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Jenna Wieser, head of innovation at Toronto-based Ace Beverage Group, leads a product testing session at the company's offices in Toronto on Dec. 2, 2021.Christopher Katsarov/The Globe and Mail

Jenna Wieser knows what you’ll be drinking next summer.

As head of innovation at Toronto-based Ace Beverage Group, Ms. Wieser served up many of Canada’s bestselling drinks last summer, including fruit-flavoured Cottage Springs vodka seltzers and Ace Hill brand beers and radlers. Ace, one of the country’s fastest growing beverage makers, scored again in the recent holiday season with products that included a five-litre blood-orange vodka soda mini-keg; introduced in November, the $29.95 party starter quickly sold out.

Ms. Wieser spent the past few months in Ace’s laboratory, testing hundreds of flavours of tea and dozens of packaging formats ahead of planned April launch of vodka iced teas. The “hard tea” category, as it is known in the industry, does more than US$400-million in annual sales in North America and is dominated by the Twisted Tea brand, owned by the Boston Beer Co.

Ace is using a well-researched approach – the company has a 74-step process for introducing new products – to win hard-tea drinkers away from its American rival. The pitch starts with health: The new Cottage Springs brew contains one gram of sugar, versus 23 grams in Twisted Tea. In an interview at Ace’s Toronto open-concept head office, surrounded by two dozen colleagues who all look like they run marathons, Ms. Wieser said: “The core of everything we do is creating drinks that taste better, and are better for you, than what’s on the market.”

Deft timing on product launches and what co-founder and chief executive Mike Wagman called an “asset-light” approach to production – the company outsources brewing and bottling its beer and seltzers – have six-year-old Ace poised to become a dominant player in Canada’s fragmented craft brewing and distillery sector.

“The insight at Ace Hill was to follow the consumer and move from its base in craft beer into the ready-to-drink sector, where you’re seeing superior growth,” said Iain Chalmers, a professor in Centennial College’s alcohol business management program and former executive at Diageo PLC, one of the world’s largest spirits companies. He said that over the past eight years, there has been a convergence of the beer, ready-to-drink cocktails and cider categories as consumers look for different “refreshment drink” options when they are sitting on a dock or watching a hockey game.

Big Rock Brewery Inc. , a publicly traded beer producer that produces Ace products in Western Canada, said in a recent presentation that industrywide “mainstream lager” sales are expected to decline slightly through to 2025, while ready-to-drink sales are expected to grow by 8.5 per cent annually.

Ace forecasts revenue will rise 50 per cent next year, to about $70-million, according to a presentation Mr. Wagman gave last month at a conference hosted by investment bank Stifel Financial. In an industry in which many founders have local ambitions – running craft breweries that sell from their premises, rather than listing with provincial alcohol retailers – Ace’s executive team includes veterans of tech ventures who aspire to build a national champion. Mr. Wagman was a New York-based corporate lawyer at Paul Weiss Rifkind Wharton & Garrison LLP before returning to Canada and launching Ace in 2016 with software consultant Blake Anderson, now the company’s chief commercial officer.

From the start, Ace tapped consumer data to shape decisions, including feedback from a social-media network that now boasts 9.6 million people. “Innovation drives our growth,” Mr. Wagman said. “We have a saying we keep coming back to: The consumer is our compass.”

In 2017, Ace raised expansion capital by selling a stake in the business to private equity fund manager Kensington Capital Partners. In November, 2020, the company tapped its backer for the cash needed to acquire Iconic Brewing Co. Inc., owner of what’s since become the country’s No. 2 vodka seltzer brand, Cottage Springs.

A selection of Ace Beverage Group's Cottage Springs line.Christopher Katsarov/The Globe and Mail

“From Day 1, the striking thing about the team at Ace was their ability to innovate, to anticipate the move from craft beer to radlers to vodka seltzers and vodka water,” said Kirk Hamilton, a managing director at Kensington who is on the Ace board. As it grows, the company is also pruning its beverage offerings. Ace sold a three-year-old cannabis division branded as Ace Valley to Canopy Growth Corp. in April.

On one wall of Ace’s head office, the shelves are stocked with an example of each of the company’s products. The lineup includes a can of Life Raft Caesar, a low-calorie, low-alcohol version of the cocktail. The drink is one of Ace’s few missteps, and offered insights into how customers think about alcohol.

Ace co-founder Cam McDonald said Life Raft sales fizzled because consumers typically only enjoy one Caesar at a sitting and want the drink’s full punch, while they will consume several beers or seltzers at a sitting. “We’ve learned more from our mistakes than our successes,” Mr. McDonald said.

In the near future, Ace expects to do more acquisitions, to expand its portfolio of brands and its geographic reach, Mr. Wagman said. He said the company’s priority is expansion in the ready-to-drink sector – ciders, cocktails and wine-based beverages – as these drinks hold the greatest growth potential.

Ace, with its roots in the beer industry, is planning for growth at a time when most craft brewers are struggling to survive. The number of independent brewers exploded over the past five years, growing 80 per cent to more than 1,100 companies, according to a recent survey by the Canadian Craft Brewers Association (CCBA). The association said many of these brewers were losing money prior to the COVID-19 pandemic and now face daunting business challenges.

“Most craft beer businesses are actually three businesses: a manufacturing company, a licensed restaurant and a retail store,” said Rick Dalmazzi, executive director at the CCBA, in an open letter lobbying for federal government support. “For these reasons, the COVID-19 pandemic has been devastating to the Canadian craft beer community,” he said.

Ace, on the other hand, is benefiting from the economies of scale that come from increasing production. Mr. Wagman also said the company has the resources to increase marketing spending in 2022, as it launches hard teas, along with margaritas-in-a-can and vodka cucumber water. “We’re in the fortunate position of being where the consumer is going, with brands that fit an active lifestyle,” he said.

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