Matt Wowchuk was well into writing a business plan for opening a brewery when he discovered the costs and complications of buying a sufficient number of kegs upfront. He and his business partner shifted focus and soon North Keg, a keg leasing company, opened with the goal of providing brewers an alternative path to owning the best quality kegs in the industry.
Matt Wowchuk, Co-Founder and Managing Partner of North Keg chatted with Spotlight about entrepreneurship and the success of his lease to own keg business.
While earning his business degree at St. Mary’s University in Halifax, Wowchuk signed up for an entrepreneurship elective and found himself faced with a group challenge. “Essentially, you’re given $100 and you have to create a profitable business out of that. My group started a business. We had some struggles becoming profitable, but it was a great learning experience.”
Bitten by the entrepreneurial bug, Wowchuk began the entrepreneurship program at SMU, taking courses about running a small business, understanding venture capital and more. “Throughout high school and my early university days, I was never so much an involved student. I just went to class and went home. But this really motivated me.” Wowchuk worked with the Business Development Centre, an incubator for entrepreneurship, and helped design a couple of entrepreneurship courses.
“I wouldn’t say that you can really prepare anyone for life as an entrepreneur because every single day, new challenges are being thrown at you that really nobody can teach. The only way to learn is to fail in those challenges or find solutions on your own. SMU did absolutely everything that it could to prepare me as an entrepreneur. And I still learn every day on the fly.”
While having a beer with a friend, the two began brainstorming the idea of opening a craft brewery. “Craft beer in Canada was really starting to take off and we both really enjoyed craft beer. We didn’t know the first thing about brewing beer. He had previously started a company and I had obviously had my experience in university starting businesses.”
The two began exploring the possibility of opening their own craft brewery, creating a business plan and a potential profit and loss statement. “The last question that we had was how do you go about acquiring your kegs?”
After talking to several experienced brewers about the challenges of starting a brewery, Wowchuk discovered a common problem – kegs. “We kept hearing this – kegs are difficult. So, we started looking at how you go about acquiring your keg float.”
It turned out that a major upfront cost for opening a brewery was the hefty cost of purchasing kegs, a cost that is often overlooked and generally incurred each year as your brewery expands.
The two went back to the same brewers they had previously talked to and asked if they would be interested in leasing kegs. “We shifted from starting a brewery to potentially starting a leasing company.”
The idea was a hit. Wowchuk found himself fielding 10 to 15 calls over the course of a week from brewers interested in leasing kegs. “At this point, it was really just us asking if they’re interested in leasing kegs. The next thing you know, I’m getting these phone calls from people saying ‘I hear you’re leasing kegs. Can we sign on for some kegs?’ My answer to them was ‘Listen, we’re not leasing kegs, but if you give me six months, we will be.”
Wowchuk and his partner spent the next two months developing a business plan, finding investors and raising capital. “Fast forward two months and I left my full-time job to pursue the leasing company that is now North Keg.”
The fledgling company faced challenges early on, first needing to secure upfront capital. It was quite a challenge for two 24-year-olds, only a year out of university, with little cash on hand and no assets. Fortunately, two investors were interested, and business got underway.
The second hurdle was getting bank financing. “We were going into banks and asking them for lines of credit, they really couldn’t wrap their head around the concept as to why two 24-year-old guys were trying to start this leasing business. Since then, we’ve been able to secure great financing but it’s something that took us a while to do. At one point, we had to halt selling lease contracts, because we just didn’t have the capital to support it. We didn’t anticipate how hard it was going to be to actually go and raise that capital or that financing.”
With financing secured, the next challenge was concept awareness. North Keg had to educate Canadian brewers, as well as wineries, cideries, and kombucha companies, on the benefits of this new, alternative way to obtain kegs. “It was an uphill battle just educating the market
that there is an alternative option and what the benefits to that option were.”
Wowchuk stresses that majority of the time cash can be better used elsewhere inside the brewery whether it’s investing in a new tank, in marketing to help generate brand awareness, or in sales to get more tap handles. “We’re giving breweries access to these kegs without having to put up large amounts of capital.”
Kegs can be leased from North Keg, at prices beginning at $3.25 per month through a unique rent to own plan. The lease solution is customized for each brewery, depending on size and need, with the option to buy the kegs at any time. North Keg also offers a straight finance option as well as short-term rental options.
“We always chat with breweries to get an idea of what their operational goals are. We can cater the solution that fits best to them.” Short term leases are available as well, which allow brewers to fill the peak demand times in the summer months with extra kegs. In addition, the lease expenses are 100% tax deductible.
The keg leasing program allows the breweries to reinvest their capital dollars back into the business to promote growth. It’s a win all around. “Every payment made toward the kegs is ultimately building equity into the kegs. And if the brewery is growing, ultimately that means that they’re going to need more kegs – which means that our business is growing with them.”
The kegs are custom branded for each brewery for maximum brand exposure. “That’s a fee we take care of. We silkscreen the brewery branding onto every keg. It’s like a free piece of advertising for their brewery. And, I think it intrigues the customer at the end of the day, as to what might be inside of that keg.”
Kegs are compatible with all major keg tracking software and come with a laser etched 2D matrix code as well as serial numbers for efficient keg tracking.
While the fast-growing craft brewing industry is the main focus, North Keg also supplies cideries, wineries, kombucha and cold brew companies, and even the RTD – ready to drink – business for beverages like vodka soda or wine spritzer on tap. “It’s really for any beverage that you would like to put into a keg that can be dispensed from a tap. But breweries are definitely our largest market. We work with breweries of all sizes from customers that have 24 to 48 kegs to customers that have 3000+ kegs.”
Flexibility is a key selling point for North Keg. Along with being able to ease into a large purchase, kegs are readily available on short notice. The company holds a large inventory of kegs in a main warehouse in Mississauga, Ontario where the kegs are silkscreened. “There’s no need for breweries to bring in more kegs than they require immediately. It only takes us five to seven business days to get more kegs delivered to them fully branded.”
Wowchuk lists several benefits for the keg leasing program, beginning with cost. “Our lease to own option is going to be the most economical option for any brewery. It’s always the most beneficial to own your asset. We import our kegs all directly from Germany into our own proprietary warehouse. We’re not using any third parties to brand or warehouse our kegs. There’s no other competitor that’s able to do that.”
North Keg is Canada’s exclusive distributor for Blefa kegs, which are the gold standard internationally and come with a 30-year warranty.
North Keg is also the only certified tech servicer for Blefa kegs in Canada. “We actually have the ability to service and repair those kegs if needed, which none of our competitors have the ability to do. We support our breweries from a service standpoint. We’re part of Global National Keg Servicing Partners (GNKS). We provide all of our customers with a service agreement.”
The keg leasing program supplies Canadian breweries, cideries and other operations coast to coast, from British Columbia to Newfoundland.
Partnerships with breweries like Dominion City and Hometown Brewery, two of their first customers, offer the flexibility for the breweries to grow. “They make fantastic beer and they’ve done a fantastic job of getting their beer to the public. We like to measure our business’ success on the success of our customers.”
North Keg is actively involved in the Canadian brewing scene. “Most provinces have their own provincial trade show and we always take part in those and support the brewers at that level. We sponsor the Canadian Brewing Awards and we typically sponsor the hospitality suite at the Canadian Brewing Awards. We also recently sponsored Dominion City’s “Rooted in Place” event which showcased influential breweries across Canada.”
North Keg enjoys highlighting the successes of the breweries. “That’s our way of supporting them and saying thank you to them by sponsoring and supporting those events.”