Look out Alberta oil, here comes ... craft beer?

Craft breweries jump from 20 to 65 in 2 years

If the Conservatives have it right, it is impossible for a society to tax and spend its way to prosperity: But by the Alberta NDP’s lights, we may be able to drink our way there.

After the oil crash of 2015, and surprise victory of an NDP provincial government, Alberta’s economy has struggled to recapture the high of its resource-fuelled booms.

In a bid to turn things around, the NDP has focused on economic “diversification” — the hope that this province’s economy will flourish even as it weans itself off the extraordinary wealth created by the northern oilsands. And in no industry has the NDP placed more obvious hope and help than in — craft beer.

Every few months, the government seems to announce some new tax structure or rebate, or grant or scheme to build and grow the province’s craft breweries.

But if prices have skyrocketed and the province has to create an allegedly anticonstitutional quasi-protectionist regime to go about it, well, at least you know this Alberta industry is hipster friendly. Two years ago, there were 20 craft breweries in Alberta. Now there are 65, with more growth expected.

“One in five beers sold in this province now is from craft breweries, which is pretty incredible. A few years ago, it was the big (brewers) selling beer here. Small brewers in this province are an important part of economic diversification,” said Joe Ceci, Minister of Finance. “It’s a grain-to-glass experience where all Alberta product is being used, including hops in many cases. This is really, truly a craft industry.”

Ceci acknowledged that craft brewery only makes up a small percentage of the province’s overall GDP, but notes that it is a growing percentage.

“We believe the market could have been bigger had it not been an open market for so long in this province. Many companies across Canada and the world brought their product into Alberta because we were open, and I believe that stunted this industry. So it’s playing a lot of catch-up now.”

Last week, the NDP announced a $60,000 grant to develop a brand and digital platform to transform Alberta into a craft-beer tourism destination. The government has liberalized and streamlined regulations, permitting bars and restaurants to gain more control over the size of their patios, for example. They’ve loosened time limits for happy hours. They even allowed craft beer to be sold in farmers’ markets.

The most controversial of these initiatives, however, has been a new tax. Originally, the government proposed lower markups for beers from within the New West Partnership. However, upon realizing that system wouldn’t stand a trade challenge, they introduced a new system. All beer in Alberta is to be taxed at $1.25 per litre. Small local brewers then receive a rebate depending on how much product they brew.

Critics argue this tax essentially acts as a tariff, undermining the free-flow of boozy goods between provinces. Both Ontario-based Steam Whistle Brewing and Great Western Brewing in Saskatchewan are subjecting the program to a constitutional challenge.

Courts have granted a temporary injunction on the tax while the case is heard.

“We would no longer be a feasible business in Alberta,” said Cam Heaps, co-founder and CEO of Steam Whistle. “It’s a 125 per cent increase in our tax rate, which would price our beer out of competition.”

This is not how other provinces manage liquor markups, he added.

“The way most provinces deal with it, like Ontario, for example, is that if a brewer wants to sell in Ontario, they are eligible for all the same preferential tax treatment that a small brewer in Ontario gets,” Heaps said.

Alberta is unique in that its distribution and sale structure is entirely open and private — which means a store in Alberta can buy liquor from just about anywhere. Other provinces, like Ontario, manage sales and distribution through a monopoly, which means it can be difficult for Alberta products to eke their way in.

“There is no protection here, we’re totally open. But if you turn the table and look at the other provinces, they have protection going on,” Ceci said. “They have tasting panels and limited shelf space for out-of-province products, so it’s difficult to get on the shelves in other provinces.

“That’s why (Alberta brewery) Big Rock had to open breweries in Vancouver and Toronto. It was the only way they could sell their product in those provinces.”

Terry Rock, the executive director of the Alberta Small Brewers Association, put it bluntly: “If Alberta is offside, then every other province is worse.”

“The support we’re getting now is helping us recapture the ground that we should have had before. Alberta can be one of the world’s great brewing destinations,” he said. “Our perspective is that the whole thing is very complex. We have a national trade scenario that is difficult to work with and the government of Alberta worked with us to create a level playing field.”

Alberta’s brewery plans have also been challenged by a local business. Artisan Ales, which imports beer from all over the world, successfully challenged the new tax regime under Canada’s Agreement on Internal Trade. Company owner Mike Tessier won, but the government is appealing the decision. “It is convoluted, but what they’ve done is they’ve given local brewers a 1,150 per cent tax advantage over (other) beers,” he said.

That works out to about $3.50 per six pack, and doesn’t include other costs, Tessier said. Tessier said the consumers have suffered. “Beer prices have gone from some of the lowest in Canada, to the second highest for craft beer in Canada,” he said.

IT’S A 125 PER CENT INCREASE IN OUR TAX RATE, WHICH WOULD PRICE OUR BEER OUT OF COMPETITION. IF ALBERTA IS OFFSIDE, THEN EVERY OTHER PROVINCE IS WORSE.