New brewers emerge thanks to Alberta’s current beer policy
Alberta has become a fascinating political experiment in recent years. I’m not talking about the $15 minimum wage or the carbon levy, I’m talking beer. It is an interesting case study in how policy can shape an industry.
For ages, Alberta’s beer laws were outdated, archaic and served to be a significant barrier to the growth of craft beer in our province. A combination of restrictive rules for opening breweries, privatized liquor retail and open borders made the province an economic wasteland for prospective local breweries. The hurdles were too high.
Provincial rules required a minimum production capacity that necessitated hundreds of thousands of upfront capital. Cities had restrictive zoning pushing breweries to unpopular light industrial areas. Then, if you did find a way to open, you faced having to sell your beer store-by-store in the most crowded import beer market in the country.
It is no surprise that in 2012, Alberta had only 10 breweries, among the lowest in the country. Best estimates put Alberta craft sales (excluding Big Rock) at about one percent of the market.
Things have changed. The first step was back in 2011 under then-Premier Alison Redford, who lifted the dreaded minimum production capacity, which required a brewery to have enough capacity to make 500,000 litres of beer a year. This change meant smaller-scale breweries could open, with much less start-up capital required. Within a couple of years, we started to see an increase in breweries, mostly smaller operations often located in smaller centres, meaning they could avoid some of the hassles of competing against breweries around the world.
Things really started shifting in 2015 at both the provincial and municipal level. The new NDP government prioritized development of a local craft beer industry and started looking closely at how provincial regulations affected the industry. Over the past two years they have quietly changed rules to make things easier for craft breweries, including relaxing rules on brewery tap rooms, allowing breweries to sell beer at farmers’ markets and offering marketing support to the Alberta Small Brewers’ Association to promote Alberta-made beer.
But their most important move was hardly quiet. They revamped the beer mark-up policy to create more space for Alberta breweries. The changes are a bit complicated but here is the nub: all beer sold in Alberta now has the same mark-up rate, $1.25/litre. Formerly, mark-ups were set based on brewery size (no matter where the beer was produced). In addition, the government created a new program for Alberta breweries that provides a size-scaled grant designed to offset the increase in mark-up rates. The effect is to give Alberta breweries some price advantage in the market.
It’s a highly controversial, and possibly unconstitutional, policy. A lawsuit and a trade complaint have been launched by importers and import breweries against the policy. Those complaints are still working their way through the system.
I’m not here to argue the appropriateness of the policy, but what I can say is: it is working. The past two years have seen a rush of new breweries opening up. As of mid-November we now have 61 separate breweries, scattered across the province, most of which opened in 2016 and 2017. Best estimates suggest Alberta craft now holds almost four percent of the market (again without Big Rock, which has about five percent on its own).
It is not just at the provincial level where things are changing. Last year, Calgary changed its zoning bylaw to allow small breweries in commercial districts. This fall, Edmonton passed a similar amendment, meaning small breweries can now open on Whyte Avenue, Jasper Avenue, 124 Street and other popular commercial areas. It is too early to determine what affect these new bylaws will have on the growth of local beer but people involved in the beer industry tell me they are very excited about what it means for creating beer spaces in high-traffic locations.
Of course, the policy changes alone are not the explanation for the explosion of craft beer in Alberta. It is always about a combination of factors, including a growing consumer openness to craft, a vibrant local food movement and the availability of capital due to the oil downturn.
But politics matter. If the old policies still stood, Alberta would have fewer craft breweries today and those that did exist would be having a harder struggle to get by.