Canada, BC: Craft brewers unhappy by government setting the wholesale prices for their beer

Michael Kuzyk spends a lot of time on his feet. The owner of Category 12 beer is competing in one of British Columbia’s hottest industries, CBC.ca reported on January 23.

Craft brewing is also a fast moving field. Dozens of breweries entered the industry in 2015, including Kuzyk's. As those new beer makers arrived, so did a major change from the provincial government.

It used to be breweries could sell their product directly to private retailers or through their tasting rooms at a discount. But now the wholesale price is set by the government's own liquor distribution branch.

Bottom line, prices have gone up.

"We had this tectonic shift in the foundation of our business plan," Kuzyk said. "I don't think anyone really saw it coming. The direct impact — the cost of our bottles went up for the end user. Plain and simple."

The government now has to come clean about its role in the inadvertent price hike. Otherwise, the province's legions of beer fans are likely to unfairly place the blame on people like Kuzyk.

Before the changes came into effect on April 1, 2015, the government assured the public "to expect no significant change to product pricing." from the new rules.

But an internal government briefing note released this week clearly shows the province knew three weeks after making the changes they had made a mistake.

"For a majority of cases, the retail price for small-production breweries packaged beer sold through B.C. Liquor Store and private retailers has increased as part of the transition to the new wholesale pricing model," said the note.

The province has painted a much different picture in public.

"Government does not set liquor prices. It is up to the government and private liquor stores to set retail prices," said MLA John Yap. "In 93 per cent of the inventory of products in the B.C. Liquor Stores, they have seen no change of prices."

Lovers of the other seven per cent of products might reasonably hope the government would right its wrong.

Yap has been consulting with craft beer makers. Change is coming. But for the people who make the beer, it can't be soon enough.

For Kuzyk, at Category 12, a change could mean another 15 cents per bottle in his pocket. Like many in the industry he has called for a reduction in the amount of tax per litre brewers pay.

Right now, it is set at 55 cents a litre. One suggestion is to lower that to 45 cents a litre and allow for lower retail prices and wider margins for beer makers.

This is something the province is in the midst of considering as they "crunch the numbers."

"For a brewery of our size it could basically allow us to expand and grow our business," said Kuzyk. "It is a really significant business case for us. We are optimistic the change will come."

Brewers have also complained that the wholesale pricing has made it harder for certain labels to get on B.C. liquor store shelves. The way the distribution works now is that older craft breweries often have an advantage getting in provincial stores. This needs to change to allow the industry to grow.

There also needs to be better signage for B.C. craft beers. How about signs clearly stating a beer is made in British Columbia?

It would allow both locals and tourists to understand what products are part of the province's growing craft beer scene.

"Most of the retailers and the breweries have been in a wait-and-see. We have just told them we are working with the government and hoping to get a resolution," said Ken Beattie, the executive director of the B.C. Craft Brewers Guild. "Some of our members lost listings and maybe didn't get as many as they did in the past."

There has been some movement behind the scenes on developing a B.C. craft beer designation. In the past the government has indicated that B.C. beers can't have their own designation because unlike VQA wines, a majority of the ingredients in a beer aren't made here.

But with consultations the government seems to have had a change of heart on that position as well.

"I think the designation has to be based on sale volumes. There is no other jurisdiction that base it on ingredients. Beer and wine are two completely different drinks," said Beattie.

27 January, 2016