E-Malt.com News article: Canada, AB: Big Rock Brewery blindsided by announcement of new production markups in Alberta

Big Rock Brewery is feeling blindsided by an announcement of production markups from the Alberta Gaming and Liquor Commission, Calgary Herald reported on March 27.

Changes in tax rates introduced on the 26th of March’s provincial budget mean mid-size breweries — those producing between 2 million and 20 million litres annually — like Big Rock Brewery and Minhas Brewery will be asked to pay an additional 11 cents on each litre they produce.

Big Rock, which produced about 16.8 million litres in 2014, had paid a markup of 40 cents per litre.

“This tax hike strategy was not expected and has hit us hard. The government is asking for three times our prior year’s income in additional taxes,” said Susanne Fox, communications manager at Big Rock Brewery. “As a result, we are reviewing all of our operational costs.”

Big Rock’s 2014 financial results show the brewery reported net income of C$624,000 for the year ended Dec. 30. With the newly announced markup on production — the province’s take of liquor revenue — it expects to pay a total of C$10.5 million in annual tax going forward.

“As an Alberta producer, we have no qualms helping to shoulder the burden of easing the province’s deficit,” said chief executive Robert Sartor. “We were quite shocked to find that we were expected to pay 27.5 per cent more tax under this budget, whereas the large foreign multinationals received only a 22.4 per cent increase.

“So much for the Alberta advantage.”

Major producers such as Molson Coors — which produced 589 million litres last year — will be charged a markup of C$1.20 per litre under the AGLC’s new guidelines, an increase of 22 cents a litre.

“While the large foreign multinational brewers had a higher increase in dollar terms, their size is exponentially larger than ours so we have been left to shoulder a disproportionately larger increase, relative to our size, than they have,” said Sartor.

Small brewers that produce less than 2 million litres were not affected by the budget and will continue to pay a markup of 20 cents a litre.

“We had been watching the situation closely as the days progressed,” said Ben Leon, managing director at Dandy Brewing Company. “We’re happy to continue growing as a small brewery without the hurdle of taxes in the way.”

Consumers will also pay more for alcohol under tax increases in the new provincial budget. A case of 12 beer increased by 90 Canadian cents, effective Friday, March 27, while a bottle of wine will cost 16 cents more.

In addition to the production and tax markups, the AGLC is in the midst of conducting a review of the province’s liquor laws that could impact hours of service for licensed establishments, happy hour rules and how liquor licences for private events are managed.

“These changes could be extremely revolutionary, while keeping with the structure of our current model,” said AGLC president Bill Robinson. “The competitive nature of the industry will keep the market in line.”


01 April, 2015