Vancouver Island Brewing is closing its beer operations on Government Street and has signed a production agreement with a local competitor to continue making its products.
Citing a significant rent increase on the property and escalating operating and production costs, Vancouver Island Brewing announced it will close its tasting room Sept. 14 and the plant that contains its tanks and canning line by Nov. 1.
About half of Vancouver Island Brewing’s 30 employees will lose their jobs as the company shifts production and packaging of its brands to Phillips Brewing and Malting, located about a block away on Pembroke Street.
Phillips has signed a long-term deal with Vancouver Island Brewing. Though financial details were not disclosed, Vancouver Island Brewing general manager Thom Riley said the company expects to produce about 18,000 hectolitres a year — its current volume — at the Phillips facility.
The beer industry uses hectolitres as its volume measurement. One hectolitre amounts to 100 litres, and 18,000 hectolitres is 1.8 million litres.
Ontario-based owner Bob MacDonald, who acquired the company in 2016 from local farmer Barry Fisher and shareholders, revealed the plans to staff on Wednesday morning at the brewery at 2330 Government St. The lost jobs will be on the brewing production and canning side, while about 15 positions will be maintained in sales and marketing, finance and administration.
Vancouver Island Brewing will keep about 10 per cent of the space in the current location for offices and a microbrewery for new recipes.
The company was founded in 1984 in a small Central Saanich warehouse by John Hellemond, John Young, Ray Moore and Jim Clarke and is considered the Island’s oldest craft brewing operation. It is marking its 40th anniversary this year and its 35th on Government Street.
“It’s a tough day, but we’re trying to be proactive to preserve the legacy of the company,” Riley said, adding that the brewery was built to brew twice the volume being produced now.
“There’s impact to this decision … but our primary goal is that this 40-year-old brand lives on.”
Increased costs and competition
Riley said the company was facing a 35 per cent increase in rent from its landlord based on current property assessments. The owner of the property is a company registered in Vancouver as Nicola 2330 Government Nominee Inc.
He also said the brewing company is grappling with supply chain challenges and inflation that has significantly increased the prices of grain and hops, aluminum for cans, and fuel surcharges for distribution.
Ken Beattie, executive director of the B.C. Craft Brewers Guild, applauded Vancouver Island Brewing and Phillips for the agreement, which will ultimately save the 40-year-old brand and its flagship beer, Islander Lager.
He said the province’s 220 craft brewers in 80 communities are facing difficult times with unprecedented increases in the cost of ingredients, packaging materials, rent and distribution, all of which have risen dramatically in the years following COVID.
Beattie said the agreement was a “creative approach to ensuring the longevity of one of B.C.’s original and most beloved craft breweries.”
There’s been rapid growth of the craft beer industry, he said, noting that between 2016 and 2022 alone, 154 breweries opened across the province.
“[But] post-COVID is the first time we have seen breweries close and these closures are predominantly related to cash flow issues stemming from increases [in costs],” he said. “Unlike other package-goods manufacturers, these increases are not passed on to consumers as price increases, resulting in monthly cash flow pressure for a number of breweries.”
Swan’s Brewing last week announced it would cease production at its facility downtown, though its pub and hotel remain open. The proliferation of craft brewers is considered by some to be correcting amid the the rising cost to operate.
Competitor Phillips ‘happy to help’
Jim Lister, general manager of Phillips Brewing and Malting, said the company was “happy to help” Vancouver Island Brewing.
“In the local beer industry, there’s collegial relationships,” Lister said. “Our primary sentiment is we were able to help find a solution. We want to see them stay around.”
Phillips employs 100 staff, including 75 at its brewing and malting facilities downtown. The company has 60 fermenting tanks and several other brite tanks where beer products are finished and ready for bottling and canning.
Riley said the discussions with Phillips “came from a place of trust.”
“In a lot of industries you don’t talk to your competitors, but in craft beer, we talk through challenges because we’re often going through the same challenges,” he said.
Beattie said the craft beer industry’s share of the beer market in British Columbia is 32 per cent, the highest of any province in Canada.
Beer remains a popular drink, but consumer tastes are always changing, he said.
He said many craft brewers are diversifying and offering products such as ready-to-drink beverages, hop water, low-alcohol and no-alcohol beverages, and sodas to compete for consumer attention.
“Today’s consumer has an unprecedented number of choices available to choose from,” Beattie said. “As beer is still the largest beverage category across the country, we are seeing some losses based on more offerings and more choices.”
Vancouver Island Brewery said it will be business as usual as far as its brands are concerned. It will be re-launching one of its legacy beers, Sea Dog Amber Ale, at RibFest on Sept. 6, and a seasonal favourite, Hermannator Ice Bock, is currently in production — the last at the Government Street operation.
Riley said the company will continue to innovate with new recipes, but is focused on making its core brands — Islander Lager, Broken Islands Hazy IPA, Mystic Haze Pale Ale and West Coast IPA.
“Consistency is key … that dependability,” Riley said. “I always think of the person that finishes a hard day’s work, buys a six pack and goes home and cracks the can and it tastes exactly as they would expect.”
