In a trade battle over beer, Saskatchewan companies such as Great Western Brewing could stand to lose a lot of business under Alberta’s new tax regime.
Right now, smaller provincial breweries are classed as regional and pay a lower tax rate to export into Alberta.
As of Aug. 5, however, those companies will fall under the same tax rate as multi-national breweries such as Labatt or Molson.
The mark-up on beer made outside Alberta amounts to $1.25 per litre.
Michael Micovcin, CEO of Saskatoon-based Great Western Brewing, said 60 per cent of the company’s sales are in Alberta.
He said the new tax policy will force Great Western to significantly increase the price of a case of beer there.
“Brewhouse is our largest brand in Alberta. It sort of competes in what we call the value price segment – priced everyday below the big national brands,” Micovcin said. “We would expect to see, with this new tax rate, the price of Brewhouse to increase by almost 25 per cent, or almost $7 a case overnight”
The new Alberta tax system would give preferential treatment to Alberta-based breweries, which don’t have to pay the higher rate.
Saskatchewan Liquor and Gaming Authority (SLGA) Minister Don McMorris is calling it a subsidy that flies in the face of the New West Partnership meant to open up trade between provinces.
Micovcin is waiting to hear more about exactly how the Alberta breweries will stand to benefit, but he is sure it will put regional breweries in other provinces at a competitive disadvantage.
“It’s not only devastating for us, I think it’s devastating for the Alberta consumer,” Micovcin said. “The risk is there could be beer brands that just simply pull out of the province because they just can’t compete, given the new economic realities of doing business in Alberta.”
He said smaller microbreweries in B.C., Saskatchewan and Manitoba are currently taxed at an even lower rate, around $0.20. If they have to pay the same rate as a multinational company to sell in Alberta, Micovcin doesn’t see how the craft beer industry could compete at all.