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Winter
2017
grainswest.com27
or years, the Alberta government has
struggled to reconcile efforts to promote the
province’s craft brewing industry with a privatized
liquor system that attracts hundreds of breweries from around
the world to vie for consumer dollars. In its most recent
attempt to give local beer a fighting chance against out-of-
province competition, the government has made sweeping
changes to provincial beer markups and introduced a new
grant program for Alberta breweries.
Under the new system, beer sold in the province has a
$1.25-per-litre markup applied to its wholesale price. This
markup rate applies to all breweries that sell beer in the
province, regardless of where they are located and their annual
production volumes. Previously, beer markups in the province
were applied using a graduated scale, with reduced rates for
breweries with small annual production volumes.
To offset the cost of this markup for small breweries and allow
them to maintain their current beer prices, the government
created the Alberta Small Brewers Development Program, which
provides monthly grants to brewers based on their production
and sales volumes. All Alberta breweries that produce and sell
up to 300,000 hectolitres of beer annually are eligible for the
grants. Under the new grant system, breweries that sell 10,256
hectolitres of beer per year or less will receive $1.15 per litre—the
exact difference between the old graduatedmarkup for that
brewery size (10 cents per litre) and the new blanket markup. The
grant amount decreases as a brewery’s annual sales volume goes
up, and the government expects to dole out $20 million through
the program over the next 10 years.
As a result of the new system, the price of Alberta-brewed
beers should remain relatively constant, while out-of-province
brewers will be forced to up their retail prices—making it more
attractive than ever for Alberta beer lovers to drink local.
“I think it’s really beneficial for us,” said Matthew Berard, one
of the co-founders of Banded Peak Brewing in Calgary. “It’s
making small breweries much more viable.”
Together, the new grant program and blanket markup
provide the financial support Alberta’s craft breweries need in
order to become established and compete in an increasingly
crowded marketplace. More importantly, these changes
appear to level the uneven playing field that had come to
characterize the Alberta market.
For several years, breweries from provinces with generous
economic incentives in place for local brewers could take
advantage of the same tax breaks as Alberta breweries when
selling beer in the province. In theory, this could be viewed
positively, as it promoted a greater selection of craft beer
from all sources in the Alberta market. However, it failed to
account for the fact that Alberta’s privatized liquor system is a
far different animal than the government-controlled systems
in other provinces. While some out-of-province breweries
had unfettered access to the Alberta market and tax breaks to
boot, Alberta breweries had a much harder time getting their
F
products on the shelves of BC Liquor Stores or Liquor Control
Board of Ontario outlets, for example.
“I am totally supportive of the government for the action
that they took, just because we were being taken advantage
of,” said Charlie Bredo, co-founder of Troubled Monk Brewery
in Red Deer. “In the next three to four years, we’re going to
become this awesome beer haven and part of it is going to be
because of these rules that were just changed. So it’s setting
the stage for better things to come.”
Beer policy evolution
Alberta’s old graduated markup structure was designed to
help small brewers compete with large multinational breweries,
which are able to take advantage of economies of scale to
lower the price of their products and drown out competition.
The graduated markups did help the bottom lines of several
Alberta craft breweries, but they failed to do much to promote
the establishment of new breweries in the province. While
Alberta’s small cohort of craft breweries could now price
their products at a level that would allow them to compete
with macrobreweries like Molson, Labatt and Coors, they
were suddenly overwhelmed by an influx of beer from small
breweries located outside the province. Since you didn’t
actually have to brew your beer in Alberta to receive the lower
markups, many savvy brewers set up shop elsewhere and
then started sending their products into the Alberta market to
take advantage.
In 2015, eligibility for the graduated markup program was
narrowed to only breweries operating within the member
provinces of the NewWest Partnership trade agreement—
Alberta, Saskatchewan and British Columbia. Although this
eliminated the competitive advantage of many out-of-province
breweries selling beer here, the main factor holding back the
growth of Alberta’s craft beer industry remained unchanged.
Small breweries in B.C. and Saskatchewan were still able to
take advantage of the low markup rates when selling beer in
Alberta, in addition to the financial support and protected
markets provided by their home provinces. In this regulatory
environment, it made more financial sense for many aspiring
brewers to set up shop in neighbouring B.C. than in Alberta.
“The jobs were going out there, the expansion for the
breweries was going out there, and it was growing their tourism
and industry,” Bredo said. “The money was leaving.”
In addition to this outwardmigration of brewing talent and
capital, B.C.’s 100-plus craft breweries were more than happy
to inundate Alberta with their beer, which could be sold here
much cheaper than in their home market. This was great news
for Alberta beer drinkers who wantedmore selection at cheaper
prices, but the big picture was less rosy for Alberta brewers.
“In an international trade scenario, it would be considered
dumping, where breweries are selling beer in our market
at—in some cases, we believe—below cost,” said Terry Rock,
executive director of the Alberta Small Brewers Association.