Matt Johnston was stone-cold sober when he signed the lease to a 55,000-square-foot brewery in Hamilton and sunk major money into beer-making equipment, though his actions might have suggested a tipple or two. He hadn’t even secured a business loan yet.

Collective Arts co-founders Matt Johnson and Bob Russell. Photo: Matt Barnes

But how was he to know his plan to expand his craft beer company would get rejected by almost every major Canadian bank? Or that structural setbacks would delay construction by six months and put him $1 million over budget? “It was one of the scarier points of our journey to date,” Johnston admits.

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Things were better back in September 2013, when the 41-year-old launched his company, Collective Arts Brewing, with co-founder Bob Russell. The Hamilton-born buddies pooled their expertise (Johnston knew ales; Russell knew art) to create a beer that would connect drinkers to creative types by featuring an ever-changing array of wall-art-worthy labels designed and illustrated by artists and musicians. Scan a label with a free app called Blippar (no ugly QR code here), and you’ll see a music video or artist’s bio.

Since inception, more than 350 sud labels have been carefully culled from thousands of submissions; featured artists have included Canadian band The Strumbellas, Spanish illustrator Eduardo Bertone and U.S. painter Lola Gil. “Craft beer is meant to be about creativity, so why put the same boring label on the bottles for the next 10 years?” says Johnston.

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The beer is pretty good, too. Rhyme & Reason—their flagship hop-happy extra pale ale with notes of pine and tropical fruits, was initially produced by brewer Nickel Brook Brewery in Burlington, Ont. It is one of the top-selling craft beers at the Liquor Control Board of Ontario. Their second brew, the citrus-infused Saint of Circumstance, is in the Top 30.

Given Collective Arts’ surging popularity, Nickel Brook couldn’t keep up with demand. Collective Arts had to decide: find a new supplier or build something for themselves. Since Nickel Brook was looking to expand as well, they teamed up to leverage their strengths and resources, and bought an empty space once occupied by former beer giant Lakeport Brewery Company in Hamilton. “We sort of said to ourselves, we can’t succeed as individuals. Building a brewery is an expensive undertaking, and neither of us could afford it, so it only made sense to work together,” says Johnston.

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The partnership proved even more beneficial when they found out the land couldn’t support the weight of their tanks, meaning 6,000 square feet of concrete would have to be cut out of the foundation so 150 helical steel plates could be screwed into more stable soil, increasing the ground’s bearing capacity. Having the resources of two companies helped mitigate the cost. “When you partner up, you cut the risk in half and double the chance of success,” Johnston says.

And then there was the problem of getting a loan. Any small business, particularly a young and revenueless one, will face a financing fight. For craft brewers, it’s more like a combat mission. There are currently 166 craft brewers in Ontario vying for investors, shelf space and bar taps. Craft beer sales in the province may have grown by 575% from 2006 to 2013, but they still only represented 4% of all beer sales.

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Luckily, Collective Arts found a saviour. After being rejected by at least fives Canadian banks, one foreign financial institution believed in their grassroots idea and contributed a little less than half of the $7 million investment they needed to get the new brewery going. The rest of the funds come from the two breweries themselves.

They’re now set to look west, where markets appear more encouraging (craft beer accounts for around 15% of British Columbia’s beer sales). Their good-looking beer will hit the four western provinces this year, with distribution to all of Canada and some U.S. states by 2016.

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Their next big move is cutting the ribbon for the new brewery this spring. They named it Arts & Science Brewing, as a nod to the craft and chemistry behind beer. While the two companies will operate separately, they will share 30 employees and the production facilities, which can produce up to 12 million bottles in the first year. The site also includes a 400-person music venue, an art gallery, a tap room and a beer garden—a “dream space” where they can directly sell their bevy of brews, plus invite some of their favourite bands to play.

The scares Johnston has had running this business have left a bitter taste, but so long as the beers attract new fans for his featured artists, he’ll swallow it. “When someone sees our label and tweets, ‘I love The Strumbellas,’ that’s a win for me.”

This article is from the April 2015 issue of Canadian Business. Subscribe now!

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