Why Ontario’s craft beer sector is under threat

Craft breweries in Ontario are warning they could close soon if “suffocating” alcohol taxes are not promptly addressed by the government.

Speaking in the Canadian press, the Ontario Craft Brewers president Scott Simmons said that although the association welcomes the recent announcement that sales of beer can expand to convenience stores by 2026, if the current tax structure remains then there may be fewer breweries left to take advantage of the change.

Simmons explained to a legislative committee that craft breweries are “just being stifled right now” and insisted that the government is “suffocating this homegrown industry, which I think would be a shame if another year goes by and there’s no change” and warned that, soon “we’ll see a big chunk of this industry disappear”.

Finance Minister Peter Bethlenfalvy has promised a review of alcohol support, taxes and fees as part of the implementation of the new system, however a spokesperson for the ministry declined to comment to press on the finer details that would be included in the upcoming budget.

Scott Blodgett, senior media relations advisor at the Ontario Ministry of Finance assured that “since 2018, the government has remained committed to increasing choice and convenience for consumers and providing opportunities for businesses to grow and thrive in a vibrant alcohol retail marketplace”.

Blodgett revealed that “in the months ahead, the government will continue to meet and consult with industry partners and others on an expanded alcohol marketplace that ensures choice, competition, and convenience while upholding Ontario’s high standards of social responsibility”.

Simmons highlighted how Ontario has the highest craft beer taxes in Canada, and if changes are made then this could assist in the industry’s growth rather than its downfall and urged the government to act quickly.

Describing the situation, Simmons said to the committee: “Here’s the choice before you: continue with the status quo and Ontario’s craft brewing industry and the 4,500 jobs and the CA$700 million in economic benefit could disappear. But, make common sense, measured and long-overdue changes to Ontario’s beer tax system [and] our industry could be bigger and stronger than ever, benefiting consumers, the industry, and the province’s bottom line. It’s a win-win-win.”

Simmons’ primary plea was for the government to essentially remove a tax of approximately 9% on beer cans. Currently, the environmental tax of 8.93 cents is reportedly on each non-refillable container of beer, wine and spirits. A tax which, according to Simmons, was introduced more than 30 years ago in an effort to limit the number of imports from the US, but is now scuppering the sector.

Simmons explained how, due to the pandemic, sales of draught beer dried up with the prolonged closure of bars and restaurants which forced many craft breweries in the area into either closing or existing only in packaged formats, a move that now sees most now offering their entire stock in cans.

Simmons outlined how the government has frozen the basic beer tax rate since March 2018 but noted how, with that freeze set to expire next month, there is an opportunity for the tax that is applied to local producers to be eased before any more rate increases begin again and push craft breweries towards closure.