Big Rock Is Back
Can Bob Sartor’s vision revive Alberta’s oldest craft brewer?
by Jesse Snyder
Photograph John Gaucher
Bob Sartor stands in a large, refrigerated room with dark-wood Kentucky bourbon barrels stacked to the ceiling. “I love the smell of this room,” says the CEO of Big Rock Brewery. The barrels are storing a limited-edition dark ale the company plans to release in November. It will be one of about 20 new beers Big Rock will launch in 2015 as part of a widespread effort to re-establish the company as a high-quality brewer after years of languishing sales. “My objective is to take the asset here, which is very large, and take it to its full advantage,” Sartor says of the company’s main brewery in southeast Calgary, which is serving as ground zero for the remaking of Big Rock. “I want to have the biggest and most varied barrel-aging program in Canada.”
But his plans for the company are far more ambitious than simply introducing hints of Kentucky bourbon. Since becoming CEO in 2012, Sartor has set about rearranging nearly every aspect of the slumping brewery, from launching breweries attached to lavish restaurants in Vancouver and Toronto to growing cherry trees and raising bees – for the beers, you understand – on site.
So far, investors are not convinced. They sold shares in droves following the company’s first quarter results for 2015, which caused its stock price to fall nearly half to just over $7 per share, its lowest since the 2009 financial crisis. Revenues over the quarter were down 11.6 per cent, and sales of new products weren’t sufficient to make up for lost volume on the company’s staple products. “Clearly they’ve been good,” Sartor says, “but not good enough to offset declines.”
Analysts wondered whether Big Rock had the cash flow to fund Sartor’s $6- to $8-million expansion plans, which will add three new microbreweries to its asset base. The company suspended its dividend in 2014 and took on a $12-million revolving debt facility in 2013 to pay for the expansion. Yet Sartor expects sales to rebound, and he is trying to convince consumers that his dramatic overhaul of the company is not simply a sales gimmick but a return to the company’s roots.
Big Rock was founded in 1984 by Ed McNally, who, at the ripe age of 60, launched a company that would in time become Alberta’s largest craft brewer.
Staple products like Grasshopper and Traditional Ale became household favourites, and the company flourished well into the late ’90s on steady sales of its staple products. But the McNally legacy began to wear off over time. The company added new board members from major U.S. breweries like Molson Coors Brewing Company who geared the company toward increased volumes – sometimes at the expense of quality.
When Sartor was hired in March of 2012, sales of newer products had been in decline for years, in no small part because of the kinds of beers Big Rock was brewing, he says. “The last few beers they came out with were [Big Rock] Lime, an adjunct-laced beer – which is a sin. They came out with Jackrabbit, a diluted beer – which is another sin. And they came out with Gopher, which was a Molson Canadian ‘me-too’ beer,” Sartor says. “No wonder people thought the company had lost its way – it had.”
Sartor cut all three beers out of its product line, despite the revenue they produced, sinking sales even further. “It was very difficult to do, because I knew it was going to tank volumes,” he says. “Those sales were worth about 10 to 15 per cent of the business.” To fill the void Paul Gautreau, Big Rock’s head brewmaster, concocted three new permanent beers – its Dunkelweizen dark wheat ale, the Rhine Stone Cowboy “Kölsch”-style ale and its Fowl Mouth ESB (English special bitter), bringing its permanent beer selection to 12. The company also introduced a slew of limited-edition and seasonal beers, including some hop-heavy IPAs, a Belgian-inspired ale and a super dark “Birch Bark” stout. Sartor gave Gautreau free rein to brew whatever he saw fit, and the two travelled to England, Belgium and the U.S. West Coast in search of new recipes. “I told him: ‘I’ll never tell you what to brew; just brew really good beer,’” Sartor says.
The company also cut all adjuncts or additives out of its beers and began using only unpasteurized and 100 per cent natural ingredients. It also did a colourful redesign of its labels and changed from the industry-standard 341-millilitre reusable bottle to a 330-millilitre recyclable bottle. (In hindsight, moving to the smaller bottle, which amounts to about a teaspoon less of beer, has been one of Sartor’s greatest regrets at Big Rock, having caused a months-long consumer backlash.)
But the boldest aspect of Big Rock’s shakeup is its expansion into other Canadian markets. It opened a brewery with capacity for 25,000 hectolitres in Vancouver last April, which currently runs at about 7,000 hectolitres. Big Rock expects to open another in Toronto early next year. “I came to this conclusion several years ago that one giant operating plant was not the way craft beer was going,” he says. The brewery uses local ingredients and produces entirely different beers than the Calgary facility to accommodate the local palate (B.C. beer drinkers tend to like their brews hoppy). The Toronto facility will do the same, as will the brewery Sartor plans to build in Montreal by 2020.
That will give Big Rock accreditation as a local brewer in each province and provide the company better access to shelving space, which is extremely limited for imported craft beers. It is also expected to cut shipping costs. “This company has the highest distribution costs of any company that I’ve ever either run or been a part of,” says Sartor, who previously worked for mega chain companies like Forzani Group.
But the expansion hasn’t come cheap. The facilities are not so much breweries as they are “houses of worship,” as Sartor calls them, equipped with full-menu restaurants and a brewpub where people can listen to live music, meet the brewmaster and sample new beers. The Vancouver facility is lavishly furnished and has full-length windows looking into the brewery. The total expansion will cost up to $8 million and will take the company well beyond its core competency of brewing and shipping beer. And there’s more: On top of the four major breweries he has planned, Sartor is looking to build roughly six smaller facilities in various markets across Canada. The question is whether consumers will buy in and make those expansion plans worthwhile.
Sartor, 58, has a history of turning companies around. Over the years HE’S earned a reputation in Canadian business as a tried-and-true “Mr. Fix It,” taking slumping companies and restructuring them into profitable businesses. He began his management career in 1983 after leaving his job at Coopers & Lybrand (now PwC), where he discovered his ability to dig into the back-end machinery of a company and reconnect its financial loose ends. His first company was Bolands Limited, a grocery wholesaler and retailer out of Halifax, where he worked as CFO for two years before the company was righted and then acquired by another company. He worked with six companies in various Canadian markets, ending with Calgary-based Forzani Group, which sold to Canadian Tire in 2011 for $771 million.
The deal marked the end of a significant turnaround for the company. Matthew Handford, who worked closely with Sartor at Forzani Group and now runs a consulting business in Vancouver, remembers one of his first meetings with him before he joined the company in 2006. Sartor was trying to convince Handford to leave his job at WestJet to join the company. “He had me convinced all within a 45-minute, to the point, very clear communication about what he planned to do with the company,” Handford says.
The company was months away from announcing its best-ever year for sales, and investors were happy with the direction Sartor was taking the company. But Handford says Sartor was already focused well into the future, listing off all the things the company needed to change or improve. “He’s not a sales guy. He’s a thinker, he’s intense and he’s very straightforward,” Handford says. After the Canadian Tire deal, Sartor went into retirement. But after six months of boredom (“I was like a caged animal,” he says), Sartor agreed to head Big Rock.
Whether any of the changes he’s made since then translate into real returns remains an open question. But on a cloudless May morning in the yard of Big Rock’s Calgary facility, one can see changes taking place. “This is where we’re going to plant these hops,” says Gautreau, as he points toward a row of dark, overturned soil in a small plot of land near some large bay doors. They will also be planting Evans Cherry trees, barley, pumpkins and peas. Next week a greenhouse will arrive. The bees that Gautreau raises could produce as much as 4,000 pounds of honey per year. “Everything that’s grown here we’ll be able to use in our beer,” he says.
The crops will make up only a small portion of the ingredients mixed into Big Rock’s beers. But their use marks a shift in the company’s thinking, from sellout back to craft brewer. As to whether or not consumers will come back around, Sartor remains confident. “A lot of people fall apart under stress,” he says. “I don’t.”