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The federal government hopes to cut tap costs for local craft breweries with a cap to excise duty or ‘beer tax’ increases.
Effective for two years starting on April 1, the excise tax increase for beer, spirits, and wine will be capped at two per cent, instead of the original inflation-tied 4.7 per cent.
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For smaller brewers, excise tax rates will be cut in half for the first 15,000 hectolitres of beer brewed in Canada, which the federal government said will provide a typical craft brewery with up to $86,952 in tax relief through 2024 and 2025.
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Co-founder of Prairie Dog Brewing in Calgary, Gerad Coles, said that it’s great to see a pause on the excise tax, although it makes up a fairly small overall cost for them overall.
“Every little thing that can be done to help save a few bucks here and there always helps business right now,” said Coles.
He estimated that on a per-can basis, the two per cent cap will only make a few cents’ difference.
“Costumers are going to see that the price, maybe, doesn’t go up on their beer next year, related to that,” he said.
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Factors like supply chain issues, packaging costs, and ingredient costs for hops, malts, and yeasts have been driving prices up along with taxes, according to Coles.
“All of these things combined, and so the price of beer has been going up in the background — and surprise surprise, the consumption rates have been going down.”
By the time their product hits liquor store shelves, Coles said they are barely breaking even if the liquor store is charging $15 for a four-pack.
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“The increase in excise taxes is just cutting deeper and deeper into that tiny slice of margin, because the reality is that the consumer is not going to pay $25 for a four-pack,” he said.
Breweries ‘aspiring to get bigger’
Breweries employed nearly 23,000 Canadians in 2022, including more than 1,900 people in Alberta, according to Statistics Canada.
A Conference Board of Canada report from 2018 also found that for 2016, the beer industry supported 149,000 Canadian jobs, paid $5.3 billion in wages, and contributed $13.6 billion to Canada’s GDP.
“Canada’s small craft brewers are among the finest in the world, and are an important contributor to our growing economy by creating jobs in communities across the country,” said Finance Minister and Deputy Prime Minister Chrystia Freeland in a press release.
Lisa Watts, co-owner of Hub Town Brewing Co. in Okotoks said that every brewer’s dream is to be big enough that they can pay the bills at the end of the day, but that’s getting harder and harder to do.
She said that right now they brew under 1,000 hectolitres per year, a very small amount in comparison to the bigger players.
“So our pricing is exponentially higher, because you don’t have that purchasing power. So however you look at it, we (breweries) are all aspiring to get bigger so that we can get better product pricing.
“We don’t need a tax that prevents that even further,” she said.
Watts said that despite there still being an increase year-over-year, she thinks things are going in the right direction.
“I’m happy to see that they’ve cut the increase to a lower level and I’m glad to hear that there’s going to be an opportunity for some relief. Every little bit helps, and we’re grateful for that.”
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