Sunday, February 9, 2014

The Beer is out of the Garden Part II: Recommendation Misses for the BC Craft Beer Industry

Recently, citizens of BC were privileged to see the great reveal in regards to what direction the province is considering alcohol-wise as the Liberals released the BC Liquor Policy Review Final Report  outlining all 73 of John Yap's recommendations for modernizing BC liquor laws and policies.

While many of the recommendations look promising in regards to hauling our liquor policies into the 21st Century, it is important to remember that at this point they are nothing more than recommendations and the real test as to how modernizing these policy changes will be comes when the actual policies are drawn up and implemented by the bureaucrats working on behalf of our elected officials.

And have no illusions, it is not the politicians who are drafting these policies, as few of them have any idea what the issues really are and most depend heavily on the advice and direction given by their top dogs at the LDB and LCLB who the politicos trust. It is also the bureaucrats and their staff that implement, regulate and enforce the policies so without them on board, it is possible little could change.

Yap is probably the most learned politician in BC regarding to issues related to our current liquor laws and policies, after sitting down with the 66 stakeholder groups for their direct input and feedback, and the countless social media and on-line submissions from citizens of our province. Hell, why the BC Liberals do not give him the alcohol portfolio at this point is beyond me.

There is a chance that many policy changes will be very positive for our exploding craft beer industry (read here) but there are a few recommendations hidden away in the 59-page report that could have a negative impact and a few misses, recommendations that were not made, that, by their absence, failed to hit the mark in supporting BC craft beer.

The first one to come to mind is going to be very unpopular with both manufacturing and consumer sides of the craft beer community. Recommendation #18, in Yap's report, states:
"LDB should consider tying minimum prices to the amount of alcohol (e.g., a beer with seven per cent alcohol would have a higher minimum price than a beer with four per cent alcohol)" 
This is not surprising for many reasons and you can bet that the various health authorities, addictions-based stakeholders, all of whom are looking solely from the public safety and health perspective, and the big, national breweries, who churn out endless volumes of 5% swill, pushed Yap & Co. hard on this one.

The negative impacts are obvious I would think. Whether breweries are taxed at a higher rate for higher alcohol beers, or the minimum price is just increased once the beer is in the hands of the LDB, consumers will be paying more for these beers which could see a decrease in sales. It may also limit beers what brewers will be allowed to brew as brewery managers/owners may shy away from the higher alcohol beers if price increases start impacting sales numbers and the brewery's' bottom lines.

But let's be honest, the alcohol content listed on labels are, at times, closer to suggestions than actual fact as it is so this may have little impact. The enforcement of verifying the actual strength for all beers for every batch being sold is next to impossible and the LDB will have to depend on the good will of the breweries to tell them the truth.

One positive from this for fans of less boozy brews is that breweries might start looking at making more session beers than the high octane craft brews we see dominating the market at times.

I have always felt that the breweries were living on borrowed time, with the "mark-up" or tax being the same on beers up to 11.99%. I was just waiting for the government to realize that they could make a tax grab from breweries under the guise of promoting public health and safety. That time may have come and considering all the potential great changes for breweries and consumers, this may not be too hard to swallow, again depending on the actual breakdown and policy.

Another recommendation I believe many breweries will find annoying, especially those who have splashed out lots of money to create hip & happening tasting rooms, is the recommendation that would, "allow private and public retail liquor stores to sell growlers (refillable bottles) and operate refilling stations."

This could be construed as a negative because, for starters, giving liquors stores the ability to sell and refill growlers, be them private or government run, could potentially draw customers away from the above mentioned tasting rooms which could cut down on consumers, specifically beer tourists, buying other merchandise and products offered in the tasting room.

Secondly, growler fills are a unique way of connecting the consumer directly to the manufacturer and those who work directly for the breweries. By allowing liquor stores to sell and fill growlers, the beers being poured may not receive the same respect from the retail outlets and the staff pouring or selling the beers may or may not be knowledgeable about the products on the same level that brewery employees will be expected to be. Control of the product will be relinquished to a third party whose only interest in the beer could be to sell it to make a profit.

On the other side of the coin is the fact that by allowing liquor stores to sell and refill growlers, breweries will have more outlets to market and sell their products, but, if the listing process for government stores remains the same, the added opportunity will most likely be at the expense of another product which will have to be de-listed to make room for the growler sku on government liquor store shelves.

I also think that Yap missed a few opportunities to help support local breweries. The first one that comes to mind is recommending that the government appoint a special beer envoy, like the did for the wine industry last February, with the "with a mandate to work to complement existing efforts to open up domestic markets" for B.C. beers (see announcement here). I am not sure if this would benefit all craft breweries, as many are small scale and have trouble keeping up with local demand, but it would help those who are growing and looking to expand their markets and customer base outside the province.

Along those same lines, I do not know why the government is recommending to "work with other Canadian wine-producing jurisdictions to jointly develop thematic wine promotions in each jurisdiction’s liquor stores to promote Canadian wine," and not apply the same recommendation to craft beer to jointly promote Canadian craft beer as well especially considering that other craft beer jurisdictions across the country are starting to come into their own and flourish like ours has in BC.
I am sure there are a few more negatives among the 73 recommendations as far as the manufacturing side of things goes, but for me, those are the highlights, or maybe more appropriately, the low lights of the report. If there are more that are obvious that I have missed out on, I would love to hear from brewers, brewery owners, managers, etc to get their perspective.

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