Friday, February 8, 2013

Gov't Announces Liquor Law Changes That Could Benefit Craft Beer Consumers & Industry

Today, Rich Coleman, the minister responsible for the province's alcohol portfolio, announced some long anticipated changes to BC liquor laws, many of which have a direct impact on the craft beer industry and craft beer related licensees.

In a press release issued today from Coleman's office, these are the changes I see as having the most impact on the craft beer consumer:

  •  "Small- and medium-sized liquor manufacturers"  to have "three common ownership and business relationships with licensed establishments located off their manufacturing site." Translation, tied house laws have been relaxed and you will soon be able to enjoy Parallel 49 beers at St Augustine's come March 1/13.
  •  ""Brewers and distillers now can apply to have an on-site consumption area such as a lounge, tasting room or event area." Translation, beer lounges at breweries are not far off.
  • "Rules around how liquor manufacturers can promote their products in bars and restaurants have been simplified by removing the requirement for a buy-sell agreement." Translation, breweries can now buy tap and shelf space legally and bars restaurants will be able to demand inducements for the right for a brewery to sell their product via the licensee.
These changes are to take effect March 1, 2013. Some of the wording is somewhat vague, for example, what is a small-and-medium sized liquor manufacturer in regards to a brewery? 

My assumption is that they mean breweries who produce less than 160,000 Hectolitres per year, which means the big boys like Molson and Labatt cannot have tied houses. What is yet to be seen is whether Granville Island, owned by Molson, will be able to have three tied house arrangements, thereby giving Molson a way through the door.  But even if this is the case, the press release goes on to explain that tied houses must also "carry a variety of products from different suppliers to avoid particular products being favoured," meaning they cannot shut out the competition in these licensed establishments.

Another question I have is how is how difficult are the government going to make it for breweries to have on-site beer lounges, which are essentially liquor primary licenses. Does that mean over-19 years old allowed only? What hoops will the brewery have to jump to get these licenses? This is the most significant of all the changes for craft breweries, in my opinion as now small nano-style breweries can operate and exist without ever having to distribute their beer. Growler fills and bottle sales from the tasting room-lounge combined with lounge revenue could be enough for these smaller breweries, with no plan to expand, to exist. This is, as far as I understand, the business model for Brassneck Brewery, who, under the new laws, could also offer their products at the Alibi Room due to the tied house law changes (Brassneck and the Alibi both have Nigel Springthorpe involved in ownership).

I am going to dig more and talk a bit more about how these changes could impact the craft beer scene come March 1, 2013 after I do some digging and reflecting on the announcement. As with everything announced by this government, I will wait until the fine print is produced to see just exactly these changes mean. The BC Liberals have a habit of making announcements that look to be making big changes to liquor laws when in fact, they are little more than tweaks and minor adjustments when the full extent of the changes are understood.  


  1. Paddy, I've been thinking about this and I disagree with your analysis of the point about no longer needing buy-sell agreements. Under the current act, a buy-sell agreement is needed for certain kinds of promotions and tie-ins, but you are still never permitted to pay for taps, buy a customer fixtures or fittings, pay for their advertising, or even to pay for entertainment at their bar. I don't see how eliminating the need for a buy-sell agreement would change any of that. It just strips some of the bureaucracy out of the process.

    For more info on what the buy-sell agreement was for, check out this liquor board guide for brewers and agents. It starts on page 23:

  2. @bencoli If there is no enforcement mechanism, then it renders the regulation moot.

    I have a problem with those who say that because paying for taps and offering inducements is rampant, the regulations are unenforceable and, therefore, should be eliminated. This is utter rubbish. This government is simply not devoting any resources to enforcement because they see no problem with this. In terms of government contracts and P3s, they call this "lobbying".

    The whole point of sanctioning these practices is that they reduce fair competition. Small breweries can't compete with the war chests of the larger ones, so they get locked out of the draught market. When you have to meet a high bar to maintain a listing in the LDB stores and there's a high barrier to entry in the draught market, it's pretty tough to start a brewery with a modicum hope of success unless you have a lot of money.

    Now, however, it seems a brewery can sell direct to the public and have its own brewery tap. Will this be enough for them to grow into the more lucrative markets, or will it keep them perpetually small? It will be interesting to see how this all shakes out.

  3. Thanks for the comments Ben...always welcomed
    You can buy taps in many ways and breweries-wineries are very creative. We have yet to see the actual wording of the new policies and legislation so I may be acting as Chicken Little, but maybe not. We'll see how it all shakes out. In talking to one prominent restaurant owner, he stated he believes it really opens up the door for inducements and bribery.

    As for for the laws being unenforceable as they are now...well, they are unless you get the tax man crawling up the butts of the breweries and the licensees.
    As in any industry, it is extremely hard to track cash kickbacks. I am dead set against bribes and against licensees demanding kickbacks, don't get me wrong. The only way it will stop is by industry enforcement and certain portions of the industry have no interest in that...and it is not just the big breweries as there as some craft breweries involved and playing the game

    That is how I see it

  4. and remember Ben, buying taps involves more than $$$$s. Many things are being used as currency making it even harder to track

  5. The current legislation contains three lists of promotion practices. The first list is stuff that's always allowed, the second list is stuff that is only allowed with a buy-sell agreement in place, and the third list is of stuff that is never allowed. I assume by the wording "removing the requirement for a buy-sell agreement" means that they're effectively combining the first and second lists.

    @bcbrews - There's no enforcement now, either. All I'm saying is that things won't get any worse. What's illegal will remain illegal, and the legal stuff might just be a little easier to do. It's more or less the status quo.

    @Paddy Of course there are loads of ways to buy taps, and people are doing that right now anyway. I doubt you'll notice the difference with this particular change. Of course, we'll have to wait and see the details of the actual legislation before we know for sure.