The word “diversification” gets thrown around a lot in agriculture as farmers look to get more value from their raw products. And while farmers are independent business people simply through the nature of what they do, starting a business is a completely different kettle of fish.
That’s what the Hamills found out when they decided to put a malt house on their fourth generation farm near Penhold, AB. Their journey to build Red Shed Malting, a thriving value-added business, holds lessons for anyone thinking of diversifying.
Ideas born at the kitchen table
Matt Hamill, his brother Joe, parents John and Susie and Joe’s wife, Daelyn, all played a role in the creation of Red Shed Malting, which began production in April 2016.
“We started planning a little more than three years ago,” says Matt. Joe was an avid home brewer at the time, which is why building a brewery was part of those early after-supper discussions around the kitchen table.
At the time, craft brewing had taken off in Alberta. Regulatory changes in 2013 removed minimum production limits and opened the floodgates for small breweries, which quadrupled in number by 2016. That momentum shows no signs of waning with roughly 30 new craft breweries opening in 2017, and more scheduled for 2018 and beyond.
That kind of market is partly why the Hamills started thinking about malting the barley they grew rather than brewing. After all, those new breweries need to get their malt from somewhere, and the movement toward locally produced, traceable ingredients as part of many brewers’ branding efforts seemed tailor made for an Alberta family farm looking to add value.
Building is the easy part
“There were a lot of different choices to be made,” says John Hamill. “For example, how big to start the operation.” On the advice of Kathy Bosse, a new venture specialist with Alberta Agriculture, the Hamills did a feasibility study to find out, among other things, how much specialty malt was being bought in Alberta — nearly all of it, by the way, imported from other countries.
It’s worth pausing here to explain that beer is made with two types of malt: base and specialty. Base malt is just that — it provides the base of fermentable sugars needed to make beer and comprises the bulk of a brew’s malt input. Specialty malts are used to give a beer its special character, providing colour and flavour, and are used in smaller quantities than base malts. A typical all-grain craft beer recipe, for example, may have 70 per cent base malt and 30 per cent specialty malt.
Right from the beginning, the Hamills were interested in making specialty malts so they researched what equipment they’d need, where to source it and how much it would cost, including the cost of building a malt house in half of John’s new (red, of course!) equipment shed.
But this wasn’t just a building job. Before a shovel went in the ground, Matt and Joe went to the Malt Academy at the Canadian Malting Barley Technical Centre in Winnipeg for specific training. The brothers also sought out Alberta craft brewers and industry experts to talk about what the industry wanted and needed. Those discussions along with market insight from the feasibility study helped with the decision on how big to build.
Having a great business idea is one thing; financing it takes some real fortitude. How did the Hamills get their heads wrapped around the capital outlay and the risks that entailed? “With great difficulty,” laughs John. “We had to keep it within a certain cost so that if it flopped, the farm could bail it out. It was extremely daunting!”
Fortunately, Matt works in agricultural banking, so he had a better idea than most about how the numbers would play out. It didn’t stop them going through those numbers again and again with a fine-toothed comb to make sure that the financial risk was manageable and worth the reward.
Adjusting your mindset
The malt house they built has the capacity to produce five tonnes of malt a week. That’s small potatoes when you consider that the Rahr Malting plant in Alix, AB, about 45 minutes northeast of the Hamill farm, produces around 2,700 tonnes per week.
Even so, they knew there was a market for their product, but selling to that market required a whole new set of skills. “It’s a big challenge,” says John. “When you’re growing grain there’s always a buyer. When you’re selling malt, you have to find a buyer and that means establishing relationships.” And that requires a decent amount of travel away from the farm, face-to-face meetings, lots of discussion, offering samples etc.
One of Red Shed’s early wins was going into Edmonton’s Alley Kat Brewing Company with samples. The successful craft brewery started to work on a recipe with Red Shed’s malt right away, says Matt. Currently, 22 Alberta craft breweries are now using Red Shed malt regularly in their operations. Not bad at all for under two years in business!
And Red Shed is already branching out. With an increasing interest in how a specific malt barley variety can affect beer flavour, it’s also started to make some single variety base malts, for which there is some demand.
Being a price maker is an interesting mind shift, too. Red Shed specialty malts are priced a bit higher than imported competitors and it’s something the Hamills have wrestled with. “It’s a lot of worry to get our sales up there where we want them to be and keep them there,” says John. “And that’s really a different thing to have to think about.”
“We’ve always been challenged with finding the right price,” says Matt, explaining that while Red Shed can produce five tonnes of malt a week, it’s done five 22. 7 kg bags at a time, which is the full capacity of the roaster. Ultimately, this is where Red Shed’s ability to custom malt, as well as being local and traceable, have to become sellable features, which circles back to the importance of relationship building.
It never stops
The whole family is committed to making Red Shed Malting a success. Joe works full time in the malt house, Matt looks after sales and deliveries, John produces the barley (about 1,500 tonnes of malt a year, 200 of which goes to their own malt house), Susie does the books and Daelyn handles social media. So far, only Joe is taking a wage.
Matt is constantly touring small groups of brewers through the malt house to show them what Red Shed can offer. A group of agricultural journalists were through in June and left eager to write stories. Open Farm Days in August offered an opportunity to tour wider audiences, because part of creating demand is encouraging consumers to ask their local brewers about the malt in their beer. All tours begin with a professional video telling the story of Red Shed and include tasting some of the malt produced there.
It’s going well, really well. But John, Matt and Joe are still putting in crazy hours and still learning. “You always hear how hard it is to start a business, how much time it takes,” says Matt. “But I sure underestimated it. And you’d think I should know better, working in a bank and helping entrepreneurs!”
“It’s just such a steep learning curve,” says John. “Malting barley on this scale, in this way — there are no real resources out there to tell you how, so you just have to figure it out. You change one small thing in the malt process and that changes everything down the line and you think, ‘Oh, I just learned another lesson.'”
For John, a pleasant surprise of the whole venture is seeing how well everyone works together as a family. “One of the reasons I got into this was the boys were so interested in it,” says John. “Matt is very good on the business end, and Joe just loves being in the malt house. I look at the farm, too. The price of land is getting up there, it’s hard to find land to rent, equipment is expensive and succession planning is difficult. I see this malt house as part of the succession plan.
It’s a way to stay together.”