Canada, NS: Nova Scotia's craft brewers say unfair regulations stifle their businesses

Almost 25 years after he entered Nova Scotia's craft brewing industry, Brian Titus says he's still fighting many of the same battles with the provincial government, CBC reported on January 23.

"It's slightly depressing to think that after 25 years, a lot of what we're fighting for now is the same thing we were fighting for then," said Titus, the owner of Garrison Brewing and the president of the Craft Brewers Association of Nova Scotia (CBANS).

When Titus started the Halifax brewery, there were only a handful of microbreweries in the province.

Today, there are around 70 that employ roughly 1,150 people. Titus said this growth is an example of an industry succeeding in spite of government regulations, not because of them.

The association recently released a strongly worded annual report that took aim at several issues it says are unfair, uncompetitive and stifle their businesses.

"Outdated government regulations and punitive new rules are now holding back this industry and making Nova Scotia an increasingly inhospitable place for craft alcohol producers," said a press release announcing the annual report.

Among the issues is what constitutes a microbrewery. In Nova Scotia, a microbrewery is one that produces under 15,000 hectolitres (1.5 million litres) of beer a year.

It used to be that breweries paid reduced markup (40 per cent) if they produced under 15,000 hectolitres of beer that was sold through the NSLC. But they paid 84.5 per cent on all of the beer produced if it exceeded 15,000 hectolitres.

A change introduced last year now means craft breweries may have to pay the higher markup rate at production less than 15,000 hectolitres. Nine Locks Brewing in Dartmouth hit that threshold at 11,000 hectolitres of production, said Titus.

Titus said even the reduced markup rate is the highest in the country, while the production threshold is the lowest.

He said the high markup rates act as disincentives for craft breweries.

"Anybody who is starting to get close to that number is now putting those plans a little bit on hold to see how this plays out," said Titus. "Because if you can't make profit when you sell one ounce over the hectolitre limit, then why would you bother producing that? It doesn't make any sense."

If breweries are selling their products directly to consumers or through private alcohol stores, they pay the NSLC something known as the retail sales markup allocation, which is five per cent of the product cost. They don't pay the markup rates described above.

NSLC spokesperson Beverley Ware said Nova Scotia's markup rates must be looked at within the context of what the corporation does for the craft brewing industry.

"The NSLC provides marketing and merchandising support for free, has invested significant capital and allocated an increasing amount of shelf space to better accommodate local product in its stores, and provides funding to the industry associations," she wrote in an email to CBC News.

Titus said breweries would like the markup rates to be tiered to provide more support for the smaller breweries.

Ware said the NSLC plans to complete a full review of the markup rates for all alcohol producers, not just craft breweries.

Titus said breweries would also like to be able to sell their product through other breweries in the province, which is permitted in New Brunswick.

Ware said allowing this isn't so simple.

"Allowing Nova Scotia craft brewers to sell each other's product has broader trade implications since producers outside of Nova Scotia would not have the same market opportunity," she said.

While craft brewers have long butted heads with the province, there was optimism things would change with the election of the PC government last summer.

The party's campaign literature even referenced the plight of Nova Scotia breweries, noting the party would correct "lamentable retail imbalances that actually hurt our local producers, as happens with Nova Scotia craft beer producers."

Perceived inaction by the new government has led to some frustration in the craft beer industry.

"The PCs were more than happy to profile us in their election literature, use us as backdrops and court our support," Debbi MacDonald, CBANS's executive director, said in a press release. "Here's hoping they haven't lost their taste for local product and producers now that they're in."

Titus said a request to meet with Finance Minister Allan MacMaster before Christmas was turned down. However, since the release of the annual report, the province has said MacMaster will meet with CBANS in the near future.

Titus said craft breweries play an important role in tourism because they attract people to visit them across the province. As well, he believes they play a vital role in revitalizing rural economies because they entice people to live and work there.

"This is exactly what needs to be supported in terms of industries," he said.

That's why he's frustrated with what he believes are regulations that hold craft breweries back.

"This is a story of survival more than it is of thriving," he said.

In a statement, Finance Department spokesperson Gary Andrea said the new government has had extensive written communications with CBANS since taking office.

"The craft beer sector in Nova Scotia has experienced significant growth within the existing policy framework," he said.

24 January, 2022