Alberta brewing a bitter concoction of beer protectionism

Province’s tax and rebate program hurts the majority, writes Gianfranco Terrazzano.

The Alberta Small Brewers Development Program is a classic example of government intervention in the market: many will suffer for the benefit of a select few.

Many people have suggested that the program is a means to improve the provincial economy. But will it really promote economic development in Alberta? Let’s take a closer look.

Alberta small brewers will become more competitive within that province. The rebate program allows local brewers to keep their retail prices low while the price of their competitors’ products increases.

As the price of out-of-province beer increases, some consumers will likely switch to Alberta-made beer.

Although local microbreweries will benefit, it is unlikely they will see major innovation or efficiency improvements. These gains typically arise in response to competition, not from government protectionism. Furthermore, provinces like Saskatchewan have already said they will consider retaliatory policies. If so, Alberta breweries may lose the opportunity to sell beer in other provinces.

Alberta consumers will be made worse off due to higher prices and less choice. Although the price of Alberta beer may not increase, the price of beers produced in other provinces will go up. Albertans will now have to pay more to enjoy B.C. microbrews.

It’s possible that some outof-province brewers will not pass the total cost of the tax on to consumers. To offset the tax increase, producers may accept a lower price in Alberta. However, many small brewers don’t have the profit margins to reduce prices and will no longer be able to compete.

At least one Alberta microbrewer has acknowledged that, without the rebate, the tax hike would have run him out of business. According to Dalen Landis, head brewer at Grain Bin Brewing Company, a “1,200-per-cent tax increase definitely would have made something that has a potential to be profitable (into) something that’s going to cost us more to make beer than we can sell it for.”

Some microbreweries outside of the Alberta-B.C.-Saskatchewan New West Partnership have already left the Alberta market. Albertans can expect even less selection, as now B.C. and Saskatchewan breweries will also be forced out of Alberta.

Local businesses that rely on the sale of out-of-province beer will also suffer. Mike Tessier, an owner of Artisan Ales, says his Alberta-based importing business has taken a huge hit due to tax increases. The company is importing only 40 per cent of the beer that they did prior to tax hikes.

Alberta pubs and restaurants will lose revenue, as higher prices result in individuals drinking less at their establishments. In an effort to combat the negative effects of the tax, these pubs and restaurants will attempt to reduce costs.

Unfortunately, reducing costs usually means laying off people or reducing the hours each employee works.

Alberta’s tax and rebate program is intended to grow the province’s brewing industry, create jobs and enhance the economy. All are desirable. But what are the real impacts? Local breweries will be more competitive within Alberta and likely expand. However, they may face retaliatory restrictions in other provinces, making it harder to sell their beer across Canada.

Alberta beer drinkers are made worse off due to higher prices and less choice. Other businesses in Alberta will also be made worse off with employment cuts likely to follow.

Instead of developing the provincial economy, the tax and rebate program benefits a small few, at the expense of many Albertans.