Buried in Alberta’s latest budget is a “brewing” policy change that has pitted the province against its largest and oldest craft beer provider.
Big Rock Brewery, founded in 1985, now faces a 22 per cent hike to the beer fees it normally pays—a new rate that has very minimal impact on other, smaller breweries in the province.
The increase announced on Feb 28—a day after the budget was tabled—means the Calgary-based company will now pay just over $1.4 million in additional taxes each year.
The change decreases their capacity to grow by 55 per cent.
Brad Goddard, vice-president of business development and government relations for Big Rock, says his team was given just eight hours' notice of the change.
“Our reaction was one of big surprise. The markup was effective midnight, so there’s a lot of things that you have to do, a lot of pricing systems that have to be updated,” he said.
“We’ve got money allocated to different capital improvement plans, improvements to some of our equipment over on the operation side and marketing plans.
“All of those things have to be put on pause now because, of course, this is an unbudgeted increase to our tax.”
Alberta Gaming, Liquor and Cannabis (AGLC) collects fees from companies for every litre of alcohol produced.
Those that produce more pay more.
Under the AGLC’s new fees, every beer maker in the province that produces more than 180,000 hectolitres annually will now pay $1.25 per litre.
In the past, breweries were eligible to produce double that amount before they would be charged the $1.25 rate.
The change had very little impact on 146 small craft breweries in the province who mostly produce 5,000 hectolitres or less and will pay $0.10 cents per litre.
A hectolitre is equal to 100 litres.
Big Rock produces roughly 150,000 hectolitres each year and will now pay between $0.78 and $0.81 per litre—about $0.20 more than before.
“It amounts to about a $0.05 per can increase in our tax, which is a lot actually, and then at a time of tariffs, it’s a lot of money, because we’re mostly an Alberta-based brewery … this is the market we depend on for the majority of our sales,” Goddard said.
“So, we can increase the price of beer to consumers, which is never popular with them or our sales team.
“Alberta is a very competitive beer market, and so what we have found in the past when the government has taken us on this roller-coaster ride of increases in tax is that when you pass on price to consumers, your volume goes down and that actually makes the problem worse.”
Calgary brewpub owner speaks out
Ernie Tsu, owner of Trolley 5 Brewpub and president of the Alberta Hospitality Association, says the new liquor markup schedule will affect many.
“This is going to impact contributions to commercial property tax as well, and of course, charities. It will affect restaurants slightly, but it discourages small brewers from wanting to get bigger,” Tsu said.
“Just the way this has been written, it keeps small breweries and small distilleries small locally. It is not an incentivization program for any small local brewery to grow.
“You do not want to hit a point where you hit that tax bracket and now you can’t afford operational costs.”
Tsu says small brewers are a massive piece of the local economy, contributing to thousands of jobs.
“It’s really important to understand that the multinational companies aren’t supplying as many jobs as the local breweries are, and quite frankly, not contributing to our local charities or again, commercial property tax that goes back to our city and our profits,” Tsu said.
New wine taxes will also have an impact on hospitality, Tsu says, as the AGLC will increase fees starting April 1 for what it calls “high-value” wines.
The increase means wines priced between $15 and $20 will be hit with a five per cent markup, wines between $20 and $25 will cost 10 per cent more and anything above $25 a bottle will see a 15 per cent increase.
“It’s already tough for customers to get out there and enjoy multiple social meetings,” Tsu said.
Service Alberta aims to protect small brewers
Service Alberta Minister Dale Nally, who oversees the AGLC, says the change in beer fee structures will protect the vast majority of smaller brewers while charging bigger producers accordingly.
Nally’s press secretary, Brandon Aboultaif, says a comprehensive review of the liquor markup system was conducted for the first time in 20 years and the new rates weren’t designed to increase government revenue, despite the province’s new budget forecasting a $5.2-billion deficit.
In a statement to CTV News, he said Service Alberta acted primarily on feedback from industry stakeholders—large and small—who shared concerns about fairness, growth opportunities and unintended consequences of the existing system.
“They told us the system may impede the growth of manufacturers and has led to market distortions and disparities between product categories and inequalities between small and large manufacturers,” Aboultaif’s statement read.
“That imbalance needed to be addressed to improve fairness across the board and to ensure the benefits provided under Alberta’s small producer programs are doing what they are supposed to do—support the growth and investment of Alberta’s small craft producers.”
Aboultaif says revising the standard markup rate will “better focus the program on small beer manufacturers and their growth.”
The province says it will also make a firm commitment to conducting regular reviews of the liquor markup system every five years as a way of striking a balance between industry growth, government needs and consumer interests.
Beer Canada, an organization representing brewers nationwide, fully endorsed Nally’s decision and called it a step toward levelling the playing field.
“The government decided the 400,000 hectolitres mark was way too high, and I certainly agree with that. It’s way out of norms globally, and reducing it to 180,000 is a pretty reasonable number,” said Beer Canada President CJ Hélie.
“Moving it to just over (180,000) gives a much more gradual ramp-off that allows brewers to plan for that as they get closer to that.
“I also believe this was chosen to recognize there are sort of no brewers in Alberta producing between 180,000 and the 400,000 hectolitres—there is no short-term, immediate impact based on the definition threshold of what a small brewer is.”
Hélie says his team had regular conversations with Service Alberta, which included in-person discussions, online surveys and written submissions from beer industry stakeholders to inform the changes.
“Everybody had a chance to advocate and put forward what they viewed as things they would like to see in a new markup structure. It was a very open and transparent process,” Hélie said.
‘Less incentive to grow’: Alberta Small Brewers Association
Big Rock Brewery is now lumped into paying fees closer to the pace of multinational breweries, including Molson Coors and Anheuser-Busch InBev, both headquartered in the United States.
These changes hit breweries hard amid the ongoing Canada-U.S. trade dispute.
The cost of aluminum cans, for example, is slapped with tariffs twice in most cases—once for the raw aluminum crossing from Canada to the U.S. and again for the finished cans coming back.
Blair Berdusco, executive director of the Alberta Small Brewers Association, says it is troubling that the province increased markups on beer production.
She says the previous markup rate change in 2019 had a really strong impact on the growth of the industry, more than doubling the number of breweries and volume produced.
The concern now is the new tax hike will discourage other breweries from growing.
“Access to capital was already a very challenging thing, and now that you have a smaller runway and smaller opportunity to grow, we do expect access to capital will become even more challenging,” Berdusco said.
“That means there’s less incentive to grow because you can’t grow as big before reaching that same markup schedule as a multinational company.”
According to an IBISWorld industry report, more than 2,200 people work in Alberta’s beer industry, which contributes more than $840 million to the province’s GDP.
Berdusco says moves from Alberta’s government could put those kinds of investments at risk and allow major breweries to take a much larger market share moving forward.
“Yes, Big Rock is the biggest brewery in Alberta, but it’s still an Alberta ‘small’ brewer. If you look at how much they manufacture on an annual basis versus a multinational, it’s less than 0.03 per cent,” Berdusco said.
“If that’s not small, I don’t know what is.
“To put this on them—and with eight hours' notice—is significant, and it is damaging to their future planning.”
