Great Western Brewing expects ‘substantial’ hit on sales after beer markup
|globalnews.ca 19 Jul 2016 at 17:56|
Saskatchewan-based Great Western Brewing is expecting a “substantial” hit to its beer sales after recent changes announced by Alberta that will see a standardized beer markup rate for all beers.
The rate of $1.25 per litre will be applied to all companies, regardless of size, location or level of production.
“About 60 per cent of our company sales gets done in Alberta, so it’s very significant part of our company,” CEO of Great Western Brewing company, Michael Mocovcin said.
The brewing company said it’s been a major active player in Alberta for about 20 years.
Great Western Brewing is currently paying $0.47 per litre. After Aug. 5 when the changes take effect, that tax rate will rise to $1.25 per litre, a 166 per cent increase.
“We really don’t know what the impact is, but we expect it to be significant,” Mocovcin explained.
The changes are also a concern for the provincial government, who explained it is looking at ways to deal with the change in the beer markup.
“We’re going to look at what we need to do to offset if there are things to offset, and we’re looking at all options,” Don McMorris, Minister responsible for Liquor and Gaming, said.
“We’re not happy with this at all.”
Premier Brad Wall will be discussing the tax hike with Alberta Premier Rachel Notley at the premiers’ meeting in Whitehorse.
On Tuesday, he tweeted out that his office did offer a call.
Last wk asked my office to reach out to AB Premier s. A call was offered. We also said we d make statmt about AB beer tax, which we did Mon
Saskatchewan economists agree with the provincial government, saying the trade mark-up could be potentially dangerous for the beer industry.
Jason Childs is a professor that teaches “Beer Economics” at the University of Regina. He said the tariff goes against the progress made between the western provinces.
“It speaks to [a] reversal of a trend towards breaking down interprovincial trade barriers, even international trade barriers, but it’s starting to build them back up,” Childs said.
He said the most concerning part of the changes is the grant system that will apply to Alberta-based brewers alone.
“This looks like protectionism,” he said.
Childs explained it’s hard for neighbouring provinces like British Columbia or Saskatchewan to not retaliate in response.
“It’s going to be hard to say… OK you’re not letting our products in, we’re not going to let yours in. It’s that tit-for-tat idea,” he said.
It’s a barrier that will most likely translate to higher prices for consumers. According to Great Western Brewing, it’s going to have to raise prices to offset those costs.