Jenna Wieser knows what to drink next summer.
As head of innovation at the Toronto-based Ace Beverage Group, Ms. Wieser served many of Canada’s best-selling drinks last summer, including Cottage Springs fruit-flavored vodka seltzers and beers and Ace Hill branded radars. Ace, one of the country’s fastest growing beverage producers, scored again in the most recent holiday season with products that included a five-liter blood-orange vodka soda mini-barrel; introduced in November, the $ 29.95 party starter quickly sold out.
Ms. Wieser spent the last few months in Ace’s lab, testing hundreds of varieties of tea and dozens of packaging formats ahead of the planned launch of vodka ice cream in April. The “hard tea” category, as it is known in the industry, has annual sales of more than $ 400 million in North America and is dominated by the Twisted Tea brand, owned by Boston Beer Co.
Ace uses a well-researched approach – the company has a 74-step process to introduce new products – to win hard-drinkers away from its American rival. Pitchet starts with health: The new Cottage Springs brew contains one gram of sugar against 23 grams in Twisted Tea. In an interview at Ace’s headquarters with open concept in Toronto, surrounded by two dozen colleagues who all look like they are running marathons, Ms. Wieser said: “The core of everything we do is create drinks that taste better and is better for you than what’s on the market. “
Agile timing of product launches, and what co-founder and CEO Mike Wagman called an “asset-light” approach to production – the company outsources brewing and bottling of its beers and selters – has six-year-old Ace ready to become a dominant player in Canada’s fragmented craft brewing and distillery sector.
“The insight at Ace Hill was to follow the consumer and move from its craft beer base to the ready-to-drink sector where you experience superior growth,” said Iain Chalmers, professor of Centennial College’s alcohol business management program and former director of Diageo PLC, one of the world’s largest liquor companies. He said that over the last eight years, there has been a convergence between the categories of beer, ready-to-drink cocktails and cider, as consumers look for different options for “refreshment” when sitting on a quay or watching a hockey game.
Big Rock Brewery Inc., a listed beer producer producing Ace products in western Canada, said in a recent presentation that the industry’s “mainstream lagers” sales are expected to decline slightly by 2025, while ready-to-drink sales are expected to grow by 8.5 percent annually.
Ace predicts revenue will increase by 50 percent next year, to about $ 70 million, according to a presentation Mr. Wagman gave last month at a conference hosted by investment bank Stifel Financial. In an industry where many founders have local ambitions – to run craft breweries that sell from their premises, instead of listing with provincial liquor retailers – Ace’s management team includes veterans from technology companies striving to build a national champion. Mr. Wagman was a New York-based corporate attorney at Paul Weiss Rifkind Wharton & Garrison LLP before returning to Canada and launching Ace in 2016 with software consultant Blake Anderson, now the firm’s commercial director.
From the start, Ace used consumer data to shape decisions, including feedback from a social media network that now boasts 9.6 million people. “Innovation drives our growth,” said Mr. Wagman. “We have a saying we keep coming back to: the consumer is our compass.”
In 2017, Ace raised expansion capital by selling a stake in the company to private equity fund manager Kensington Capital Partners. In November 2020, the company used its support for the necessary cash to acquire Iconic Brewing Co. Inc., owner of what has since become the country’s No. 2 vodka-seltzer brand, Cottage Springs.
“From day 1, it was striking about the team at Ace’s ability to innovate, anticipating the transition from craft beer to radlers to vodka seltzers and vodka water,” said Kirk Hamilton, CEO of Kensington, which is at Ace. Board of Directors. As the company grows, the company also cuts its beverage offerings. Ace sold a three-year-old cannabis division labeled Ace Valley to Canopy Growth Corp. in April.
On one wall of Ace’s headquarters, the shelves are filled with an example of each of the company’s products. The series includes a can of Life Raft Caesar, a low-calorie, low-alcohol version of the cocktail. The drink is one of Ace’s few mistakes and provided insight into how customers think about alcohol.
Ace co-founder Cam McDonald said sales fleets stalled because consumers typically only enjoy one Caesar at a meeting and will have the full impact of the drink while consuming several beers or seltzer at a meeting. “We have learned more from our mistakes than our successes,” said Mr. McDonald.
In the near future, Ace expects to make more acquisitions to expand its portfolio of brands and its geographic reach, Mr. Wagman. He said the company’s priority is expansion in the ready-to-drink sector – cider, cocktails and wine-based beverages – as these beverages have the greatest growth potential.
Ace, with its roots in the beer industry, is planning growth at a time when most craft brewers are struggling to survive. The number of independent brewers has exploded over the past five years, growing by 80 percent to more than 1,100 companies, according to a recent study by the Canadian Craft Brewers Association (CCBA). The association said many of these brewers lost money before the COVID-19 pandemic and now face daunting business challenges.
“Most craft beer companies are actually three companies: a manufacturing company, a licensed restaurant, and a retail store,” Rick Dalmazzi, CEO of CCBA, said in an open letter lobbying for federal government support. “For these reasons, the COVID-19 pandemic has been devastating to the Canadian beer community,” he said.
Ace, on the other hand, benefits from the economies of scale that come with increasing production. Mr. Wagman also said the company has the resources to increase marketing spending by 2022 as it launches hard teas along with margaritas-in-a-can and vodka-cucumber water. “We’re in the lucky position where the consumer is heading, with brands that fit an active lifestyle,” he said.
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