Entrepreneur: The innovators -- Japanese solution for made-in-Canada sake

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***FREELANCE PHOTO - POSTMEDIA NETWORK USE ONLY*** TORONTO: DECEMBER 10, 2012-- Ken Valvur, president of Ontario Spring Water Sake Company, poses for a photo at his Toronto brewery on Monday, December 10, 2012. (Michelle Siu for National Post) [FP Entrepreneur]

Ken Valvur is founder and president of Ontario Spring Water Sake Company, a sake brewery that opened in April 2011 in Toronto's Distillery District where the traditional Japanese distilling process is on full display for passersby. A former banker, Valvur's sake can be found in 60 restaurants and more than 110 Liquor Control Board of Ontario stores, as well as Société des alcools du Québec. The Financial Post's April Fong spoke with Mr. Valvur over a few cups of sake about Ontario Spring Water Sake's turning point and how he plans to grow the company in the future. The following is an edited transcript of their conversation.

Q Your first business was the Canadian ready-to-eat sushi company Bento Nouveau. Why have you turned to sake now?

A When I was still leading Bento, I helped bring sake from Japan's Masumi brewery to be sold at the LCBO around 2006. Like many other brewers, the owner of Masumi was interested in expanding to foreign markets because sake has been declining as younger generations drink more wine, cocktails and beer. When I visited the Masumi brewery in Nagano, I tried unpasteurized, undiluted sake with a ladle from a just-pressed tank. It was fantastic and so flavourful. I realized that the only way to get this to Canada would be to actually make it here.

Q How would you describe the sake market in Canada?

A It is sort of an echo to the Japanese food market here in general. People started to get into Japanese food in North America, in California and New York, then it eventually spread elsewhere. It was the same with sake. In Toronto, more restaurant operators are realizing, 'Why should we only have a single sake item on our menu?' and taking the opportunity to offer a better experience to diners and also make some money.

Q What was the turning point for Ontario Spring Water Sake?

A The decision to bring a Japanese head brewer, or "toji" to Canada after a number of mediocre test batches, starting with one made in my basement, was certainly the turning point. To achieve a quality to resemble the product that hundreds of years old breweries made couldn't be achieved with just our small team experimenting. I think with Yoshiko Takahashi, an award-winning master brewer from Nagano with 20 years of experience, we increased the probability of producing outstanding sake from Day 1.

Q What did she do for your company?

A Ms. Takahashi moved to Toronto for a whole calendar year. She made everything work in this environment, which was a pretty cool task because in Japan, most people who are master brewers are stewards of centuries of tradition. They're not given a blank canvas. But here, our "toji" was able to make her own equipment choices, take some direction from me and then came up with three first batches. We took water from Muskoka, rice from California, and a mold known as Koji-kin from Japan, which Masumi also sources.

Q Could you have done it without her?

A It's a lot more expensive to bring in someone from the outside. In my view, this wasn't a decision to guarantee success, but it would help us get a lot further toward success. If people came in through the door here and spat out what they drank, this business would have been a complete waste.

Q How does the Ontario Spring Water Sake Company differentiate itself?

A What we sell at the brewery and to restaurant clients is virtually all unpasteurized, while most Japanese sake is twice pasteurized. The second thing we offer is very short lead time. One of the risks with this industry is that sakes from Japan might have sat in a warehouse and they're past their prime when they reach Canada. Sake really only has a 12-month shelf life, and our sake at the LCBO for example will be recently delivered in almost all cases. The third thing we offer is a way for consumers to connect with sake. We've done tasting tours for about 1,000 people in the past year.

Q Have you adapted your sake for the Canadian palate at all?

A Part of what I believe North Americans crave in ethnic taste experiences is that they be fundamentally authentic to a product's origins. So despite the current Japanese trend toward dry and subtle sake, our choice to make sake from soft water like that found in Fushimi, Kyoto, produces a fuller-bodied flavour with some residual fruity sweetness, which was made with the North American sake consumer in mind.

Q How have you been innovative?

A We were the first to produce something in this area, and that's somewhat innovative but I think it's quite obvious, too. Most good ideas are pretty obvious, but it's actually breaking the idea down and finding a way to sell it that takes innovation. The core innovation in both Bento and Ontario Spring Water Sake has been that I've taken something successful from one country and applied it in a Canadian environment. It's sort of like idea arbitrage.

Q What are the biggest challenges you've faced while running this company?

A The Canadian tax authorities have provided a lower rate of taxation on a couple of types of beverage producers, such as the VQA wineries and craft brewers. This helps them compete with major players. But we're taxed the same way as the largest Japanese foreign manufacturers. I think there should be some uniformity in the way small beverage producers -- including our company, whiskey makers -- are taxed in Canada. We have fantastic water resources and great market here. I wonder how many would take the plunge to start a sake brewery like I did if it wasn't for this tax issue.

Q What is your growth plan?

A Right now I want to use the existing capacity we have to find a really great mix of retailers and buyers, and make sure we're self-sustaining. If we achieve that level, it might be time to build another brewery and focus more on the regional market and supply some of the U.S. We're not trying to create anything of massive scale. I want this to be a smooth, controllable and delicious business.

-- Financial Post

Republished from the Winnipeg Free Press print edition February 5, 2013 B5