Thank you very much.
Mr. Chairman, honourable members of the committee, thank you for the invitation to appear before you today.
My name is Luke Chapman and I am here representing Beer Canada. For those of you who are not familiar with it, we are a national trade association comprising 48 member brewing companies that account for 90% of the beer produced in this country.
I'm here to talk about what's happening in the Canadian beer industry and to share a proposal we are asking this committee to recommend for inclusion in the upcoming federal budget. The proposal is supported by Parliament's beer industry caucus, brewing companies, barley farmers and many businesses along beer supply chains. It requires little government investment and aligns with the government's objectives of creating jobs and encouraging Canadians to lead healthy lifestyles.
We are asking the government to make minor, yet impactful, changes to beer's excise duty rates in order to stimulate growth and investment in Canada's budding low- and no-alcohol beer market. I will provide more details about this proposal in a moment.
Right now, there are over 1,000 breweries dotting towns and cities throughout Canada. The products created by these local businesses help to bring people together at social and sporting events, over meals with friends and family, and to celebrate festive occasions and milestones. Brewers are leaders when it comes to supporting community events, festivals, concerts and fundraisers.
The Canadian beer industry contributes a lot to Canada's economy. Domestic brewers are proud to directly employ 15,000 Canadians and pay $1 billion in salaries and wages. Of all beer sold in Canada, 85% is made here, and brewing makes up three-quarters of the GDP generated by the entire domestic beer, wine and spirits industries combined. The sale of beer in Canada supports 149,000 Canadian jobs and $5.7 billion in combined federal, provincial and municipal tax revenues.
Despite these important contributions, the future of the market is uncertain. From 2018 to 2019, domestic volume sales of beer declined by nearly 4%, which is the equivalent of eight million fewer cases of beer sold in just a one-year period. Over the last decade, we observed similar declines in per capita consumption, exports and beer share in Canada's beverage alcohol market. There is no simple explanation for what is causing these declines. Changing consumer preferences and changing demographics definitely play a role.
With respect, changes to how federal and provincial governments tax beer haven't helped either. Brewers know that they must continuously innovate with new products and invest in their brand portfolios to ensure they can engage consumers across a range of occasions. An emerging trend within the beer sector today is no- and low-alcohol products.
We have developed this proposal not only to stimulate investment in a promising new segment of the market, but also to respond to Canada's national alcohol strategy and the World Health Organization's global alcohol strategy, which calls on governments to promote the production and marketing of lower-alcohol products as a way to reduce alcohol-related harm.
Currently, excise tax on beer is calibrated under three alcohol-strength thresholds. The top excise duty rate comes into effect for beer with an alcohol strength of 2.5% alcohol by volume or greater. I did send a table around that helps explain this next paragraph. We'll walk you through it because it gets a little tricky.
Unlike no-alcohol wine and spirits, no-alcohol beer is not exempt from excise. We would like to change this. In addition, we are proposing that beer within the range of 0.5% to no more than 2.5% ABV have one-quarter of the top excise duty rate applied, while beer over 2.5% but not more than 3.5% ABV have half of the top excise duty rate applied. The top excise rate would apply to beer over 3.5% ABV.
In 2018, less than 2% of overall beer sales had an alcohol strength of 3.5% ABV or less. The market is small, but it is growing. This means that the fiscal cost to government of implementing our proposal would be small, an estimated $4 million in the short term, and in time the costs could be mitigated by positive volume growth of Canadian beer. For perspective, in fiscal year 2019, the federal government collected nearly $700 million in excise revenue on beer alone.
The domestic brewing industry is facing challenges, but with challenges come new opportunities for future success. We believe the proposal we have put forward today can help secure the future success of Canada's domestic beer industry. It is low cost to government, but it would be very helpful to brewers and those businesses that are dependent on a successful Canadian beer industry.
We kindly ask that this committee recommend that this proposal be included in the upcoming federal budget.
Thank you for your time. I'd be happy to answer any questions.