report, there were controversies in the country due to strict government policies. Government pledged to bring the price of a beer down to a buck on the Labor Day i. e. fix the prices of the beer minimum to $1 to $1. 25 on Labor Day. This was done just to increase the votes for the party. Canada has a number of jobs in the beer industry. In the year 2016, there were 149,000 jobs in the country in the beer industry and $5. 7 billion annual tax revenues enjoyed by the federal government in Canada.

Economic factors: Brewing is one of Canada's most seasoned businesses and Canadian brewers today hold an 85% share in the market. The mission for a 'cold one' is a Canadian convention that creates work openings and gives critical income to organizations and governments. Altogether, Canada's beer economy was in charge of $13. 8 billion of spending in 2016.

Socio-cultural factors: While an assortment of statistic, social, and financial elements have caused lager utilization on a for every capita premise and fares of Canadian brew to decay,' the report stated, 'the lager economy keeps on contributing fundamentally to Canada's monetary and financial success and give business chances to numerous Canadians the nation over’. Support rates for liquor utilization shift with age yet are generally steady for a given age gather after some time. A person's utilization of liquor keeps an eye on most noteworthy between the base legitimate age for drinking liquor, which is between 18 to 19 years old in Canada, and 30 years of age. It decays from that point.

Technological factors: In this global world, major effect on our life is of technology and social networking. “Technology helps in creating a device to brew beer, which is called “the Pico brew zygotic”. Millions of bottles can be brewed just in a few minutes”. Beer industry heavily relies on refining and brewing technology. Some people are very health conscious: regarding calories, sugar, carbs etc. “Beer industry modified technology by using new techniques in microbiology and biotechnology. It helps to make low calorie and low carb beers”. The increasing use of social media and technology to capture the attention of the consumer. Manufacturers can easily share upcoming product information in the market to achieve large market share and modifications made in existing product.

Legal factors: “Legal factors affect the industry while packaging, labeling, and advertising. Factors such as: - for use of person over 19 years old, manufactured date, ingredients etc. ” Federal government and state government impose various types of taxes on beer industry: on location, amount of production, and equipment used.

Environmental factors: Beer industry affects the environment. “Three main things are included in environmental factors: recycle waste, water conservation and energy management. In order to make improvements in the packaging, recycle waste increase the use of paper, glass, aluminum, cardboard”. Wastewater disposal creates environment hurdles. Water shortage can be felt everywhere in this world. Brewing process makes extreme use of water.

Prediction in Breweries Industries in Canada

Beer is a big business in Canada, over the past few years hundreds of craft breweries are operating and receiving high demands from consumers. When the industry is on the rise, there are some trends that need attention. Here are some predictions about this industry, most recently in 2019 and beyond. The beer market is saturated, and factories are thinking of reducing expansion in the city and expanding to rural areas, and this will increase job opportunities for workers in remote areas. As breweries tend to grow, there will be three major scales: continue to build and grow bigger businesses, consolidate businesses, or sell.

BC leads the beer industry

In general, Ontario still holds the top position, but in the past few years, BC has had activities in Ontario because of the best brewery in the country. From the annual awards, the gap between the two provinces is gradually narrowing and maybe in 2019 BC will surpass Ontario.

The beer industry in Canada has undergone development over the past 6 years.

Revenue of small-scale breweries is increasing, consumers are no longer using many traditional beer brands and instead are modern high-end firms, representing manufacturers. industrial beer, however, due to higher craft beer prices, the turnover in recent years has been faster than the historical trend.

Small-scale factories are increasingly popular, which entails concerns about the growth prospects of international brewers, a great pressure on sales of top value products respectively. In the year, 2018, Due to the higher price of craft beer, consumers buy beer in smaller quantities in exchange for higher quality brands or have completely reduced the purchase of alcohol. As businesses innovated and launched new products, profit margins fell during the period from 7. 9% in 2013 to 4. 7% in 2018. Industrial growth is forecast to be slow. In the next years, until 2023, when the craft beer market becomes saturated with microbiological factories, consumers continue to shift their focus from traditional and high-end beer brands. In addition, on the monetary side, in the past few years, the Canadian dollar has struggled with currencies from the largest trading partners. However, it is expected to recover in the next 4 years. In addition, the US dollar is continuing to increase strongly, and this makes the price of Canada beer cheaper than American beer and will attract American consumers. However, the Canadian dollar is rising and if the US dollar is exceeded, consumers will turn away from Canada beer. Therefore, export growth in general is likely to remain limited in the next five years. IBISWorld expects industry revenue to grow at a slow annual rate from 1. 0% to $ 6. 8 billion until years 2023.

Conclusion

Even though per capita consumption of beer in Canada came down by 2. 1% in the year 2017 but still it was a pretty big year for the industry as a whole. The number of operational breweries in the country rose by a big 17. 6% in the year, rising to a total of 817. The year also saw a price rise of 2. 6%.

Overall sales saw a minor increase of 0. 6% but the Canadian beer saw its market share shrink from 85% to 84%. Craft beer has played a major role in the rapid growth of the breweries in the country.

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