One week before opening, St. Paul brewer measuring change in beer markup
Lower taxes to help small Alberta brewers ended by province after complaint from Steam Whistle Brewing
A St. Paul brewer who is set to open his own operation next week says the new markup faced by Alberta craft brewers has him reconsidering his prices.
The government announced Tuesday that all breweries, regardless of where they are from, will have a $1.25 per litre markup applied to their products starting Aug. 5.
The move ends the lower markup, introduced in last fall's budget, that was intended to give an advantage to Alberta brewers.
- Steam Whistle granted injunction against Alberta tax increase
- Calgary beer importer laments tax changes
Colin Porozni, owner of Lakeland Brewing Company in St. Paul, would have had a 10-cent per litre markup applied to the product from his small brewery prior to the increase. Now he's going through the numbers on his business plan.
"The simple math is that it's a 1,150 per cent increase in terms of the markup," he said Tuesday.
If I would have known this a year and a half ago when I did my business plan, my business plan probably may have not have actually been feasible.- Colin Porozni, owner of Lakeland Brewing Company
"When I initially look at the numbers, if I would have known this a year and a half ago when I did my business plan, my business plan probably may have not have actually been feasible."
Porozni is looking forward to details of a grant the government plans to introduce next month that it says will mitigate some of the effects of the change.
Beer writer and educator Jason Foster has heard the grant will make up the difference in markups for Alberta small brewers.
"The grant is the key piece in this puzzle," he said. "Which is why it's a bit unfortunate the government did not announce details of that today. I think that would probably have made things clearer for all involved."
Steam Whistle complaint
Many in the industry believe the government is ending the markup because of a trade complaint from Ontario brewery Steam Whistle.
The lower markup, based on volume, was as low as 10 cents per litre. A $1.25 per litre markup only applied for production over 200,000 hectolitres under the fall pricing scheme, something that will change under the new plan.
- Beer tax hikes push Ontario's Muskoka Brewery out of Alberta
- Beer tax changes cheered by Calgary's Tool Shed Brewing Company
"We're treating all beer the same," Finance Minister Joe Ceci said Tuesday. "If you're producing beer and it's coming into this province, everyone's being treated the same."
Neil Herbst, owner of Alley Kat Brewery in Edmonton and chairman of the Alberta Small Brewers Association, said the association is taking a wait-and-see attitude on how the government plans to implement the grant program.
He said last year's lower markup helped Alley Kat.
"It gave us a little more cash flow, it helped us maintain our pricing where it needed to be," he said. "So it was very nice."
But Herbst says the grant should help make up the change in the markup.
"So I think it's all going to come out in the wash for us. For Alberta brewers, it shouldn't make a huge difference depending on how it's implemented."
When the government lowered the markup on Alberta craft beers last fall, it raised the tax on craft beer outside Alberta, British Columbia and Saskatchewan from $0.48 per litre to $1.25 a litre.
Steam Whistle opposed the change and was granted an injunction in January, which suspended the increased tax.
The matter is set to be heard in court next week. Ceci declined to discuss details of the case because it is before the courts.
Foster, the beer educator, said the fact that Alberta has the only privatized liquor system means that the market is completely open, unlike Ontario and B.C., which control what gets imported into their provinces.
"Alberta breweries have been at a disadvantage because anybody can come into the Alberta market," he said.
Foster says he thinks the grant may even the field and make Alberta breweries more competitive.