Border Booze Brawl

Albertans aren’t anti-trade goons who hate Saskatchewan beer

prov-fight

Pints | by Jason Foster

I know that summer is the season of beer, but this is ridiculous.

There has been a lot of squawking about beer lately. In July, Alberta Premier Rachel Notley and Saskatchewan Premier Brad Wall got into a war of words, publicly sniping at each other about Alberta’s new approach to beer policy.

Most of us care about beer, so when there’s a controversy about beer taxes and prices, people pay attention.

But what is really going on?

It all started when the Alberta government announced a change in its policy priorities regarding beer. Specifically, the shift affects what is called the mark-up — the price the government adds to the wholesale price of liquor. Historically Alberta, like most provinces, has had a multi-tiered mark-up for beer. Smaller breweries had a smaller amount added to their price, which was meant to help them be competitive. And until this summer, the smallest breweries had only 10 cents per litre added to the price of their beer, and the mark-up jumped in stages until it maxed-out at $1.25 per litre for the largest breweries.

Historically, the rate applied to any brewery that sold beer in Alberta, regardless of where it was located. Last fall, the government changed that, only giving the lower rates to Alberta, B.C. and Saskatchewan breweries. Those provinces were saved because of their inclusion in the New West Partnership. All others had the full $1.25 rate applied to their price, whether they were big, small or somewhere in between.

The latest announcement scrapped the tiered mark-up entirely. All breweries, including Alberta’s, will have $1.25/litre added to the price, creating a level playing field — except that the government also announced a grant program for Alberta breweries which will pay them roughly the equivalent of the difference between their former mark-up and the new, full rate everyone pays.

The government’s stated purpose is to promote and develop an Alberta-based beer industry. Right now, by most measures, Alberta’s beer-patch lags behind most Canadian provinces.

The new policy gives Alberta breweries an advantage: thanks to the Alberta-only grant, they can price their beer slightly lower than out-of-province imports and thus gain market share.

The announcement sparked a flurry of outrage from B.C. and Saskatchewan brewers, and drew Premier Wall into the fray; he declared Alberta’s new approach “protectionist”. Notley shot back, saying she wouldn’t be “lectured” by other provinces about how to create jobs and economic development for Albertans.

And thus the war of words began. It only ended — for now at least — when Wall and Notley met in Whitehorse and agreed to have their respective bureaucrats deal with the dispute.

Nevertheless, there were notable attempts to frame the fuss as an ideological scrap between Alberta’s socialist NDP hordes and free-market champion Brad Wall and company. But the situation is not that simple — Mr. Wall has a few protectionist skeletons in his closet as well.

Looking strictly at mark-ups, Alberta is still a cheaper place to sell beer than Saskatchewan. Alberta’s lowest rate is 66 cents per litre and its highest is $1.99. The Saskatchewan system is complicated, based on both volume and packaging, but in general Alberta takes a smaller cut than tax-phobic Wall, even after this change.

But if we look at each province’s system as a whole, it becomes a lot harder to argue that Alberta is erecting anti-trade protectionist walls. Frankly, it’s the only province with a policy of open borders. Fill out a two-page form and pay the $75 application fee, and your beer can be sold in Alberta.

In contrast, the importation of beer in every other province — including Saskatchewan — is controlled by liquor boards. These gatekeepers determine what enters a province and they’ve long used that power to restrict the amount of competition their local producers face.

Any brewery wanting to sell in Saskatchewan must submit its product to a panel of civil servants in Regina, who can give it a thumbs-up or thumbs-down as they see fit. They don’t have to give a reason for their decision, nor do they have any publicly available criteria.

Saskatchewan has refused applications from Alberta breweries to sell in SLGA stores. And while we can’t know why they said no (because they don’t have to say!), we can speculate that one of the reasons is to restrict the amount of competition for shelf space in SLGA stores. Alberta currently has eight times the number of beer products on shelves, most of that imported, than Saskatchewan does.

Here’s the core of the problem. Breweries in every province except Alberta have been able to grow up under the protective shield of their liquor commissions, giving them the space to thrive. Alberta’s breweries have, for years, been exposed to the full brunt of international competition, and that’s stunted their growth.

The new Alberta government is trying to correct the mistakes of the old government.

I fully recognize the interests of Great Western and other Saskatchewan breweries trying to sell in Alberta are harmed by this shift, and that’s partly why Wall is being so vocal. But where would Saskatchewan’s nascent craft beer industry be if it had to live under Alberta’s rules for the last 20 years? I suspect most of the new players, like Prairie Sun, Rebellion, Nokomis and Black Bridge wouldn’t exist.

If we’re going to debate beer policy, let’s at least have all the facts out in the open.

Jason Foster is an Edmonton-based beer expert whose column appears semi-regularly in Planet S.