Drummond Brewing employee Antonio Rodriguez works on the can filling line at the brew pub  in Red Deer Tuesday.

Drummond Brewing employee Antonio Rodriguez works on the can filling line at the brew pub in Red Deer Tuesday.

Brewers say beer tax system a tough swallow

One of the co-owners of Red Deer’s Drummond Brewing Company says the province’s beer tax system is driving brewers out of Alberta.

One of the co-owners of Red Deer’s Drummond Brewing Company says the province’s beer tax system is driving brewers out of Alberta.

“I’m just livid,” said Kevin Wood. “I’m ready to pack it up and move. At this point it doesn’t make any sense to operate here.”

In Alberta, small brewers pay less tax per litre of beer sold than do their bigger competitors. But this incentive, which was introduced 11 years ago to promote the development and growth of new breweries, is available whether the producer operates in Alberta or elsewhere.

“Right now, under the small brewer program, 51 per cent of it goes to breweries outside of Alberta,” said Wood, who owns Drummond with Cody Geddes-Backman.

That means Alberta is sacrificing tax revenues to support out-of-province and out-of-country businesses, said Wood, and non-Alberta brewers have an incentive to ship and even dump their product here.

“We have the worst beer trade deficit in all of Canada, except for Prince Edward Island,” said Wood, pointing out that only 42 per cent of the beer consumed in this province is actually produced here.

“We have 33 breweries from Quebec selling here, collecting the small brewers’ markup.”

Meanwhile, Alberta brewers like Drummond are unable to sell into the Quebec market.

“It has to be brewed in Quebec, or in New Brunswick,” said Wood.

Other provinces also restrict the entry of Alberta-made beers, in the interest of supporting their brewing industries. Wood cited Saskatchewan as an example.

“They carry 300 beers; we carry 3,600.

“They don’t want to carry anything unless it’s produced domestic or it’s from one of the major breweries, because they get full tax on that.”

The situation isn’t much better in Ontario.

“If I want to sell through The Beer Store (in Ontario), which is owned by Molson, Labatt and Sleeman, I can pay them $52,000 to get one shelf space for one SKU (stock-keeping unit) as a small brewer.”

The large number of brewers selling into Alberta is even crowding producers here out of the distribution warehouses maintained on behalf of the Alberta Gaming and Liquor Commission, said Wood.

“We have 282 other breweries that have shelf space and cooling refrigeration that we don’t.”

The situation is discouraging small Alberta breweries from expanding here, and has even forced some out of business, he said.

“There would be an advantage for me to open in British Columbia, where I would get automatic shelf space on all the government-run liquor stores, and I would still have all of my Alberta production.”

Drummond and other breweries have been pressing the province for change — mostly recently as an 11-company group operating as the Alberta Small Brewers Association. But despite promises of change by Deputy Premier Thomas Lukaszuk, the old system remains.

“I’ve pretty much completely given up on my government,” said Wood, who has discussed the issue with 26 MLAs.

Lukaszuk told the Advocate that the issue is a sensitive one.

“Everybody is lobbying for change but everybody is lobbying for different change,” he said, explaining that depending on their size, Alberta breweries are calling for different thresholds for the incentive to kick in.

Some want it available only to Alberta companies, others think it should apply to Canadian breweries and others want it eliminated completely, said Lukaszuk.

Another concern is how modifications to Alberta’s beer tax systems will be received in other jurisdictions.

“We have to make sure that those changes are not such that they’re positive domestically in Alberta but punitive outside of Alberta,” said Lukaszuk.

Otherwise, he said, there’s a risk that Alberta-made beer and other liquor products that are sold into other markets could be subject to retaliatory restrictions.

“In all other markets in Canada, government decides what products get sold and in what volume.”

Lukaszuk said he’s written to his counterparts in other provinces so that he can gauge the repercussions of any action the Alberta government might take.

Wood doesn’t think retaliation should be a concern.

“Big Rock (Brewery) is the only (Alberta-based) brewery that currently exports into other provinces, and they don’t receive a small brewer markup in any other jurisdiction.”

Lukaszuk said he’s reluctant to place a timeline on when changes might be implemented, but is optimisitc a resolution can occur by year’s end.

hrichards@bprda.wpengine.com

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