Challenges & Opportunities: A Bitter Draught


Liquor legislation can be a contentious subject within the foodservice industry — so much so that Restaurants Canada launched its Raise the Bar report card on provincial liquor policies for bars and restaurants in 2015 to start a dialogue on these challenges. The reality is licensees face a number of roadblocks associated with liquor policies in place across Canada. Excise tax, interprovincial-trade barriers and a lack of wholesale pricing are among the key pain points operators identify.

“The most challenging part for us is from a purchasing perspective,” says Dan Kennedy, co-owner and operating partner at Toronto-based Amano Pasta and Union Chicken. “Not only is there no discount for buying in bulk, but in a lot of cases, we actually pay a little bit more than the public does. The average person who isn’t in the restaurant industry would probably assume that we get [our liquor] for less because of how much we buy; for that reason, when they look at sell price in restaurants, they may think they are being gouged.”

This issue is one that plagues licensees across the country, with the exception of those in Alberta, the only jurisdiction that offers true wholesale pricing for all licensees — although the P.E.I. Liquor Control Commission offers discounts to licensees and Nova Scotia offers a wholesale discount on wine and spirits.

“I would always like to see more flexibility on licensee pricing, especially now with the cost of labour going up — it naturally follows that the selling price of all of our products is going to creep up throughout the industry,” Kennedy adds.

“It’s a very restricted industry, especially [given that] we’re 90 years post-prohibition,” agrees David Farran, president of both the Alberta Craft Distillers Association and Eau Claire Distillery. “We’re still living through some of the legacies of that [era].”

One such legacy is interprovincial-trade barriers — an issue that has recently received significant media attention due to a case currently in front of The Supreme Court of Canada. Colloquially known as The Comeau Case, or the “free-the-beer” case, it brings into question the constitutionality of interprovincial-trade barriers (specifically New Brunswick’s Liquor Control Act), as they are contravened under section 121 of the Constitution Act, 1867 (see sidebar).

“On a national level, [an] excise tax is something we should be looking at,” adds Farran. “The U.S. has just made some huge moves to reduce excise [tax], which makes us less competitive.”

As of the March 2017 federal budget, tax currently represents 44 per cent of the price on a bottle of wine, 50 per cent on beer and 76 per cent on spirits, while in the U.S., those figures are 21 per cent, 40 per cent and 54 per cent respectively.

This particular issue isn’t expected to improve any time soon. In fact, the federal government has implemented an “elevator-tax” model allowing excise tax to automatically increase by the rate of inflation every year, without a review or a vote in Parliament. The Comeau Case has provided a platform for the industry to express its desire for policy reform/legislative change. The Supreme Court decision on the case is expected in the coming months, however, with the issue of interprovincial-trade barriers currently in the national spotlight, an opportunity exists to keep the dialogue going in an effort to facilitate change — regardless of the outcome of this case.

In the meantime, as part of last year’s Canada Free Trade Agreement (CFTA) talks, the federal government set up a provincial working group to make recommendations on liberalizing alcohol trade in Canada, which is set to report its findings by July 2018. The 2017 CFTA — which took effect on July 1, 2017 and replaced the decades-old Agreement on Internal Trade — removed several roadblocks to interprovincial trade, but specifically excluded beer, wine and spirits.

This strategy can also be applied to other licensee challenges. In recent years, there have been a number of adjustments to provincial regulations, particularly as they pertain to craft producers. For example, last March, Quebec granted craft distillers the ability to sell its products at its distilleries and announced a financial-assistance program for small-scale producers and distillers.

In general, provincial governments have been implementing policies aimed at fostering healthy local brewing and distilling industries, which leads to a wider variety of products available in provincial/territorial markets. This environment provides licensees with an opportunity to highlight an ever-increasing variety of locally produced products in their beverage programs.

“In Ontario, we might have it the best. The sheer size of the province and the number of great craft breweries and wineries [means] we don’t have to look too far from home [for product],” says Kennedy. “Things have been going in the right direction and we have a lot of choice right now, more so than ever before.”

However, Kennedy acknowledges other provinces may not be so fortunate — in areas such as Atlantic Canada, the selection of products available is often seen as lacking. The general consensus is that steps are being taking to improve and modernize the laws/policies that impact restaurant and bar operators — with many provinces reducing red tape and/or exploring wholesale pricing models. The key is to keep the momentum going.

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