Since my post on Wednesday on the Alberta budget and the change to mark-up rates (see here) I have been trying to keep my mouth shut and let readers say what they want to say in the comments section. After all, I rambled for 1500 words or so therefore the least I could do is give some space to others to respond.
I must say the level of debate on this site has been a lot more thoughtful and respectful than stuff I have seen elsewhere – so thank you all for that. I encourage it to continue – there is no limit to how many comments can be added to a post, so debate away!
I am fascinated by the shape the debate is taking over the past couple days. I have read media stories, had many private exchanges with people on all sides of the issue and done a couple of media interviews myself (such as for this Global TV story). Lots of interesting takes have been shared. In many ways they parallel the three perspectives I discussed in the post, but given the specific context of the change, I am very interested in how they are each expressing themselves.
Here are a few observations a few days in, in no particular order:
- First, I have learned that on the same day as the budget, Connect Logistics, the private monopoly contracted by the previous government to handle warehouse and distribution of all liquor in the province (except Alberta-based producers who are allowed to self-distribute if they choose), announced a set of fee increases starting in the new year. They charge for a variety of things and their rates are going up between 2% and 40%, and they are adding some new fees for longer term storage. The biggest increase is in fees for using the cooler space – something only affecting beer. So an interesting double whammy for imports. Local beer are affected as well, since most use Connect for at least some of their distribution.
- Media reports have generally been favourable to the policy, seeing it as a benefit for local companies. However, many misinterpret or only partially understand the change. Many emphasize the mark-up separation between small brewers and the big boys, but downplay the effect on imports.
- In private conversations with some agents and non-NWP breweries, I am a bit surprised at the speed of the effects. A number of accounts dropped some of their imports the very next day. Whoa. That said, I am also getting reports of many accounts pledging to keep the product, despite the price increase. It will take a while to really get a sense of how this will affect imported beer. The price increases are immediate, but how it ripples through the market is still hard to tell.
- I am growing increasingly aware that, like all policy, there will be some collateral damage. I am not overly concerned for the fate of Stone Brewing or Innis & Gunn if their sales drop due to the change. They have solid, sizable home markets and plenty of options around the continent to sell their beer. However, smaller breweries, especially Canadian breweries with more restricted options in terms of alternative markets. I don’t mean to single out Yukon, but many people, including Alberta brewery people, have expressed to me their empathy for Yukon’s plight. Their home market is small (and they already rock it pretty well) and so Alberta is a crucial market for them. It is unfortunate, especially in the short term.
I am finding much of the debate, even on this site, has lacked context. People are reacting strongly to the change, accusing the government of protectionism. If we take a step back, it is clear Alberta continues to have the most open borders in the country. There is no body in Alberta approving or denying applications (sometimes somewhat arbitrarily) to bring a beer into the province. Every other province restricts market access directly. Alberta’s ONLY policy lever is the mark-up policy. As others have said, Ontario or Quebec or Atlantic breweries are negatively affected by this shift – and as a supporter of craft beer across the country I lament that – but today they still have better access to Alberta than Alberta breweries have to their provinces. If Alberta is being “protectionist”, what do we call Ontario? A fortress? I would challenge those mobilizing against the policy to consider spending a similar amount of energy lobbying their own governments to open their borders if it is that important a principle to them.
- I find the arguments about consumer selection and the harm to people’s livelihood to be valid and it is important to keep sight of those things. This does affect real people. Some, however, are turning the issue into an anti-tax rant, trying to mobilize people against the government for hiking taxes on hard-working businesses and that somehow the increase is illegitimate because the government hasn’t earned or deserve it. I find this argument both specious and disingenuous. First, the mark up is applied to the wholesale price of the beer – the brewery is not paying more, the consumer is. Second, taxation is a legitimate tool for economic and social policy. I appreciate some have the view that no tax increases are legitimate, like our good friends over at the Canadian Taxpayers Federation. However, I take the position that a tax should be judged based upon what it achieves. This is a policy change aimed at generating economic activity and jobs. Whether it will remains to be seen, but that is the goal and it is a legitimate one. And besides, everyone, we are talking about beer – a discretionary item that is entirely within the personal control of the consumer. Don’t want to pay higher liquor taxes? Buy less liquor.
- I think we all (me included) need to keep our perspective on this policy. It is a significant shift but not a revolutionary sea change. The beer market in Alberta will continue to purr along. I don’t mean to diminish the significance for people whose livelihood may be directly affected, but those are fairly small numbers. Some breweries will pull out of the market; others will increase their prices. But I predict Alberta will continue to have the best import beer selection in the country and maybe, must maybe, in a few years we will also have a more vibrant and exciting local beer scene.
Keep up the debate, here or in the previous post. Thank you to everyone who has commented and I pledge to keep this a respectful space for healthy disagreement and discussion.