Peter Chiodo calls it the “second renaissance.” About a generation after small breweries with flavourful beers stormed the oligopoly that controlled the beer sector, craft beers, many of them made in micro-breweries and distributed locally, have become frothy and surprisingly upscale competitors in an industry that traditionally functioned at the meat-and-potatoes end of the alcohol spectrum.
Indeed, there are now about 25,000 micro-breweries operating world wide, many of them offering complex, gourmet beers that have little in common with mass market, heavily branded lagers. Liquor agencies in B.C. and Ontario have reported a significant increase in craft beer sales in recent years, with market share in Ontario estimated to be about 5%, despite generally flat beer sales growth in recent years.
Chiodo owns one such operation—a small but rapidly growing micro-brewery in Barrie, Ont. he founded a decade ago. He unapologetically goes for maximum hop, and also offers specialty brews, with chocolate notes. But besides the recipes, Chiodo’s firm has a flavour that arguably sets it apart from the rest: its name—Flying Monkeys Craft Brewery—as well as unique packaging (individual bottles are sold in separate decorative boxes) and a zany brand that has more in common with Monty Python graphics than the imagery of upscale brewing.
After seven years spent building a case-by-case presence in the Canadian market, Flying Monkeys made a concerted push to establish itself internationally in 2012, first in Europe and then in the crowded U.S. market.
The effort, says Chiodo, appears to have yielded results in both regions. The 37-employee company, which now brews about 1.2 million litres per year (equivalent to four million bottles), is planning to expand its manufacturing capacity by 40% next year in order to meet growing demand both domestically and internationally. Exports now account for 16% of revenues. The most important element in establishing a consumer brand abroad, he says, is “understanding that when you hit those international markets, the product has to sell itself. You can’t be there to baby it.”
The company traces its roots to Chiodo’s university passion for DIY brewing. In the early 1990s, he and his wife were studying at the University of Alabama, and brewing beer in their spare time. He’d do specialty ingredient runs to Memphis, Tennessee. After completing his MBA, Chiodo ended up working as an operations executive for a Fortune 500 company, but he never abandoned the dream of setting up his own brewery. “My father always said, going to work should be like going on vacation, and then you’ll never work a day in your life.”
In the early 2000s, he scrounged together the funds—about $3 to $5 million—and built a micro-brewery on a waterfront site in Barrie. He drew inspiration from what he’d learned about craft beer in the U.S., and then took a flyer with his graphics and packaging. As the firm built its following in specialty pubs and craft beer festivals, Chiodo reckoned he was ready to export. “We knew we had a brand that we could take abroad.”
As it turns out, abroad came knocking on his door, first in the form of a Swedish distributor, which began with small orders, and then, in early 2013, a large Spanish firm, Groupas Varagoza, which wanted to represent Flying Monkeys across Europe. The Swedish company, says Chiodo, had heard about Flying Monkeys because its beers scored well on RateBeer.com, a popular connoisseurs’ site. But with both, the European distributors were looking for a specifically Canadian brand.
Like many entrepreneurs dabbling in the export business, Chiodo realized that he’d likely have to partner with foreign distributors, and that meant figuring out how to distinguish between reputable players and firms that wouldn’t pay much attention to his product. It’s a complex mating game, as he says, pointing out that Flying Monkeys wants a long-term, committed relationship, not a one-night stand.
He hasn’t been burned yet, and that’s because he spends a significant amount of time investing in the personal relationship between his firm and the distributors that want to carry the beer. Chiodo invites their executives to Barrie to tour the brewery, meet his staff and share some beer. Chemistry is important, and he looks for partners who get the craft beer industry.
As it happens, Chiodo, when he began to expand into the U.S., ended up partnering with an old-school Ohio distributor, Esber Beverage, which mainly handled Miller’s product line. Despite those fundamental differences in market position—niche vs. mass market—Chiodo says the partnership flourished because Esber was in the process of entering the craft beer space, and needed a brand they could develop. Still, he adds, the decision to go with a firm that only distributes mainstream brands was something of a risk. The call, ultimately, was all about gut.
Esber, it turns out, knew its own customer base well enough that it succeeded in establishing a beach head for Flying Monkeys in the U.S. In fact, the Ohio firm has signed on as the brewery’s importer, and is now shipping to other distributors in New York State and Michigan.
As the firm’s expanded production facilities come on line next year, Chiodo says he’s going to broaden his U.S. presence, as well as seek partners in Mexico and China. With so much of the company’s branded merchandise such as beer openers, glasses and T-shirts being made in China, Chiodo says his goal with that market is to reach sales that balance out the cost of the goods he’s purchasing from that country.
For other consumer products firms looking to follow a similar path, Chiodo offers a telling piece of advice about how to gauge the potential of a foreign market, and the commitment of a local partner. Don’t worry about the size of the initial order; those are the trials. The real taste test, Chiodo observes, is that first re-stocking order. He recalls his experiences with the Spanish distributor. The second order took up 90% of a shipping container. “I knew it had been well received.”