Tax hike a sobering dose Breweries, hospitality sector bracing for upcoming spike in federal duty
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More expensive alcohol, fewer novel beers and fewer places to grab a drink could be on the menu this summer.
Breweries and hospitality businesses across Winnipeg are rethinking their operations as Ottawa prepares for its largest alcohol excise tax jump in more than 40 years.
“If we keep eating these costs, there will be a point where we just can’t produce anymore,” said Camila Bellon, Torque Brewing’s general manager.
The federal beverage alcohol duty is set to increase 6.3 per cent on April 1. It’s imposed at the manufacturing level and adjusted annually based on inflation.
Torque Brewing is deciding how to deal — on top of the increased costs of barley, packaging and “every piece of ingredient or material,” said Matthew Wolff, the brewery’s operations manager.
“We’re dealing with fuel costs, material increases,” he said. “Everything is going up all at once.”
He’s deliberating: should Torque take the hit for the tax increase, or change its manufacturing process to save money, or pass the cost to the customer?
“If we price a product to reflect (increased operating costs) to the customer, the product will be so expensive no one will buy it,” Bellon noted. “Beer, it’s one of the first things people cross off their shopping lists. It’s not an essential product.”
A summer full of specialty brews is unlikely, Wolff said. Importing exotic hops is expensive— for now, it’s best to stick with ingredients close to home.
“You’re not going to see this big push of innovation,” Wolff said. “You’re going to see a lot of lagers coming through… because they don’t use up a lot of material.”
The tax increase will be baked into newer products’ prices, he said. It’s the regular offerings that are in question.
Alcoholic beverage suppliers set their shelf prices; they apply to increase prices through Manitoba Liquor & Lotteries.
Manitoba Liquor & Lotteries’ next price change is scheduled for May 1, meaning customers won’t see the effects of the federal excise tax increase until then, according to a spokesperson for the Crown corporation.
“It’s just poor timing. It’s just another hurdle that we have to overcome.”–Shaun Jeffrey
“Our team is still processing the price adjustments submitted by suppliers,” the spokesperson wrote, adding input cost hikes — like bottles and barley — could affect pricing.
Price increases at the liquor store could be up to 25 cents per 750 ml bottle of spirits, up to 20 cents per 750 ml wine bottle and up to 40 cents per 24-pack of beer.
“On a bottle of beer, it might only be pennies, but when you purchase the amount of alcohol a restaurant does… it’s pretty significant,” said Shaun Jeffrey, CEO of the Manitoba Restaurant & Foodservices Association (MRFA).
The scheduled increase shows Ottawa’s lack of understanding about the industry’s recovering state, Jeffrey said.
“It’s just poor timing,” Jeffrey said. “It’s just another hurdle that we have to overcome.”
George Chamaa is considering not renewing his liquor licence.
Currently, Beaurivage Bistro sells wine, beer and shots of rum and gin. “Specialty coffee” is a $12 offering.
“If they’re going to (raise the tax), they shouldn’t be charging us fees every year to register for selling liquor,” Chamaa said. “All my colleagues in this business struggle every frigging day.”
Most of the Corydon Avenue eatery’s lights weren’t on during Friday’s lunch hour. It’s a money-saving strategy, Chamaa said. After all, he just paid $160 for a case of lettuce, he added.
Since the pandemic, fewer people have dined in at the Lebanese restaurant. Takeouts don’t order booze, Chamaa said.
“Maybe I’ve sold $10 or $20 or $30 (of alcohol) between Christmas and now,” he said, noting it doesn’t cover his liquor licence.
Many restaurateurs are facing a 65-cent minimum wage bump on April 1, to $14.15 per hour.
“Our industry cannot support these additional increases in costs,” Jeffrey said. “We have to pass these on to the consumer.”
“Our industry cannot support these additional increases in costs. We have to pass these on to the consumer.”–Shaun Jeffrey
Some eateries might purchase less alcohol, switching their focus to mocktails and hot drinks, among other things, Jeffrey said.
Drinking alcohol in restaurants has decreased from pre-pandemic levels, he added. The price of alcoholic beverages served in licenced places increased 4.3 per cent last month, according to Statistics Canada. Prices of such drinks bought in store rose six per cent.
Torque Brewing is beginning to partner with local microbreweries to buy products like aluminum cans in bulk, with the aim of lowering each company’s costs.
“It’s hard to keep competitive when… your competition is the macro-breweries,” Bellon said. “They can keep their prices down because they can buy bigger volumes, they have better cashflow situations.”
Phoebe Greywood has cut back on drinking. She’ll split a pitcher with friends during a night out, but since the pandemic, those nights have been far fewer.
“My laundry just increased by $1, which is almost double what we were paying before,” Greywood said, sitting on a bench in Osborne Village.
She has rent and groceries to worry about. Buying alcohol isn’t her priority.
“We’re very conscious of customers’ economic situations,” said John Scoles, owner of Times Change(d) High & Lonesome Club.
If alcohol price increases come, the venue will absorb the cost, he said.
The tax increase is an opportunity to cater to people who aren’t consuming alcohol, Scoles said.
“We should be catering to that,” he said. “It is very much a part of our way forward in the hospitality industry.”
— with files from the Canadian Press
Gabby is a big fan of people, writing and learning. She graduated from Red River College’s Creative Communications program in the spring of 2020.