Agriculture Committee on April 16th, 2013

[Luke Harford]

Everybody wants the compositional standard for beer fixed. Everybody wants it modernized, and we're in the process of consulting with our non-members as well to let them know what we're doing here in Ottawa to modernize the compositional standard for beer.

[The Chair]

Go ahead, Mr. Richards.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you.

Thanks for being here today.

I know that prior to working for the brewers you used to work for the Canadian Vintners Association, so I think you've got a very good background and you understand how different policies will affect the different types of beverages. It's nice to have you here with that background.

Mr. Lemieux asked you about some of the interprovincial trade barriers. You indicated that you did face similar issues with interprovincial trade barriers as your friends in the wine business, and obviously, with your background in both aspects, you are very familiar with that. You indicated that you did have issues there, and I'm sure you're familiar with all the changes that were made through a private member's bill from one of my colleagues, Dan Albas. I'm wondering if you would be supportive of similar types of changes to knocking down interprovincial trade barriers for brewers, for beer, and if those would be helpful to your members.

[Luke Harford]

In terms of fairness, if the wine industry is now able to do this, then we want to be able to do it, too. Are you going to ship cases of beer the same way you're going to ship bottles of wine? I doubt it. I don't think the market opportunity is the same as it is for the wine industry, so we don't have members clamouring for the same as the wine industry got.

The issue for the brewers, with the change that was made on the wine side, is that the provinces need to figure out how to handle it, and they will, but there is a big change in that they're not necessarily applying the same markup or taxation rates on the wine that is being shipped between provinces as they are with beer that has to go through that system. I think over the course of time the brewers will say they understand wine and beer are different, and they are marketing themselves and they've got this opportunity, but we don't want to have to shoulder the cost of all the social programs and all the health programs that are funded in part through a taxation on alcohol, with wine being shipped directly to consumers without that added tax.

[Blake Richards, Conservative, Wild Rose, AB]

I get that there are obvious differences, but you would be supportive of changes in that regard for interprovincial trade barriers for your—

[Luke Harford]

Market access is vital, right? You need to be able to put your products in front of your customers.

[Blake Richards, Conservative, Wild Rose, AB]

Excellent.

I want to ask a little more broadly here, and generally, and it will touch on trade as well, more of the external variety, I guess, in this case. I wonder, looking at the trade balance in terms of our beer, do we export more beer or import more beer? What's the balance there, and what's the percentage?

[Luke Harford]

Historically, we have had a positive trade balance. Now we're almost dead even with how much we're importing. That's a function of changes with consumers as well. Consumers are demanding more imported products, more choices, and the provincial liquor boards, too, with the portfolio they want to offer to their customers, and what's attracting premium pricing and all that kind of stuff, and that constant turnover.

So there are different variables, but certainly Canada has the capacity and the capability to be a fairly substantial exporter of beer.

[Blake Richards, Conservative, Wild Rose, AB]

I remember 20 years ago, when I was first of drinking age, it was Molson Canadian or Coors Light, and those were your choices. Now there are so many choices, so many different varieties and different flavours. I think you're right, the consumer has more choices. But I think we're meeting that here in Canada. There are all kinds of great Canadian microbrews and different things here. I think that's kind of what you're getting at here.

[Luke Harford]

There's a beer for every occasion right where we are.

[Blake Richards, Conservative, Wild Rose, AB]

With that, with the changes that we've seen over the last number of years, have we seen a change in the percentage when we look at the different alcohols in Canada? Has there been a change in the percentage of those sales that are beer, or has that been pretty steady? What is that percentage between beer, wine, and spirits? What are the percentages in terms of sales in Canada?

[Luke Harford]

From a dollar value standpoint, we've seen the market share of beer go from over 50% to now, just last week, being reported at 44%. Wine has basically taken up that delta, from a value standpoint, so they've gone from 25% to now 30% or 31% of the retail value of beverage alcohol sales. But beer is still, from a volume standpoint, the dominant beverage in Canada.

[The Chair]

Mr. Atamanenko.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thanks very much, Mr. Harford.

I have technical and other questions. Years ago, we had three major brewers: Carling, Molson, and Labatt. They were Canadian. Are they all owned by foreign companies now, just out of curiosity?

[Luke Harford]

Yes, they're part of global entities, but they have investments here in Canada. They do employ Canadians and they're continuing to invest in their Canadian facilities. They're opening up new canning lines; they're opening up new breweries.

Molson opened up a brewery in Moncton just a few years ago. They are investing in the craft category. Creemore, up in Ontario, is expanding and adding 135 jobs over the course of the next couple of years, because they've taken that brand national.

There are a lot of great stories to tell. Even though they may be part of global entities, they are making investments here domestically and are very much Canadian.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Are there any barriers for moving beer across the border, whether coming into Canada, if we look at the United States, or exports?

[Luke Harford]

It depends on what you would consider a barrier. Yes, you've got to go through customs, you've got to go through the liquor board to get into that province. Then, if you're going to move it from one province to another, you've got to move it to the other liquor board.

So, yes, there are all kinds of.... Because alcohol is provincially controlled or regulated, you're dealing with almost different countries each time you cross into another province.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

But if we export to the United States, there's no specific tariff that's placed on our beer, or vice versa, when an American beer comes in internationally.

[Luke Harford]

I'm not a hundred per cent sure how it works. I don't know if you get instant access to the entire U.S. market or if different states have different requirements. Are there any tariffs on beer coming in? There were some things that provinces negotiated back before NAFTA that are still in place, but, no, beer moves into Canada fairly freely.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Here's a question I've always wondered about. What's the difference between beer and ale, or is there one?

[Luke Harford]

Beer is a general term that you would use to cover all different styles. Ale is a specific style of beer that is different from a lager or a pilsner.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

A lager versus ale, then.

[Luke Harford]

That's right. The difference is the type of yeast they use. Ale is brewed or fermented at a warmer temperature, with yeast that floats to the top, and lagers are fermented at much cooler temperatures, with yeast that settles to the bottom.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I'm still a little confused where barley fits in with hops. We have specific barley we grow, which is called malt barley, which differentiates from other barleys grown specifically for—

[Luke Harford]

There's feed barley and then there's malt barley.