Craft brewers to get boost from provincial tax credit plan

Ontario has been loosening constraints, slightly, but small operations such as Block Three could use more flexibility

ONTARIO’S CRAFT BREWERS – and, not coincidentally, beer drinkers – got something to toast this week, as the province announced an expansion of its support for the industry.

Changes to the Small Beer Manufacturers’ Tax Credit, outlined in the 2018 Ontario budget, aim to allow more breweries to expand their operations, create jobs and fuel economic growth.

The move was welcomed by the province’s craft brewers.

“The new supports announced today will certainly help accelerate that growth. It is a great day for the craft beer industry and a great day for Ontarians who enjoy locally made craft beer,” said Scott Simmons, president of Ontario Craft Brewers. “The OCB is committed to further strengthening Ontario’s reputation as a centre of craft brewing excellence and today’s announcement is a critical step on that path. We have already seen the positive impact of ongoing government commit- ment to this industry, with 250 independent craft breweries now open and growing in over a hundred communities, generating thousands of jobs and an economic impact in all corners of the province.”

The changes build on prior measures introduced by the government to support small breweries, including expanding the sale of beer to more than 350 grocery stores – eventually growing to 450 stores – as well as mandating that at least 20 per cent of shelf space for beer be reserved for small brewers’ products. There are also provisions for breweries to have a bar or restaurant at each of their licensed manufacturing sites.

The province is also developing a new agreement to strengthen the position of small and craft brewers, including improved product placement, shelf space and other marketing practices in Beer Store locations.

One of the big changes comes along with tax reductions for breweries. That would see the beer tax rate reduced from the current 90 cents per litre to 40 cents for sale of microbrewery beer, as well as removing the tax on up to 10,000 litres of beer for product promotion at onsite retail stores.

Ontario’s hefty tax rates have been a hot topic within the craft beer industry. Earlier this year, Beer Canada launched a campaign, www.axethebeertax.ca, that informed consumers about the issues facing the industry and encouraged the signing of a petition demanding they scrap the escalator tax, which came into effect this month.

The group notes that 47 per cent of the price of beer is government tax, which is reflected in higher costs for consumers and potential loss of profits for producers. Although federally the fight against taxes has yet to be adjusted – the escalator tax is a federal initiative – this week’s announcement does help some of the midsize breweries.

For very small brewers such as St. Jacobs-based Block Three Brewery, the provincial adjustment will have less impact given that they produce just 2,000 hectolitres a year.

Some additional changes to give small brewers additional market outlets would be handier, notes coowner Graham Spence.

“One of the big things for us is they have started to allow wineries and cideries to sell at farmers’ markets and obviously being in St. Jacobs we would love to sell to the St. Jacobs Farmers’ Market. I think that would open up a huge avenue for us,” explained Spence, noting that their biggest hurdle is actually getting their product into people’s hands, so being given the opportunity to connect directly outside of their brewery would be helpful.

“Putting our stuff in the grocery store, sending it all over the province that’s silly; we would prefer to keep it local and we think there is enough support for that. What we would like to see is being allowed to sell in farmers’ markets and being allowed to open a second retail location without the necessity to put in a production facility.”

Looking at the environment across Ontario, there are currently more than 250 craft beer breweries in operation with 133 selling through the LCBO network. With the industry estimating that there was more than $370 million in sales of craft beer in Ontario in 2017, up from $240 million in 2015.