A series of announcements in recent days/weeks have highlighted something I have been saying for months – that the Alberta and Canadian craft beer industry is heading for a tumultuous period of change and instability. The recent news suggests this moment of flux has begun in earnest. Allow me to summarize the stories and then offer some analysis,

Blindman/Dandy Partnership

Lacombe’s Blindman Brewing and Calgary’s The Dandy Brewing Company have announced a formal partnership. While not a merger or acquisition, it does represent an intertwining of their business operations. The key aspects of the deal are:

• Dandy’s core line up of beer will now be produced at Blindman’s facility and will be distributed and sold by Blindman. Blindman will legally own the beer produced. Dandy retains ownership of the brands. I am told the arrangement is like a “permanent licensing agreement”. The two companies will work together to make decisions about the brands, including visual branding elements.
• Dandy will use its Calgary brewhouse to brew offerings exclusively for the taproom.
• Blindman obtains a 15% minority ownership share in Dandy Brewing.

For its part, Dandy’s CEO Ben Leon says the deal allows them to “return to our roots, focus on creativity and brew the beer we want to make”. They will focus on the taproom experience and will look at opportunities to open additional tap room spaces in the future. For Blindman, this is a seamless way to expand their portfolio and market reach. Given their existing facilities they can add the Dandy line-up without much difficulty. Interestingly both breweries opened in 2014 as part of the first wave of openings following liberalization of brewing rules.

There is no question there is a synergistic element to this agreement. It allows Dandy to refocus their business model and to shed the burdens that come with broader distribution. Blindman expands their business operations in a fairly painless manner. Both parties acknowledge this move is a pro-active effort to strengthen both businesses for the uncertain times ahead for the industry. Leon states for them the process started almost a year ago when they undertook a looking-forward exercise and evaluated their place in the market as it shifts.

Tool Shed in Turmoil

The Blindman/Dandy announcement follows the shocking news last week that Calgary’s Tool Shed Brewing has filed for insolvency. Insolvency is a legal status that indicates a company is unable to meet their financial obligations. It is NOT the same as bankruptcy. In effect insolvency buys a company time to resolve the situation through restructuring, injection of capital or another solution. At this time Tool Shed continues to operate and produce and sell beer.

Court records filed for the application indicate Tool Shed owes approximately $500,000 to Revenue Canada. The application is aimed to suspend a garnishment order from Revenue Canada regarding payments from AGLC to Tool Shed (i.e., Revenue Canada has ordered AGLC to withhold a portion of all payments to Tool Shed as partial payment of the amount owing).

I am not a financial expert, so will be careful with my comments here. I can say the matter is far from resolved. Tool Shed is likely looking for an injection of cash through new investors or other means to resolve the insolvency. We will learn more in the coming weeks whether that effort is successful.

Calgary Brewery Transformations

Since the new year two Calgary breweries have announced their closure and plans for a complete overhaul of the business/branding. Revival Brewcade – a brewery/arcade hybrid operation, closed its doors in January, announcing the space will be re-opening in early 2024 as Burn Block Social Club. The ownership of the new operation is unclear, although social media posts imply they will continue to brew onsite.

More recently Elite Brewery and Cidery announced its closure at the end of January, also announcing it will be relaunching with new branding and business focus. The new company will be called Paradise Beverage Company and it appears it will broaden its focus to a wide range of adult beverages. It seems beer will continue to be produced onsite.

In my books both announcements count as brewery closures as it is not uncommon for closed breweries to re-open under different branding or ownership. I will dutifully add the new breweries when the time comes. However, it is interesting that in both instances the closure is being paired with an aggressive effort to re-cast the spaces to meet a newer kind of consumer demand – less emphasis on beer, more on other forms of alcoholic beverages, and an attempt to upscale the customer experience.

Asymmetrical Brewing Closes

2024 started in the bleakest of fashions, with the closure of Edmonton’s Asymmetrical Brewing. Asymmetrical had only opened in late 2022 so its departure was, to many, unexpected. The brewery leaned heavily into tap room sales, and it seems sales never quite reached expectations. Its closure suggests that the tap room-focused brewery model may be quite shaky in the post-COVID, high inflation environment.

More to Come

To be clear, the movement of the last few weeks is the beginning of a lot of turmoil that is going to hit the industry in the coming months. I won’t predict who, when or how, but I am sure things will happen.

At best breweries see what is coming and find a way to proactively adapt, like Blindman and Dandy seem to be doing. In other cases maybe a radical rebranding might help, although I am skeptical. The worst case is Asymmetrical, where you just have to close your doors. I really don’t want that to happen, but I fully suspect I will be writing posts this year reporting on brewery closures.

Buckle your seat belts. 2024 is going to be a bumpy ride.