Brewing an opportunity – Invest Medicine Hat

Brewing an opportunity

Reports / Start-up Culture

Medicine Hat has a thriving brewing industry with opportunities to create hyper-local craft beverages.

From a handful of breweries in 2013, Alberta’s craft beer industry counts more than 80 breweries today, including three in Medicine Hat.

As brewers look to differentiate themselves in an increasingly crowded marketplace, they are tapping local partners to supply them with key ingredients such as malt and hops.

The end result is a hyper local product that simply can’t be found anywhere else.

“A good chunk of barley is grown in Alberta,” says Jason Altmiks, a hops producer and current president of the Alberta Hops Producers Association.

And with a new hops industry getting off the ground, we have an opportunity to create a truly local product.”

Make room for malt

Malt is instrumental in producing the unique flavours in craft beer.

Malting is a three-step process in which barley, wheat or rye is soaked, germinated and kilned or roasted, which converts starch into sugar. The length of the roast creates flavours that range from light and sweet found in a typical ale, to chocolate and coffee notes found in porters and stouts.

According to the Craft Maltsters Guild of North America (CMG), the craft malt market is growing, driven by a relationship between craft maltsters and local and regional breweries that are sourcing ingredients close to home.

“It’s a highly local market,” says Jen Blair, executive director of the CMG. “Consumers are looking for local flavour and a taste of place.”

Alberta is home to a handful of craft maltsters, including Hogarth Malt northwest of Olds, Origin Malting in Strathmore, and Red Shed Malting in Red Deer County.

In an industry dominated by large industrial maltsters such as Rahr, craft maltsters rely on small-scale production to customize their product to the brewer, resulting in a finished product that simply can’t be made anywhere else.

“Craft maltsters definitely have the flexibility to pivot and collaborate in a way larger malthouses can’t,” says Blair, who sees the craft malt market moving in an upward trajectory with steady growth with some contraction in the future.

Looking south of the border, the rapid growth of craft breweries increased demand for specialty malts, which are used in high volumes by craft brewers. According to the Montana Department of Commerce’s 2018 Malting Industry Analysis, craft breweries make up 5.7% of total beer production while consuming 17.9% of the malt sold.

Further to the report, locating a malt house next to a supply of good quality barley and local brewers provides a strategic advantage. Located in Alberta, where Statistics Canada data show half of the nations barley is produced, Medicine Hat has some of the world’s best barley to supply a malthouse and three potential customers on their doorstep. Also, the city is less than a day’s drive to more than 30 craft breweries in Calgary, and more in Lethbridge and Brooks.

The investment to start a malting operation depends on the process and method the maltster chooses to use.

According to the CMG, approximately 25% of maltsters continue to use the floor malting method, which can cost less than $200,000 for a basic setup.

For turn-key operations, maltsters can expect to invest $600,000-$1 million in a malting system.

For those looking to break into the industry, three-day and one-week intensive malting courses are available at the Canadian Malting Barley Technical Centre Malt Academy in Winnipeg, while Canada Malting offers an annual six-day course.

Industry associations include the Craft Maltsters Guild of North America, Alberta Small Brewers Association and Alberta Barley.

Hop to it

Hops give balance and depth to beer’s flavour, and in recent years craft breweries have brought the plant’s bitter, floral, and citrus flavours to centre stage.

Like grapes, hops are a vine that grow up a trellis system and mature over time. Hops reach maturity at around three years and continue to grow for around 25 years.

Southeast Alberta’s long sunny days, arid climate and well-established irrigation systems create the ideal environment for hops, a plant typically grown in the Pacific Northwest and Ontario.

“Hops grow very well in Alberta,” says Jason Altmiks of the Alberta Hops Producers Association. “Tests consistently show Alberta hops have the alpha acids sought after by brewers.”

Altmiks started out as a hobby brewer and got into hops as a way to fill a gap in the marketplace. Today, Alberta has 21 commercial hops operations in various stages of production.

So far, 15 acres of hops have been planted in the province, with 8.5 acres at their second year of maturity or greater. By comparison, an average hop yard in Yakima, Washington weighs in at 450 acres.

Alberta’s big challenge, Altmiks says, is in that the demand for Alberta grown hops far exceeds the supply, especially when it comes to fresh hops, which have only a few hours to be transferred from vine to brewery before they lose freshness.

Fresh hop beer is fast becoming a seasonal tradition in Alberta. In 2018, Big Rock Brewery sourced fresh hops from central Alberta’s Northern Girls Hopyard for its “3 Way IPA.” Grizzly Paw Brewery, meanwhile, sourced hops from Southern Alberta’s Pair O’Dice hop yard for their Fresh Hop Ale.

“As local breweries continue to grow, there will be a one-to-one relationship,” says Altmiks. “Hops farmers will look to supply neighboring breweries in creating a largely local product.”

The desire to brew a truly local beer is echoed by at least one of Medicine Hat’s breweries.

“We try to get as local as we can to support the economy,” says Kaiden Vancuren, general manager of sales at Medicine Hat Brewing Company. “It’s nice to get ingredients from a couple hundred kilometres away instead of a couple thousand.”

Alberta brewers use 100,000 pounds of hops annually and it is expected to increase. In fact, a 2018 survey by Olds College indicated 93% of Alberta’s craft breweries don’t have adequate access to high quality, locally-grown hops. In the same survey, nearly half of the brewers surveyed indicated they would be willing to pay as much as 10% premium for locally-grown hops.

For entrepreneurs looking to start a hops yard, Olds College has compiled a list of resources. The college is also conducting a multi-year research project, looking at the best varieties to grow.

Hops plants need a minimum of five hours of sun per day. Medicine Hat is Canada’s sunniest region, with more than 2, 500 hours of annual sunlight and one of the longest growing seasons in Canada. Combine that with moderate winters, low land costs and excellent transportation connections and Canada’s sunniest city is well-suited for hops production.

Similar to a craft maltster, a craft hops producer would have three craft brewers on their doorstep plus more than 30 brewers less than a day’s drive away in Calgary.

Industry associations include the Alberta Hops Producers Association and Alberta Small Brewers Association.

Meet the producers

An innovative and inspiring group of Medicine Hat-based brewers and distillers make up part of the market for craft malt and locally produced hops.

Hell’s Basement Brewery

Medicine Hat’s first craft brewery, Hell’s Basement won silver at the 2018 World Beer Cup for Ryes Against the Machine, a rye beer with strong notes of toffee and spice.

Medicine Hat Brewing Company

Since opening in 2016, this family owned brewery has expanded three times. Their Winter Warmer extra strong ale placed third in the 2018 Alberta Beer Awards.

Travois Ale Works

Located downtown, Travois Ale Works features a 55-seat tasting room located in a tastefully updated 1930’s era property. Beer is produced on a small scale and sold only in the taproom.

Grit City Distillery

Jen and Andy Schmunk opened the city’s first distillery in 2018. They produce a line of premium craft vodka and gin with grain sourced from within 100 kilometres of Medicine Hat.