New large-scale distillery an opportunity for grain growers

More than 60 years after the most recent large-scale construction of an alcoholic beverage distillery in Canada, Britain-based Diageo is set to break ground this summer near Sarnia on a facility to dramatically boost production of its flagship Crown Royal Canadian whisky.

It will, according to Spirits Canada CEO Jan Westcott, “be a very sizeable plant” that will complement Crown Royal’s existing distillery in Gimli, Manitoba, and significantly boost purchases of Ontario-grown grain by the alcoholic beverage sector.

Why it matters: The new distillery represents a looming new market for the province’s grain producers.

The estimated $245-million project on 400 acres in St. Clair Township will have “capacity to produce up to 20 million litres of absolute alcohol,” Diageo said in a release. Diageo was formed in 1997 and its global brands also include Smirnoff vodka, Baileys liqueur, Captain Morgan rum, Johnnie Walker Scotch whisky and Guinness beer.

The St. Clair Township complex will also include blending and warehousing operations.

The Crown Royal plant at Gimli, Man. and the Black Velvet distillery at Lethbridge, Alta. were built in the late 1960s and early 1970s, respectively, and represent the last time major investments were made by the spirits sector in Canada.

Crown Royal, now owned by Diageo, also operates large-scale blending facilities in Amherstburg, Ont. and Valleyfield, Quebec.

According to Westcott, the changing face of the alcoholic beverage market in Canada over the past 20 years has led to the construction of “many, many new small distilleries.” In Ontario, these have joined existing medium-scale facilities operated by Canadian Mist in Collingwood and 40 Creek at Grimsby, as well as the largest distillery in North America – Hiram Walker in Windsor.

But from his perspective at the leadership of a lobby organization representing mid-to-large scale alcoholic beverage manufacturers across the country, he believes Diageo – through its Crown Royal brand – has kept pace with the growth in niche market products.

The company has made “massive investments in the last 20 years” at the Gimli facility. And judging from the recently-announced decision to build new near Sarnia, it has become clear more expansion is needed.

“Gimli is going to power on, keep producing,” Westcott observed. But “they’ve had so much success in growing the business for Crown Royal that a new plant was justified.”

Westcott sees the decision to build the distillery near Sarnia as “a huge vote of confidence” in the conditions available in this province for spirits manufacturers. On behalf of Spirits Canada, he’s willing to take some credit for helping create those conditions.

“There is not one aspect of our business that is not hugely regulated. And taxed,” he commented. “Managing government’s appetite to take more is a huge challenge for our industry” – a challenge that takes up significant resources for the lobby organization.

But much time and energy are also put towards maintaining relationships with the suppliers of the spirits sector’s raw materials – grain farmers. Westcott says this is another reason why conditions are favourable in Ontario for distillers.

Spirits Canada has regular communications with Ontario farm groups, most notably the Ontario Federation of Agriculture and Grain Farmers of Ontario. “We work closely with many of the farm organizations because we can’t do what we do if you aren’t able to do what you do.”

An example recently was Spirits Canada’s support of rural broadband expansion as well as expansion of natural gas into rural areas. “We have jumped in to support what the farm community is looking for.”

In Ontario, Spirits Canada members – the medium and large-scale operators – currently purchase about 225,000 metric tonnes of Ontario grain annually, Westcott said. Hiram Walker, representing the bulk of those purchases, uses mainly corn with some rye and a little bit of barley and wheat.

“We have been very fortunate here in Ontario that farmers produce very high-quality grain. And it’s close to us,” he said. “That’s probably one of the reasons why Diageo decided to build this new distillery here.”