Yahoo Finance Small West Coast breweries get boost with new Alberta tax break
Certain craft beers are now cheaper than others in Alberta thanks to a provincial tax break. While it’s good news for small businesses that specialize in suds, not everyone is happy with the government’s new rules.
The Alberta government launched its new budget on October 27, and the next day it raised the markup on beer from breweries making more than 200,000 hectolitres per year from $0.20 per litre to $1.25 per litre.
Smaller brewers from Alberta, B.C. and Saskatchewan, however, are subjected to lower, graduated markups, based on their annual worldwide production volume. Those three provinces are part of a New West Partnership Trade Agreement.
That means craft-beer loving Albertans will pay more if they happen to enjoy sipping brews from eastern Canada or other parts of the world.
It’s a move that pleases the Alberta Small Brewers Association.
“It’s been an ecstatic positive response from the brewers themselves,” Greg Zazchuk tells Yahoo Canada. “They’re very pleased because they recognize that the emphasis has been put on supporting the smallest of brewers….The tax structure reflects economies of scale and is focused on the growing of new breweries and their ability to grow in size.
“Our real mission as an association is to support the growth of local brewing-industry jobs, and growth in Alberta,” he adds. “Our tax dollars are applied to Alberta, and that’s what we think makes the most sense—not using tax dollars to support breweries in San Diego.”
Response from brewers elsewhere is divided.
Tim Barnes, president of marketing and sales at Vancouver’s Central City Brewing Company, says everybody agrees with the idea of supporting and promoting small, local craft breweries. He’d like to see B.C. implement some kind of tax incentive too.
“The wholesale markup needs to change in B.C.,” Barnes says. “We’d really welcome a wholesale-markup change, a reduction in wholesale markup for craft beer. We’ve got some amazing craft breweries in the province, and you should create an environment where they can grow because they’re creating jobs. We’re making the beer right here and we’re creating jobs here.
“All profits and taxes are staying right here in B.C.,” he adds. “A change would be good for business and for the whole market—not necessarily for Budweiser.”
Cam Heaps, cofounder of Steam Whistle Brewing in Toronto, was taken aback by Alberta’s sudden changes.
“I think it’s always great to see a government supporting the little guys, but this is first time I’ve seen a province say ‘OK we’re going to pick three provinces in the country and treat small breweries from those provinces one way and breweries from all the other provinces another way.’ It seems like a great intention but could use a little more work on the execution.
“What happens is our price of beer goes up two bucks a six pack, and for Molson or Labatt’s there’s really no change, so we’re treated the same as foreign-owned industrial brewers because we’re from another part of the country.”
In a perfect world, he says, a provincial government would give a tax break to local breweries, then some other kind of relief to Canadian breweries over non-Canadian ones.
“A lot of great craft brewers around Canada are going to have a hard time continuing to sell product in Alberta,” Heaps says. “Consumers with be left with a lot with less selection….It’s a little bit frustrating that we’re starting to have free-trade agreements within a country. It is so ludicrous. There are not supposed to be trade barriers that would require a free trade agreement in Canada.”
Bob Baxter of Whitehorse’s Yukon Brewing is feeling the sting too, with its products also having jumped $2 per six-pack.
“While this will affect our ability to sell beer in Alberta, and waste much of the 10 years of market building we have done there, we will look for other markets for our products,” he says. “And if you’re a beer consumer in Alberta who is a fan of craft beer, your government just told you either enjoy beers made in the three favoured provinces or get ready to pay a lot more for your brew of choice from Ontario or Quebec or Atlantic Canada or the Yukon or anywhere else.”
Baxter agrees that the changes may ultimately result in fewer craft products to choose from. “Since the liquor stores are privatized in Alberta, they like products that turn over on their shelves,” he says. “In time, as craft beers from outside of B.C., Alberta, and Saskatchewan sell more slowly, they will lose shelf space. If the damage is deep enough and goes on long enough, it is foreseeable that breweries will simply stop selling in Alberta.”
While small brewers from Alberta, B.C. and Saskatchewan are cheersing the news, other small businesses are hurting. Calgary’s Artisan Ales: Importers and purveyors of Fine Suds, which brings in beer mainly from Quebec and Europe, is one.
Co-owner Mike Tessier says that a premium six-pack used to cost $17 to $19; the tax changes will add roughly $3 per product. “Once a six-pack crosses that $20 threshold, the end customer thinks twice about buying,” he says. “This increase in taxes is ensuring that small businesses like ours, and the ones that brew the beer we sell, cannot compete in this market.”
