Philip DiFonzo is among a new league of hop-full hopefuls in the growing Canadian microindustry of craft-beer makers.

Like many lager producers, DiFonzo's mission is to concoct - or in his case decoct - the perfect beer.

Lager means storage in German and refers to the storage fermentation process where the brew is kept in large vats at cool temperature for seven to 14 days. The co-founder of the King Brewery in Nobleton takes the yeasty science an extra step by decocting, or boiling a portion of the ripening malt mash, and adding it to the final blend to infuse a toasty taste.

A family-owned microbrewery specializing in Czech-styled pilsner, King Brewery recently uncapped its second brand, a lager steeped in the Teutonic Dunkel (dark) style.

Bill Sandford, Business Edge
Peter Chiodo, founder of recently opened Robert Simpson Brewing Company in Barrie, spent three years developing recipe.

"Mainstream beers are aimed at the 19-and-over crowd and young adults who drink beer almost regardless of the taste," DiFonzo says. "Our strategy targets the over-25 demographic that prefers something different from mass-produced Molson or Labatt."

King's creators decided early on to zero in on the premium-beer segment. "This niche is expanding," DiFonzo says. "We concentrate our distribution on pubs and upscale restaurants in the GTA and the Golden Horseshoe, where adventurous beer drinkers will try whatever is new on tap."

At about $44 for a 24-case at the LCBO and The Beer Store, DiFonzo concedes his brands are not geared to the tightfisted guzzler, but "rather those with a more developed beverage palette."

Because of its European-inspired recipe, King also reigns supreme with Canadians of Eastern European descent. "Our brand reminds them of their native beer," he says.

DiFonzo is quick to point out he is not going head-to-head with the country's megabrewers. "We can't compete. We can't produce quality beer on their slim margins and efficiencies of scale.

"But ours is a growing legion of craft-beer aficionados and we're pleased with our good performance."

After mortgaging his house and receiving a top-up from government-sponsored small business loans, DiFonzo purchased a 5,000-sq.-ft. building in Nobleton, investing in 10 custom-made stainless-steel mixing vessels and fermenting vats, a bottling line and keg-cleaning equipment. The label was launched in July 2002 and now sells about 36,000 bottles of the amber-hued lager each month, with demand bubbling up fast.

Recently, King Brewery, along with 25 other Ontario microbreweries, formed the Ontario Craft Brewers (OCB), which is mandated to raise consumer awareness of the craft-beer sector, as the wineries did with the Vintners Quality Alliance, or VQA.

"We're passionate about our craft-beer heritage," says Jim Brickman, founder of the Brick Brewing Company. The company, which began brewing in Waterloo in 1984, ignited the craft-brewing renaissance in Canada.

"We are artisans, we are mentors, we create masterpieces using the small-batch brewing technique and aging our products - naturally, with no preservatives," says Brickman, who is a board member of the OCB.

Photo courtesy of King Brewery
Philip DiFonzo of Nobleton's King Brewery says his target market is people over 25 looking for beer with a different taste.

"Since we are all local, our products are delivered fresh to customers. We think beer tastes better this way," he says.

Nodding agreement is Steve Abrams, co-founder and business manager for Toronto-based Mill Street Brewery, which is located in the Distillery Historic District. The company's first offering was Mill Street Original Organic Lager.

"We take a different strategy by outsourcing about 50 per cent of our production," he says. "By contracting out, we're able to control fixed costs and funnel more resources into marketing. And in this business, marketing and location are key ingredients, bolstered by the quality of the product itself."

The brewery's location in a bustling tourist zone has helped spark wider interest in Mill Street's brands.

But Abrams is also spearheading an aggressive marketing campaign, emblazoning the company's name on T-shirts, golf shirts, pens and baseball caps. The company has also run radio and print ads and put billboards on 120 Toronto Transit Commission buses.

"Today's beer consumers aren't as brand-loyal, so you can't let them forget your name," Abrams says.

With the input of private investment and help from the Business Development Bank, Mill Street Brewery opened in late 2002 in a leased 6,000-sq.-ft. plant that has been remodelled to include an open-concept brewery, sampling bar, retail store and event space.

The company continues to ramp up capacity to meet demand. Last year it sold about 2,000 hectolitres. (One hectolitre equals 12 cases of 24 bottles.) Abrams says sales have soared during this summer's near nova-hot weather to 5,000 hectolitres and predicts sales will triple next year.

His biggest startup challenge?

"There are lots of headaches for newcomers to the industry," Abrams says, "including uncontrollable factors like power blackouts that can ruin a whole batch of beer in hours or a cool summer that kills sales."

But the biggest hump, he says, is getting distribution.

"We have presence in both the LCBO and The Beer Store, the latter the primary distribution and sales channel for beer in Ontario, but it's also an efficient monopoly. Brewers must pay $200 per stock-keeping unit (SKU) per store to be on their shelves. If our product is stocked in just 200 of their (436) stores, that translates into a hugely expensive proposition for a young company."

Despite the hurdles, Abrams says the company has survived and thrived and is moving forward with strong brands.

After nine months of operation, Barrie-based Robert Simpson Brewing Company is barrelling ahead with its core brand, Confederation Lager. A six-pack costs $12.35 at its adjoining retail store and the LCBOs and Beer Store locations that stock it.

The company is named after an early 1800s Barrie mayor who is also reputed to have been a renowned brewmaster.

Founder and president Peter Chiodo Jr. says this is the stuff of his dreams.

"Legend has it, I've been making beer since I was three," he says. "But I did cook my own beer on a kitchen stove all through high school and university."

A former vice-president of operations for a Fortune 500 company, Chiodo chucked it all to get a leg up on the lager craze. Three years of recipe development were invested before hitting on the right combination of taste, consistency and colour.

"We tested 119 formula permutations and poured buckets of prototypes down the sink," he says.

The solution, he says, was aging the beer 40 days. "This sets Confederation as a brand apart."

"Today's beer consumer wants an eclectic taste experience," DiFonzo says. "Look in most fridges today and you'll find various beer styles chilling for every occasion, from value-priced everyday thirst- quenchers to super-premium brands for entertaining at home."

Chiodo agrees, although he says he is concerned that with such an array of choice, the Ontario market may become diluted.

"Our job now as brewmasters is to introduce our customers to the premium products we produce," he says. "It's they who will decide the winners."

ONTARIO MICROBREWING INDUSTRY

* Current share of Ontario beer market (2004): 4%

* Goal for share of Ontario beer market by 2014: 12%

* Current volume produced by Ontario craft brewers: 260,000 hectolitres or 3.12 million cases of 24

* Volume goal by 2014: 1 million hectolitres or 12 million cases of 24

* Number of Ontario craft beers available (June 2005): 102 Credit: Ontario Craft Brewers Association

(Jack Kohane can be reached at kohane@businessedge.ca)