Last fall I reported on how the Alberta government was reviewing Alberta’s beer mark-up policy. In short, they were re-examining the lower rates for beer made by small producers in Alberta and for beer imported into Alberta from mid-sized breweries (to over-generalize the issue). At the time, a decision was imminent, and the Alberta craft brewers had banded together to form a common lobbying position – a new and encouraging development.

Since then it has been like a scene from Waiting For Godot (if you don’t know it, Wikipedia it). The government has announced nothing. My sources say that a proposal went to the Conservative caucus last fall but was shot down. The political issue was that each interested party (and there are ostensibly three different positions – at least among Alberta beer interests) had enough connections to the ruling party to give someone somewhere bad dreams about the wrong decision. And, hence, no decision.

That, in and of itself, would not be worth a post – kind of a dog bites man story. However, recently I received copies of recent letters/documents to the government from all three sides in this debate. And that, my friends, makes for a (relatively) more interesting story.

First up are the 11 smaller Alberta breweries – every one (currently brewing) in the province. They put out their position last summer, which was the topic of the post I link to above. In February they sent out a second letter, essentially re-iterating and clarifying their previous position. A link to the letter can be found here. In terms of their policy position, there is not much new, although they supplement it with some interesting facts, such as they employ 1,185 people directly and – they claim – make up 7% of Alberta’s beer market. That number surprised me, as it is higher than what I have heard in the past – which is closer to 3%. I suspect it might include Big Rock’s total Canada-wide production, which might skew the numbers, although I could be wrong.

In short, they repeat their call for a lower mark-up for small breweries who make their product in Alberta. They also recommend graduating the mark-up (rather than the all-or-nothing approach currently).

Next up are the big boys – Canada’s National Brewers (yes, that is their organization’s name), which is, essentially Molson, Labatt and Sleeman. Their letter, which you can read here, might surprise some people at first. Their basic position is in support of the Alberta breweries. They call for a lower rate for Alberta-produced craft beer, and for that rate to be graduated. Their position is fascinating, and suggests that their main worry are the low-cost producers, including Minhas, Great Western and Pacific Western. Evidence is found in this quote:

virtually all the beer benefitting from the AGLC subsidy that is brewed outside Alberta is not the premium craft beer that the program was intended to promote. Almost all of this beer is deeply discounted beer that is sold into the Alberta market at price points far below true Alberta craft brewers and non-subsidized brewers, negatively impacting business models of brewers invested in Alberta.

They call it a subsidy, which is strictly inaccurate as it is a lower tax rate rather than a government payment, but that is a fine point. They, too, boast of their economic impact and job creation – “over 1000 Albertans” – and make some very specific claims about the cost of the lower mark-up rates to taxpayers: $24 million which they claim 60% goes breweries outside Alberta. They indicate support for a lower mark-up for Alberta breweries, but reading between the lines suggest something less than full support. They call for the maximum value of the mark-up to a brewery and  “the size of the breweries eligible to receive the subsidy, must be reduced to where the subsidy’s potential to distort normal free market competition is minimized”.

My spidey-senses tingle upon reading that. They offer no specific production volumes at which the reduced mark-up should end, and their main concern seems to be that breweries shouldn’t be too big and receive the lower rate. It feels a bit like an uneasy alliance to me, as I suspect that if the big brewers’ worries about discount beer is addressed, they would fairly quickly take aim at keeping the threshold low even for Alberta breweries.

This brewery is not located in Alberta. Nor was it founded in 1845.

Finally there is a fact sheet from Minhas (which you can read here), which attempts to dispel some “myths” about Minhas. They make an argument that the lower rate supports “greater selection” and also trumpet their Alberta connections and economic impact (70 Alberta jobs in their case). They deny they are a Wisconsin brewer: “we live and raise our families in Alberta” and claim they only brew in Wisconsin (which you would think would classify them as a “Wisconsin brewer”, but I digress) because they were forced to: “We only brew in Wisconsin because we were forced to comply with AGLC policy in 2006”. This is a nice sleight of hand, conveniently forgetting they have ALWAYS had their beer brewed in Wisconsin and only PURCHASED the brewery there when threatened with losing the lower mark-up. I like that they somehow blame the government for the fact they have chosen to not locate their brewery in Alberta all these years.

They raise the spectre of NAFTA, that the agreement forbids setting policy that discriminates based on brewery location. This is the first time I have heard this specific argument, which is interesting. However, they seem to overlook the fact that most other provinces have preferential rates for in-province breweries, which makes me think the argument is not as persuasive as one might think. They also offer a good analogy for the mark-up/subsidy debate – comparing it to progressive taxation. I think that makes sense.

My favourite line in their fact sheet is this one: “We are the 14th largest brewer in America – true. But this is like saying the Alberta Party is the 5th largest in Alberta.” I find that very funny, especially since the Alberta Party is on the verge of folding. A point well taken, but who would want to associate themselves (even accidentally) with that rag-tag failure of a party?

I am struck how defensive Minhas’ document reads. They are not making a pro-active case for a particular policy, but simply seem to be saying “we are not bad guys”. Maybe this is because it is a fact sheet – I don’t know if they also had a letter. Still an odd tone.

So what to make of all of this?

On one level, nothing. The government does not appear to be moving on this issue, and so in many ways these letters are for academic interest only. On the other hand, it exposes in a very stark way the divisions and cleavages in Alberta’s beer industry. Each side is arguing quite explicitly for its own self-interest, trying to couch its arguments in the public interest. This is not a criticism – that is what they are supposed to do. It is the government’s job to weight each position against the public interest.

But I can’t help but wonder, where is the consumer in this debate? What works best for us as beer drinkers? And what of the other smaller Canadian breweries, like Yukon, Paddock Wood and Half Pints? These are the fourth and fifth set of interests in this debate, and there are no letters representing them.I remain convinced that a simple answer is not possible – which is why the government is paralyzed. But the more I consider the issue’s complexity, I become increasing convinced that a solution is possible. It would just be more complex than the government (and possibly the industry) would be willing to accept.

How about a low rate (or two) for Alberta small brewers. The numbers are negotiable, but for argument’s sake let’s say 10 cents/litre for under 20,000 Hl, and then 20 or 25 cents under 50,000 Hl. After that they could jump to 40 or 50 cents until a decently high level – like 400,000 or 500,000 Hl when the full rate kicks in. Out-of-province brewers under 50,000 or 100,000 Hl get the 40-50 cents rate. After that they get the full rate. As I say the exact numbers can be re-worked.The principle is this: the smallest Alberta breweries get a special rate to promote and encourage craft brewing in the province; small craft brewers outside Alberta, who suffer from similar issues of economics of scale, productivity, etc., get a decent rate to keep their product affordable; mid-size and large breweries wanting into the Alberta market pay full freight. My logic is that for breweries of that size, Alberta is not a life-or-death situation. They have a sizable market elsewhere and Alberta is gravy. Smaller brewers like Yukon and Paddock Wood are not unduly hurt – since they rely heavily on the Alberta market – but there still is an Alberta-first policy incentive.Definitely not perfect. Just a random thought as I think this through. I doubt it will ever see the light of day, however.