Smart breweries are becoming platforms - btbirkett@gmail.com - Gmail

Smart breweries are becoming platforms - btbirkett@gmail.com - Gmail



Waterloo already has contracts to mix up canned cocktails for Absolut vodka, ciders for Somersby and 10 other concoctions.

There has been much sturm and drang of late around a simple question: what do we want to drink? For awhile it was craft beer, then Millenials, apparently, killed beer. More recently, there was a cocktail craze, at least until teetotaling came back in fashion. Now, apparently, spiked seltzer is the buzz. To Waterloo Brewing Ltd. it doesn't really matter. Over the past eight years, the Ontario-based beermaker spent $65 million to expand its facilities; now it's selling that capacity to the highest bidder. Mind you, Waterloo's in-house beer is moving just fine -- in fact its volume swelled by a 25% in the recent quarter -- but renting its facility is a savvy hedge in a drinks industry grasping at straws. Waterloo is going to suck up business both up-market and down. Liquor giants are keen to try new concoctions and expand in Canada; for these companies, Waterloo is essentially a cheap skunkworks. Meanwhile, the market is awash in beverage startups that have solid brand-building chops, but lack the experience and/or the capital to build a brew-house. Waterloo already has contracts to mix up canned cocktails for Absolut vodka, ciders for Somersby and 10 other concoctions. Waterloo is no longer betting as heavily that people will like its Pineapple Radler, for example, it's betting that the booze industry is frantic to find the next hot category -- it's thirsty as the social media mantra goes. So-called co-packing, or contract brewing, is increasingly common and the strategy shift has pushed Waterloo shares up by a heady 40% this year.  What's interesting here beyond booze is that Waterloo is essentially shifting from a "pipes" business model to a platform. So-called pipe businesses create something, push it down the channel and hope people liked it. Platform businesses simply connect producers to consumers. Waterloo has become a place to publish, if you will, and it gets paid whether consumers like what it's cranking out or not.  To borrow another metaphor, the brewery used to be a TV network, now it's YouTube. More accurately, it's a little bit of both. Netflix may be the best analogy, or HBO, offering a catalogue of original creations and stuff made elsewhere. The drinks business may be chaos, but as they said on Game of Thrones: chaos is a ladder.