Two B.C. craft brewers are expanding their interests in Asia, including the biggest beer market on the planet: China.
Surrey-based Russell Brewing has just opened a brewery and two restaurants in Hefei, China with Chinese venture partner FVI Capital.
“This will be a chain of brew pubs using Russell’s brand and Russell technology,” said Ben Yu, Russell’s interim CEO.
Senior brewer Kevin Wilson has spent the last several weeks training staff and running test batches in the new brewery, which is now operational. The brewery is designed to produce enough beer to serve up to four restaurants.
Russell secured a 20-per-cent stake in the new company, Russell Breweries China Inc., as part of a technology and licence trademark deal that includes a royalty paid to Russell based on the volume of beer produced.
China consumes more than 50 billion litres of beer annually, but the small-batch artisanal beer styles that are now familiar to Canadians are virtually unknown there, according to Yu.
“Craft beer is really new to Chinese consumers,” said Yu. “The Chinese beer market is very much like North America was 15 or 20 years ago. It is highly competitive at the low end. It’s very much a working-class drink.”
But a new kind of well-moneyed urban consumer is emerging in western Chinese cities, where disposable income is rising by 10-per-cent annually.
“The younger generation is very trendy. They are quick to adopt Western culture and they are catching up to the North American craft beer concept,” he said. “These are people with money looking for a premium product.”
According to the market research firm Mintel, China’s beer market grew 29 per cent over the five years ending in 2011 and the average price paid per litre rose 27 per cent in just three years, suggesting the market is turning increasingly to premium products.
Yu is already working on the next stage in Russell’s expansion to Asia, hammering out co-branding partnerships with upscale restaurant chains to bottle signature craft beers in Surrey for sale in China.
The idea is similar to signature beers brewed by local craft brewers for chain restaurants such as Earls and Cactus Club Cafe, except in China the beer would be packaged for customers to take home, Yu explained.
Mission Springs Brewing Company has recently opened two 40-seat taphouse restaurants in South Korea, with two more on the drawing board to open next year, according to co-owner Brock Rodgers.
In partnership with Rodgers’ son, chef Santino Sortino, Springs Tap House opened in Seoul’s glitzy Itaewon district in May and added a second location in Cheongdam in October.
Sortino went to South Korea 13 years ago to help open an Italian restaurant and subsequently opened and sold three restaurants under the name Sortino’s before opening the very posh Grano in Gangnam and Caffe Grano at the new National Museum of Modern and Contemporary Art in Seoul — with Mission Springs beer on tap, of course.
“He’s like the Mario Batali of Korea, he’s on magazine covers, that sort of thing,” Rodgers said. “He’s been bugging me for years to bring our beer over.”
The hitch, until now, has been shipping costs. It’s relatively cheap to move cargo to South Korea because ships are mostly empty heading back to Asia after unloading cargo in Vancouver. But shipping empty kegs back from South Korea for refilling is prohibitively expensive, Rodgers said.
“That was going to be a deal breaker until I came across KeyKegs, a cheap disposable keg that a lot of wineries use,” Rodgers said. Rather than go into the shipping business, Mission Springs contracted Korean beer importer Indulge to take their product over.
With little in the way of government regulation, restaurant locations can be opened quickly and cheaply, between $150,000 and $200,000, including al forno pizza ovens for each, Rodgers said.
“As long as you hire a licensed contractor with a relationship with the city, there’s no waiting around for approvals, they just get things done,” he said.
Springs Tap House joins a burgeoning craft beer scene in Seoul. Canadian Dan Vroon operates Craftworks Taphouse, a chain of four gastropubs serving Korean-brewed craft beer. A handful of other craft taphouses, including Magpie and The Booth, have entered the market in the past year.
Rodgers is delighted by the competition.
“If you put one shoe store in a mall it will do OK. Put in four more and everyone shops there,” he said. “It’s creating a great scene for wealthy Koreans, tourists and military personnel.”
Mission Springs is already sending 24,000 litres of beer a year to South Korea, volume that has necessitated a brewery expansion.
“I just ordered eight new fermenters to quadruple our production,” said Rodgers. “Right now our product is split about one third for Korea and two thirds for the brew pub here in Mission, but that will change. My goal is to have 10 restaurants in Korea.”
B.C. companies making inroads in Asia:
• Pacific Western Brewing became the first brewery to export Canadian beer to China in 1991 and then to Russia in 1996. The Prince George-based brewer cracked the Japanese market in the late 1980s and remains the No. 3 import beer in Japan. Pacific Western will participate in the B.C. government’s Jobs and Trade Mission to China, Korea and Japan.
• Victoria’s Phillips Brewing Co. began exporting craft beer to Japan last year and their products are available in Hankyu Hanshin department stores, the specialty liquor store Heavenly Vines and a handful of bars and restaurants. Phillips beers were featured on a B.C. trade mission at the Hankyu Hanshin Canada Food Trade Show in Japan last February.
• China is B.C.’s most important wine export market, receiving 90 per cent of all exports with a value of $7 million in 2012.