The Ontario Microbrewery Strategy and the Politics of Craft Beer

There has been a small amount of debate recently over the Ontario Microbrewery Strategy and what involvement the provincial government should have in supporting the craft beer industry in Ontario. The money ($1.2 million/year through 2016) comes from the Ministry of Economic Development, Trade and Employment and goes to helping breweries with marketing, training and tourism opportunities, all in the name of job creation (though the fact that craft beer keeps seeing rapid increases in sales at the LCBO probably helps).

Trying to talk about the Ontario Microbrewery Strategy without getting into personal political beliefs is rather hard. There are those who think that government money should not be used to support industries, regardless of size or location. Others will argue that such initiatives are welcome for craft breweries that struggle to compete against the international conglomerates that are able to utilize economies of scale, large marketing budgets and other possible tax incentives that encourage industries to stay within a city/province/country.

Then there is the issue of how the government should support the industry, which is raised in a very interesting article by Porter’s House Beer in the article “How much beer will $2.4 million buy?” To me, the Ontario Microbrewery Strategy is better for larger craft breweries (Muskoka, Mill Street, Beaus are three examples) that have established brands, bigger market share and multiple beers that get distributed throughout the province. That may not seem fair, but these are the breweries that have worked hard to develop the craft market and should be rewarded for their efforts. While the money is not sustainable, it would not be a large hindrance to the breweries should the money even disappear.

Others, such as Junction owner Tom Paterson in this CBC article/video, want grants or loans to assist new breweries. This is an idea I want to support as a craft beer lover until my the logical side of my brain takes over. Craft breweries, just like any business, should be responsible for finding their own investors to front the capital costs. (I was going to mention small business loans – oops, just did – but then realized that the startup costs for a new brewery would mean any loan would probably buy one-tenth of a fermenter). The number of new breweries set to open in the next year or two is astounding, so people are evidently finding sources of money to cover startup costs. I’m sure it’s tough work, but isn’t that what every small business owner/entrepreneur says?

The number of new breweries opening in the province right now is staggering and my fear is that making it easier to find money to open a brewery (or expand production facilities) would lead to a lot more supply than demand. Ontario seems to be blissfully living in a state where any craft beer will sell, but that will definitely not be the case forever. Studies have shown that people will give up larger luxuries during tough economic times (say, vacations or cars) and indulge in less expensive ways (like switching from cheap lagers to craft beer). I wouldn’t be surprised if some of craft beers current growth could be explained by this phenomenon. Simply creating more craft breweries would not help the industry grow in a meaningful and sustainable way.

Ontario microbreweries and brew pubs are already taxed significantly less than the competing beer manufacturers. This is a small measure, but the easiest way to help all Ontario craft brewers regardless of size. It requires no extra provincial money and should the government ever raise the tax, the breweries could simply pass the cost onto the consumer (and hopefully make a big stink about that fact).

If people have their own opinion or other options for how the government could help, please put them in the comments. (Just please don’t mention selling the LCBO or privatization – that’s not going to happen and I’m tired of talking about the possibility.) There is also a good chance I have misremembered information from some of my undergrad Economics courses, so go ahead and refute anything that is incorrect. WordPress doesn’t come with a fact checker.

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6 responses to “The Ontario Microbrewery Strategy and the Politics of Craft Beer

  1. Thoughtful piece. Like your take on things – very fair and logical. So many times we get wrapped up in the romance of craft beer, it is refreshing to see the actual business approach come out for a change!

  2. Well, the LCBO and privatization are the only way, right? Moving on…

    Thinking about high tech and Kanata in the 1980s, you can see one way of driving innovation and creating clusters. The first part has already begun to happen as successful breweries shed some of their staff into new breweries. Black Oak alumni, big beer alumni have been part of the new crew opening smaller breweries.

    The Niagara College is another example of a cluster in the making. Government’s role could be more in supporting education, creating tax breaks for angel investor’s, reduction of interprovincial trade barriers to increase market, support for exporters and the list goes on.

    These steps aren’t that different than anything given to any other business but a small business person may not know of these things or avail themselves while running a brewery where they are literally bottle washer and master. Anyways, that is my sense of the type of help that could support the industry without causing a flood of new breweries destined to fail.

    • Making it easier for breweries to send beer between provinces would be great, especially as it is something that would also benefit the consumer, but with each province having their own regulations and retail systems that is easier said than done.

  3. I personally don’t think that it’s money that the government needs to cough up to help Ontario’s craft brewers, but rather legislation needs to change to level the playing field. We tend to ignore what a massive impact the Beer Store has on small brewers in this province but for me it’s absolutely ridiculous that it’s allowed to exist the way that it does.

    I know I don’t need to tell you that small brewers have to pay the biggest breweries in the world just for the right to sell their product where 80% of Ontarians buy their beer, but seriously, I can’t have a discussion about helping craft brewers without talking about that first. Until the legislation that allows this monopoly to happen changes, there’s not much that loans or investment can do.

    All beer-makers need to be able to sell their product in a competitive retail market where no one plays favourites with the big guys. Topple the Beer Store or allow the craft guys to have their own co-operative stores too. That would be money much more wisely spent.

    • Yes, it would be great for this to happen, but it’s just not going to. The money to buy out Brewer’s Retail would be enormous – it has to be easier on the province to find other ways to support craft brewers. The end of the Beer Store is nothing but a fantasy.

  4. one thing you could do is reduce the minimum production for a license. there are alot of good brewers in ontario and many cant sell because they would need millions in equipment to get started.at 2 bucks for a tall can i could make 20 thousand off 1000 gallons of beer i could make that in 4 months with home brew equipment (not that it would be a good idea to let people sell their stuff made in buckets). reducing regulation would be nice but as stated it will never happen.

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