‘Sneaky’ Policy Change Gives Multinational Brewing Company Local Producer Status In N.S.
HALIFAX – On April 1, the Nova Scotia Liquor Corporation quietly put into effect a new policy that changed its definition of a “local beer producer.”
Passed to “ensure fairness amongst all beer producers,” the Local Beer Production Policy makes every brewery in Nova Scotia subject to the same “taxes,” regardless of their size.
But the province’s craft brewers say the policy is anything but fair. Many believe it was created almost entirely for the benefit of one multinational company.
Kirk Cox is the executive director of the Craft Brewers Association of Nova Scotia (CBANS). He says the new policy does little more than give Labatt Breweries a major tax cut at the expense of small, local brewers. Labatt operates the Oland Brewery and Alexander Keith’s Brewery in Nova Scotia.
“The only thing the policy does is it gives Labatt Breweries, which is an international company not based in Nova Scotia, a new, $750,000 taxable benefit. And that’s the only reason the policy was brought in. It had nothing to do with local producers,” he recently told Huddle.
CBANS President Emily Tipton expressed similar sentiments in a July 13 letter to the NSLC.
In it, Tipton writes that the CBANS “in no way” supports the new policy and believes its consequences “will forever harm the growth trajectory of the craft beer industry in Nova Scotia.”
It’s All About The Taxes
There are three categories of brewery in Nova Scotia: Commercial, Craft, and Nano. Breweries are sorted into those categories based on how much beer they produce in a year.
Any brewery that produces more than 15,000 hectolitres (that’s about 4,392,000 bottles) is considered a commercial brewery.
That’s important, because the NSLC charges a “tax” (which it calls a markup) on all beer produced in the province. Prior to the new policy, craft and nano breweries were charged a smaller markup to help them compete against bigger, more established players.
The NSLC’s new policy gives “commercial” breweries access to that same reduced markup on the first 15,000 hectolitres of beer it produces. For a commercial brewery that used to have to pay full markup on all its beer, that new classification can save it as much as $750,000.
Labatt is the only “commercial” brewery in the province.
“[This is essentially] a grant in perpetuity, for every year, to Labatt Breweries for $750,000,” Cox says of the new policy. “That benefit of $750,000, most craft breweries in Nova Scotia in a year don’t have sales of $750,000.”
Labatt Owned By Same Company As Budweiser, Corona
Labatt was once a Canadian company but is now part of AB InBev, the multinational conglomerate that owns Budweiser, Corona, and hundreds of other popular beer brands.
However, Labatt does operate the Oland Brewery and Alexander Keith’s Brewery in Nova Scotia. It’s those facilities that let the company technically qualify as a “local producer” under the NSLC’s new policy.
But the fact that Labatt is now getting the exact same treatment as small, local brewers infuriates Cox.
“They’re not a craft brewer by any stretch of the imagination, but because they simply brew beer on a mass scale in Nova Scotia, they’re considered a local producer in Nova Scotia. So they receive the exact same markup benefits as a craft brewery does,” he said.
“I bet you … a day’s production [for Labatt] equals more than what most craft breweries produce in a year.”
Wade Keller is Labatt’s director of corporate affairs for Atlantic Canada.
Keller did not agree to an interview or answer direct questions from Huddle. However, in 2016 he told the CBC the Oland Brewery produces approximately 180 million bottles of beer a year. That’s equivalent to more than 600,000 hectolitres.
Policy Creates ‘Level Playing Field,’ Says NSLC Rep
In a short written statement, Keller touched briefly on the NSLC’s new Local Beer Production Policy.
“Recent changes to the NSLC mark-up structure ensures all brewers in Nova Scotia, regardless of size, are treated equally,” it read.
The NSLC’s Beverley Ware gave a similar explanation in her own written statement.
“The intent of this policy is to create a level playing field for all local beer producers and to ensure a more consistent application of the mark-up structure,” Ware wrote.
In her letter to the NSLC, Tipton argues Labatt should not be considered the same as the province’s craft breweries.
She points out the company has “prime NSLC space, lucrative national and international marketing campaigns in our market funded by international sales, a microbrew permit, ‘grandfathered’ off-site allowances, and many other resources locally owned craft breweries do not have.”
“Giving the world’s largest multinational beer producer the same benefits as a local craft producer is akin to calling McDonald’s a local restaurant,” she writes.
Policy Rollout ‘Sneaky,’ Brewer Says
As the Nova Scotia Auditor General’s recent report indicates, many craft brewers already believe the NSLC doesn’t have their best interest at heart. That feeling was only heightened by the way this new policy was rolled out.
“The impact of this policy and the manner in which it was developed and introduced casts serious doubt on whether the NSLC understands and/or supports the local craft brewing industry,” Tipton wrote in her letter.
The NSLC board voted on the policy change in February and officially put it into effect on April 1.
According to Cox, craft beer producers weren’t consulted before the decision was made and were only notified of the changes by email as it was coming into effect.
“We hadn’t talked to them about any such thing. [This policy is] supposed to be designed for our industry. We find out about it in an email in April. The board of directors made the decisions on the policy in February and we didn’t know about it,” Cox said.
In her letter, Tipton called it “deeply troubling” that the local craft beer industry was “not consulted at any point” in the development of the policy.
Andrew Tanner, who’s one of the partners at Mahone Bay’s Saltbox Brewing Company, says he and many other craft brewers are frustrated with the NSLC’s lack of transparency.
“It just comes across as sneaky, it comes across as ‘we’re doing this because we make a lot of money off Labatt, here’s a bit of cash back to them’,” he said. “It just doesn’t sit well with us.”
Tipton called on the NSLC to meet with the Craft Brewers Association at its earliest opportunity, saying it is “critical” to discuss what can be done to address “the damage this new policy will do.”