Is the Alberta Government selling out its small craft breweries?

| October 14, 2012 | 14 Comments

Craft breweries Big Rock and Minhas will especially hard hit

John Hilton-O’brien is a Calgary-based writer and political activist.

By John Hilton-O’brien          

On Monday, Deputy Minister Thomas Lukaszuk is expected to erase Alberta’s budding competitive craft breweries. There won’t be any legislation or debate: it is an administrative matter, resolved by a caucus meeting and the stroke of a pen.

The mechanics are simple. For the past ten years, the Alberta Government has levied a counter on smaller craft breweries that was smaller than that levied against massive international producers. For the majors, with their multi-million hectalitre productions, almost a dollar per litre is added to the price at the till. For the minors, a sliding scale was adopted, typically adding half this rate. The differential rate is meant to allow smaller brewers to compete with the economies of scale possible to massive breweries like Molson’s and Labatt’s.

On Monday, Lukaszuk will propose to his caucus that they eliminate the differential rate for breweries making more than 150,000 or so hectoliters per year. This will run Alberta businesses such as Minhas Craft Brewery and Big Rock out of the market, forcing them to compete against brew runs of up to 850 million hectoliters – almost a thousand times their size.

While the breweries most affected are in Calgary, Lukaszuk will have his discussion at the meeting of the Capital Region Caucus. While all of the PC caucus will be invited to attend, the matter will be decided by a 15-minute agenda item of the PC’s Edmonton MLAs. Since it is a regulatory matter rather than legislation, no public debate will ever be heard.

The spins are somewhat predictable, if spurious.

Lukaszuk will argue that the lower rate constitutes some sort of “subsidy” to Minhas and Big Rock. It’s obviously not true: Minhas and Big Rock will not actually pay a dime less tax. The levy goes direct to the consumer. In fact, our “subsidized” rate is roughly a hundred times the amount charged to similar producers in the United States.

It will also be argued that the point of the reduced levy is to protect local producers only. This seems to specifically target the Minhas brewery, which was originally forced to ship its material to Wisconsin for brewing. In 2006, a policy change aimed specifically at Minhas appeared, prohibiting contract brewing: Minhas was given six months to build or purchase a brewery – anywhere – or go out of business. They were able to purchase one of the Wisconsin breweries, foregoing longer term (and more expensive) plans to build a brewery in the Calgary area.  Minhas has since built a Calgary brewery, and announced plans to move all of its production lines there.

All of this is beside the point: the lower rate currently applies to all small brews, regardless of origin. It’s an attempt to be compliant with trade treaties like NAFTA – protectionism has never been involved. We wanted to create an environment in which we could export our beer – not to create a protected market.In 2004, in fact, the AGLC rejected a push for protectionist measures because it would have violated trade agreements such as NAFTA.

Another argument appears to be a bit of snobbery. Minhas beer, it is argued, is not really a “craft” brewer. Their beers are sold at the discount level, typically $1.25 for a can including deposit (the can itself being a craft beer no-no.) The argument also targets Big Rock, whose PC Lager’s regular price is $12.35 for a 15-pack. Those who believe that the purpose of the lower levy is to protect the craft beer industry would leave out Minhas and Big Rock – because they are not “craft” brewers.

On a deeper level, the move reflects a level of administrative incompetence on the part of the Alberta government, reminiscent of the oil royalty review.

Lukaszuk’s initiative marks the ninth time that the government of Alberta has conducted a review of the policy in ten years. Needless to say, frequent policy changes create an unstable investment market – which makes it hard to raise the capital necessary to build or expand a brewery. The very instability of the administration tends to undermine the industry.

Lukaszuk himself has no background in the alcohol industry, and no familiarity with the file. It seems likely that he is susceptible to clever lobbying. Molson and Labatt’s have their very own industry association, and a tremendous capability to hire lobbyists. It seems quite possible that Lukaszuk thinks he is speaking to the vast majority of beer producers – when he is really speaking primarily to people prepared and often paid by the large beer producers, who are no longer Canadian, except in their branding.

Our former “Canadian” beer companies are now multinationals:

  • Molson is now part of the South African Brewery (SAB) MillerCoor-Molson. They are based in South Africa and the USA. Commanding 40% of Alberta’s market share, they control 35 labels including Rickards, Creemore, Heineken, Foster’s, Granville Islad, and Leinenkugel.
  • Labatt is now part of Anheuser-Busch imBev Global.  Based in Belgium, they control Budweiser, Kokanee, Stella Artois, Beck’s Alexander Keith’s, Guiness, Lakeport, Lowenbrau, and Lucky Lager. They command 40% of Alberta’s market share.
  • Sleeman’s is now part of Sapporo Sleeman’s, in Japan. They control 18 brands, including Sleeman’s, Old Milwaukee, Pabst, Stroh’s, Schlitz, Shaftesbury, Blanche de Chambly, and Red Bull Beer. They have 8% of Alberta’s beer market.

How do the locals fare against these multinational behemoths? Big Rock has 7% of the Alberta market, and Minhas has 4%. All the others together have roughly 1%.

It seems likely (and industry sources confirm) that Lukaszuk’s push to remove Big Rock and Minhas from the Small Brewer’s Mark Up regime has to do with this market share. By making these companies less competitive or driving them out of business, the majors stand to gain 11% of Alberta’s lucrative beer market.

Does this sound fanciful?  Think again: the multinationals have bought and closed dozens of local breweries in Canada. Here’s a few examples that may be familiar to beer aficionados and Albertans:

  • Lucky (Vancouver) closed by Anheuser-Busch in 1982
  • Lakeport (Hamilton) closed by Anheuser-Busch in 2010
  • Granville Island closed by South African Brewery in 2011
  • Molson (Edmonton) closed by South African Brewery in 2007
  • Molson (Calgary) closed by South African Brewery in 1989
  • Molson (Lethbridge) closed by South African Brewery in 1990
  • Banff Brewing was closed by Sapporo in 2000
  • Joseph Waner (Calgary) was closed by Sapporo in 1999
  • Peak Brewery (Canmore) was closed by Sapporo in 2000
  • Shaftesbury Brewing was closed by Sapporo in 1999

There are literally dozens more of such examples. Manitoba no longer has a single brewery: the multinationals have moved all brewing out of province to achieve greater economies of scale.  I think it is fair to say that the agenda of the multinational brewing companies does not march well with local brewing.  These guys play for keeps.

In Alberta, the multinationals do keep paid lobbying staff. One in particular caught my eye: Gord Olsen, who was a senior bureaucrat in Klein days, has registered as a lobbyist for Labatt.

More interestingly, sources in the PC party tell me that Olsen was the campaign manager for Premier Allison Redford’s local campaign in Calgary-Elbow. This certainly makes him an effective (and doubtless expensive) lobbyist – he will literally have her cell phone number. It also explains why this move is being done by the Deputy Premier, rather than the Solicitor General or the AGLC who usually make decisions about alcohol regulations.

If true, this makes us wonder about the ethics of the situation.  We wouldn’t allow a person who was working for the government to be lobbying ministers a month later. Why are we okay with allowing someone who was providing direct partisan services to the minister to do the lobbying?

Technically, there is no law against this. But the situation looks pretty clear: the multinational brewers hired a PC crony to lobby the Premier to drive their competitors out of business. On Monday, at 8:15, he will have succeeded.

Alberta’s beer is about to smell as bad as its government.

 

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Comments (14)

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  1. RJ Pisko says:

    Not surprising. Alberta Conservatives love to steamroll small scale enterpreneurial efforts in favor of the big boys. The big guys have more to offer Alberta Government puppets. This country’s right wing has its nose very far up Mitt Romney’s butt – especially the mindless who continue to vote radical right.

  2. Alan says:

    Well written article John with good background. Sounds like the big boys once again want to push their weight around and throw the little guys out, only to raise beer prices once the competition has left the playing field.

  3. Riley says:

    Great Article, I didn’t realize who owned the big brewers, what a shame. And look at all the Breweries they have closed, the Alberta Government should be protecting Minhas and Big Rock not try to feed them to the multinationals. Low beer prices thanks to these small brewers how is that a bad thing. I will remember this during election time!

    Note to Alberta Government: Smarten Up! This is starting to sound like Oil Royalty reviews!

  4. marion davis says:

    thanks for putting the article out there John it sounds like more mom Redfraud government, everything for the big boys

  5. Bucky says:

    Awesome News!!! About time we close the MINHAS Tax loophole and start adding around $6 million a year back into the tax payers of Albertas pockets. Now the money can be used in several other proper uses, such as Hospitals, Health care, Education, etc. Albertans would rather see their money NOT used to subsidize Wisconsin jobs at the Minhas Brewery, then shipped off to a Tax shelter in Barbados where Minhas head office is located. (Mountain Crest SRL, 4 Moravian Gardens, Maxwell, Christ Church, BB15151, BARBADOS) WE should also ask how much Minhas has donated over the years to certain members of the PC party of Alberta, including hiring the X CEO of Aglc to run their operations? Its about time!!!!!!!!!!!!!!!!!!!

  6. Seibab says:

    Are you kidding the big guys, this has nothing to do with protecting the big guys, this has to do with logistics and scamming Alberta tax payers – meaning YOU if your Albertan! Mountain Crest is located in Wisconsin, they export their beer out of the USA into Canada. They receive Alberta’s small brewer mark up rate, which was designed to benefit Alberta’s small breweries. MISTAKE the opposite happened. The issue in Alberta is that everyone that imports here is receiving the tax break.
    It is irrelvant that Minhas just opened a Calgary brewery, it is what just happened the millions they made since 2003 on Albertan’s dime. They are scared because their work horse of a brewery in Wisonsin (which is the 14th largest in the USA) is now going to face the taxes they should have all along.

    It was not intended to benefit everyone that exports from the USA and our friendly neighbouring provinces are also guilty. It seems like accidental legalized fraud that the government of Alberta was trying to encourage new business & growth in Alberta, however everyone some how got to use the system. For more info read the facts in the Alberta newspapers, this guy is probably working for Minhas due to his facts are totally incorrect.

  7. George says:

    Minhas doesn’t BREW in Alberta. They brew in Wisconsin. Their brewery that just opened in Calgary seems to be a last ditch attempt to continue to get the million of dollars a year in tax subsidies they recieve now from a brewery they run completely out of the US. John, please check your facts before publishing because it seems that you might be susceptible to some “lobbying” yourself. You should try contacting some of the legitimate small brewers in Alberta and get their opinion.

    http://www.huffingtonpost.ca/mobileweb/david-menzies/minhas-brewery_b_1270464.html

  8. John says:

    Hmm. I see some people here are very excited about the HuffPo article that (a) makes massive claims without evidence, (b) is hysterical, and (c) uses links that just don’t lead to the facts they pretend to.

    Read some more, george, Seibab, and Bucky.

  9. George says:

    John – when labeling the Huffington Post article as “hysterical” and “making massive claims with no evidence” you might want to use some discretion as you don’t seem to be too concerned with the code of ethics a journalist should abide by either.

    I’m sure you know, as a journalist, one should (a) make certain that headlines do not misrepresent and (b) test the accuracy of information from all sources and exercise care to avoid inadvertent error.

    How did your article do in these areas?

    Well, your title “Is the Alberta Government selling out its small brewers?” is completely misleading due to one word – ‘small’.

    To be frank – you’ve also used the word “its” rather loosely because does Alberta really “posses” a Minhas Craft Brewery when they have only brewed a handful (we’re talking less than five) of batches of their beer in over 10 years of business in Calgary?

    But I digress… Here’s a quote straight from Manjit Minhas, co-owner of Minhas Brewery.

    “Our brewery is now the 11th largest in the world and worth over $100 million. We own, create and sell over 50 different types of beers and spirits.”

    I’m very curious as to your idea of “large” if this is your idea of small.

    Let’s name the source here, to keep the integrity (or “evidence” as you refer to it):

    http://www.darpanmagazine.com/2010/09/manjit-minhas-owner-and-inventor-of-minhas-beer/

    Now, I think she’s stretching it with the 11th largest in the world, but this IS the same brewery you’re referring to in your article, right?

    So let’s just say your definition of ‘small’ isn’t quite accurate and I’ll give you this one as an “inadvertent error”.

    Now, let me say I have only the utmost respect for Manjit Minhas. I think she is a sound and intelligent businesswoman and if someone let me know about all the tax breaks a brewery based in Wisconsin and employing Wisconsin workers could get while selling in Alberta, all while pretending to be a Canadian company because I myself am Canadian and because I put a maple leaf on the can – I’d be doing it to.

    Her brother on the other hand, doesn’t seem to have gotten the memo that as a brewery they’re actually doing quite well. He was quoted saying in the Calgary Herald “if they pull the rug out from under us — well then, I guess it was a mistake to open a brewery in Alberta, wasn’t it?”

    That is likely a very rare and expensive rug being pulled out from underneath the $100 million brewery.

    I don’t have an issue with Minhas Craft Brewery. They are large enough that they will be able to survive, no matter the tax changes. I do have an issue with people covering up the facts and bending the truth in an attempt to promote their political or personal agendas.

    Let’s move on to another point… The first LINE of your piece “On Monday, Deputy Minister Thomas Lukaszuk is expected to erase Alberta’s budding competitive craft breweries” is entirely inaccurate.

    First of all John, Monday is long gone, where’s the bloody announcement?

    And second: how is Lukaszuk erasing the craft breweries? Did you even attempt to speak to the SMALL (we’re going by my definition now) brewers of Alberta?

    I’ll fill you in on their views (but thank you for speaking for them).

    Here’s a quote from Bill McKenzie, CEO of Wild Rose Brewery, when he spoke to the Calgary Herald about the proposed changes;

    “…these changes would help Alberta’s local, craft beer industry grow.”

    Huh? Well, he’s obviously in the minority. These changes are only meant to benefit the multinational brewers!

    But wait… here’s a quote from Neil Herbst, co-owner of Edmonton’s Alley Kat Brewery from an interview with the Edmonton Journal;

    “Basically what this is about is leveling the playing field and enhancing brewing industry in Alberta…”

    What in the hell? Why don’t these small brewery owners seem to be worried that they are going to be “erased” as your article suggests?

    John, if these changes were going to annihilate the small brewers of Alberta – why would eleven small (remember, my definition – not yours) brewers FROM ALBERTA write to the Deputy Premier in the first place and ASK for amendments to the tax?

    I could go on, but bottom line John – YOUR article is biased, unfounded and hysterical. Have you ever heard the phrase “he who lives in a glass house should not throw stones”?

    As for the Huffington Post article making “massive claims with no evidence”, if you would like to point out which “claims” you’re referring to, I’d be more than happy to send you the “evidence”.

    To attempt to keep the integrity of my response, all the articles I’ve quoted from, as well as a few more that delve into the issue a bit further, are listed at the bottom of my response.

    And John, you might be wondering why I am so impassioned about your little piece on the Beacon News.

    Full disclosure, I do have a personal interest in Alberta breweries, the legitimate ones. Breweries owned by Albertans, who brew in Alberta, who purchase their product and ingredients in Alberta and who employ other Albertans.

    Breweries that register their trademarks to Alberta and who genuinely want Albertans to have as diverse a craft brewery experience as people in BC and Ontario have.

    People who have actively chosen to open their breweries in Alberta, no matter how much easier it would have been in to open in the US or in another province.

    They are fully Albertan breweries, no matter the hardship, and this is why they deserve the respect of fellow Albertans. Albertans like you, who should, at the very least, attempt to be unbiased in your reporting and in your suggestions surrounding their livelihood.

    John, if you would like to speak to genuine small breweries in Alberta, please let me know. I can get you in touch with them, although I don’t know why you didn’t try in the first place.

    Last piece of advice – read more John and have some respect.

    Here’s some articles for you:

    Calgary Herald

    http://www.calgaryherald.com/business/Craft+brewers+push+changes+Calgary+beer+makers+board/7346130/story.html?fb_action_ids=10152186679845602&fb_action_types=og.recommends&fb_source=aggregation&fb_aggregation_id=288381481237582

    Edmonton Journal

    http://www.edmontonjournal.com/life/Province+considering+changes+help+Alberta+microbreweries/7340296/story.html

    Macleans

    http://www2.macleans.ca/2011/11/01/strange-brew/

    Huffington Post

    http://www.huffingtonpost.ca/david-menzies/minhas-brewery_b_1270464.html

    http://www.huffingtonpost.ca/david-menzies/wildrose-smith_b_1441170.html

    http://www.huffingtonpost.ca/david-menzies/alberta-small-breweries_b_1112188.html

    Alberta Liberal Caucus – MLA Kent Hehr

    http://www.albertaliberalcaucus.com/index.php/site/News_story/beer_markup_rules_put_local_breweries_bottoms_up_says_hehr_october_3

    http://www.albertaliberalcaucus.com/index.php/site/News_story/strange_brew_causing_a_stir_says_hehr

  10. John HOB says:

    George;

    Seriously? Minhas and Wildrose brew roughly 250k litres per year. Lukaszuk is trying to force them to compete directly with brewers who brew around 850 MILLION litres. We can talk about Minhas, for instance, being the 11th or 14th largest brewer in Canada or the US. However, this means that they are three orders of magnitude down from the multinationals.

    As far as respect goes, George, you are making lots of criticism. . . anonymously. Sorry, but I have very little respect to give you on that. The articles you come out with – drawn from places like the Alberta Liberal Caucus – tell us that you have a big, big load of political bias. Frankly, it sounds like hooey.

    As it happens, Lukaszuk apparently withdrew his piece from the order paper. The ambush has been voided, mostly because of a reaction within the PC caucus. He’s now on vacation. Big Rock and Minhas now have time to hire their OWN lobbyists, and get in the game.

    And that, George, is what really good journalism can do. When it is timely, it actually helps with decision making. And by the by – journalists aren’t the guys who write the headlines: that’s a different department altogether.

    So, please tell us who you really are, tell us your connections to the brewing industry and the Liberal Party, and drop the condescension. You’ll get a lot more respect. We’ll even think you might have some ethics of your own.

  11. Cotton Chiltom says:

    Wow John – you really got your butt kicked!
    Better do some research before you pick on
    people who have some real facts and do their
    homework. Good Luck – As they say – “don’t
    quit your day job”.

  12. steve says:

    Lock minhas out…the sooner the better!

  13. John HOB says:

    Well, no, Chilton.
    .
    “George” didn’t actually do any research. He just gave a laundry list of news stories from a Google search, none of which had any new information.
    .
    I covered the two arguments they contained under “craft beer snobbery” and “misguided protectionism.”
    .
    So, no, “George” contributed nothing but partisan heat and arrogance.

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