Thank you, Chair.
I would like, first of all, to take this opportunity to thank the committee for inviting us to provide an overview of the Canadian beverage industry and the work that Agriculture and Agri-Food Canada does on behalf of the industry.
My colleague, Brian McCauley, is the assistant commissioner of the legislative policy and regulatory affairs branch at CRA. He will undertake to answer questions as they relate to the CRA's role in taxation and regulation of the alcohol industry in Canada. Just to summarize, they're responsible for administering the provisions of the Excise Act, 2001, on spirits and wine, and the Excise Act, on beer. Under these statutes, CRA licenses and regulates the producers of these products, as well as collects and audits the excise duties levied on these products. The CRA is also responsible for the Importation of Intoxicating Liquors Act as it interacts with the Excise Act, 2001, and the Excise Act.
What I'd like to do is provide a short presentation in two stages. I'll provide an overview of the Canadian beverage manufacturing industry. Then I'll talk a little about what Agriculture and Agri-Food Canada does in conjunction with the development and the competitiveness of the beverage industry.
We define the beverage manufacturing industry as including alcoholic beverages, but also non-alcoholic beverages, such as soft drinks, juices, bottled water, etc. It includes, of course, from our perspective, the inputs from the producers—grapes, fruit, grain—but it also includes the processors: wineries, breweries, distilleries, malters, bottlers, packers, roasters, and blenders, for example.
Our primary role in the market and industry services branch is to provide support to the industry in the form of market development assistance and trade resolution services, but also to remove barriers to growth and competitiveness in the industry. We proactively work with the industry to identify what their challenges are and see what we can do as government to assist in the resolution.
In terms of the industry itself—and I realize you've received a number of representations—in 2011, our numbers show that it provided direct manufacturing jobs for 25,000 Canadians, so it's not insubstantial. It represented about 17% of the overall food and beverage gross domestic product. Canada supplies 70% of all processed beverage products available in Canada. We're the largest supplier of our own market. The sales of alcoholic beverages were $21 billion. It's a big industry. Beer remains the largest seller within the alcoholic beverages sector, at about $9 billion, followed by wine at $6.5 billion, and spirits at just over $5 billion.
We're also big exporters. Canada's distillery industry exported about $500 million in products in 2012. Those are the distilleries. The beer exports were about $200 million. This is just the beer itself, not the ingredients for beer. For wine it was $41 million.
A lot of these are mature categories, but on the beer side, craft beers have been performing better than the overall beer category. It is expected to provide opportunities for further growth. Wine performed well in 2012, growing in both value and volume sales.
The increase in the number of craft breweries, craft distilleries, and new wineries across the country is evidence of a thriving alcoholic beverage industry in Canada that contributes economically to all regions across the country.
You will see that the larger companies tend to be centrally located or concentrated, but there are a lot of smaller companies that are growing that are adding to the economic impact on a regional basis. That's the alcohol side.
Now, the non-alcoholic side includes soft drinks, juices, bottled water, tea and coffee. The domestic shipments were valued at about $5.5 billion in 2011, and that involved 15,000 employees. Overall, there are 25,000 employees with 15,000 of them in the non-alcoholic beverages and the rest in alcoholic beverages. We're also exporters of non-alcoholic beverages. Interestingly enough, we shipped $500 million of coffee and tea out of Canada, and about $155 million of soft drinks and bottled water products.
Both the alcoholic and non-alcoholic beverage industries are very dynamic. That's probably one of the parts of the food industry where consumer demand changes quickly. We've seen that our industry is responding very well to new consumer demands, new products such as coolers, flavoured spirits, wheat beer, energy drinks, specialty coffees and teas. With the development of calorie-reduced beverages and new products that offer functional properties, the soft drink industry is being more responsive to demands for healthy products.
Although these industries are different in many ways, what we've found is that opportunities and challenges are common no matter what beverages they produce. They also have a lot in common with the food processing industry for non-beverage foods. For example, what we've seen over the last 10 years is a strong Canadian dollar, rising energy and raw material prices, and a more global environment. Packaging and landfill constraints is a big issue that has impacted the beverage industry more than some of the other food processing industries. Consumer demographics are changing as well. These are some of the challenges shared by those in the food processing industry.
We work proactively with these industries to see what we can do to help them improve their competitiveness. For example, we provide sector support and expertise on the farm inputs and manufacturing components that will ultimately benefit wineries, breweries, and distilleries. As an example of the kinds of things we undertake, last November Minister Ritz held an Agri-Processors/Producers' Summit in Toronto to facilitate discussion between the producers and the processors about approaches to enhance innovation and efficiency along the Canadian supply chain. Among the recommendations coming from that dialogue between processors and producers are specific supply chain activities to enhance competitiveness, including the incorporation of more Canadian agricultural inputs for processors, but having the dialogue to ensure that the producers are actually able to deliver what the processors need.
We're looking forward to the conclusion of your study and the recommendations you might make to improve competitiveness, particularly in the beer and spirits sector.
I appeared before you last year to talk about the value chain round tables and the work that we do there. There are two of them that I'd like to mention in reference to the beverage industry: the Horticulture Value Chain Roundtable and the Food Processing Industry Roundtable. Each of those works on specific issues that have impacts on the beverage industry, one from the fruit and vegetable production and processing side on the horticulture, and the other one more generally on the food processing side.
Each of these round tables is committed to examining challenges affecting the growth of the industry and proactively putting measures in place not only to identify opportunities, but also to undertake actions to address the competitiveness issues.
Agriculture and Agri-Food Canada also has research support in two ways. One is through the Wine Grape Research Network at the Pacific Agri-Food Research Centre in the Okanagan Valley. It's connected with the Cool Climate Oenology and Viticulture Institute. They do work on arid viticulture, vineyard ecology and terroir, crop protection, oenology, and wine sensory quality to assist the wine industry.
We're also a supporter, through our program funding, of the Canadian Malting Barley Technical Centre, which provides technical services to the beer industry on the utilization of Canadian malt, including the evaluation of new varieties and technical assistance on how best to use this to get the best product.
We also have a regulatory role. The Minister of Agriculture and Agri-Food has the responsibility to ensure adherence to the ministerial order for the issuance of age and origin certificates for distilled spirits. In plain language, that means, for example, shippers crossing over into the U.S. actually need certification from a government body to indicate that the product is Canadian whisky, because it is a protected designation, and that it really is 20 years old, 8 years old, or 10 years old. The Minister of Agriculture and Agri-Food has the responsibility for ensuring that's done and for the requirements of the Spirit Drinks Trade Act, which basically says there are certain liquor, alcohol, or spirit products that can only originate from a particular country, such as grappa from Italy. He also provides input and advice to the Minister of Industry on the protection of wine and spirit drinks under the Trade-marks Act.
We're also co-leaders on the international stage of the World Wine Trade Group, which is an organization of non-European winemakers, such as Australia, the U.S., and Argentina, etc, who collaborate on issues related to international wine trade.
We also contribute to the committee on internal trade in Canada, toward resolving issues on internal trade and movement of products across Canada.
We also work with our colleagues at CRA, Finance, International Trade, etc, in either a formal or an informal way to address specific issues across departments.
With the implementation of Growing Forward 2, there was certainly a lot of investment to the wine and beverage industry. Many of these programs have been retained. We're now in the process of receiving applications and reviewing them, and decisions will be made sometime in the next three or four months.
We have retained the AgriMarketing program, and Minister Ritz announced the AgriInnovation program in November, I believe. The industry organizations and associations, plus individual companies, have access to those programs, and with the signing of the cost-shared agreements with the provinces and territories, what we have seen is a greater interest in moving beyond, and inclusion of the food processing industry, including the beverage sector.
Essentially, these programs are available to ensure that industry and government can work together for investments in the development of technology that will continue to keep the competitiveness of the beverage industry in Canada at the forefront among the agriculture and food sectors.
Thank you, Mr. Chair, for your time today.
My colleague and I would be pleased to answer any questions that may arise.
