Thank you for having me present to the committee today.
My name is Brad Goddard. I am the chair of the Coalition of Canadian Independent Craft Brewers, an organization representing 16 of Canada’s leading independent craft brewers.
In 2021, under the advice of the government, our group undertook to engage MNP, a large national accounting firm, to conduct the first-ever economic impact study of our unique manufacturing sector. Knowing that we couldn’t get a full picture of the state of craft brewing in Canada by polling just our small membership, we were able to align our interests with the Canadian Craft Brewers Association, a relatively new national trade association representing Canada’s 1,200 craft brewers from coast to coast to coast. We were able to agree on the definition of “craft” for the study, which was no mean feat. For the purposes of this joint study, we defined craft as Canadian-owned, independent and producing less than one million hectolitres per year. A hectolitre is 100 litres.
Our study was able to show that craft brewing creates jobs—in fact, some 17,340 jobs, not to be too specific—across Canadian communities, both big and small. In terms of direct employment, Canadian craft brewing represents 96% of the brewing industry’s total employment. Our operations are what we call, rather romantically, “beautifully inefficient”. It takes a lot of people to make our beers. We do it without the global procurement advantages or scale that Canada’s largest brewers have. This means that our sector not only hires local; we also buy local inputs, use local logistics companies and stimulate the economies right outside our front door.
Our community of brewers is telling us that there are major barriers not just to growth but also to survival right now. Our study told us that most craft breweries producing less than 10,000 hectolitres a year, which is most craft breweries, are not profitable. If these entrepreneurs can survive until they reach 20,000 hectolitres, the majority of them will then become profitable. Now mash in runaway inflation and the bubbles in our beer quickly start to disappear. Our research tells us that malt prices, the backbone of our product, have increased between 20% and 50% this year; aluminum by 15% to 20%; and fuel surcharges, which is how our materials get to us and our beers go off and find their consumers, by 75% to 100%.
The answer for managing these costs would typically be to raise prices, but what we see in Canada is that beer, our national beverage, the affordable luxury during tough times, is relatively inelastic in terms of pricing. Our customers and our consumers are getting squeezed to such a degree that they’re drawing the line on beer and saying they cannot afford price increases. Beer Canada’s most recent statistics show a sustained decline in the volume of beer sold, with people drinking less beer, flat beer prices and Canadians refusing to pay more.
We’re a sector in rapid growth and we're tight on free cash. What little cash we have is just barely covering our rapidly increasing costs. Our study did look at options to help our sector not only survive but thrive. The answer is to modernize beer excise schedules. Beer excise has been untouched since the government made adjustments in 2006. The reduced rates that went into effect on Canada Day of that year supported a brewing industry poised for growth. At that time there were 88 craft breweries, and growth was capped at 75,000 hectolitres. Fast-forward to today, and that number has grown over 1,000% to 1,200 craft breweries, with much of that growth happening over the last seven years.
So what’s our bright idea? Eliminate excise on beer volumes under 10,000 hectolitres and then use a progressive tax structure as independent brewers invest and scale their businesses to a new volume cap of one million hectolitres. I realize that growing the excise cap from 75,000 hectolitres to one million hectolitres feels like a big jump, but some of Canada’s largest craft brewing markets, such as British Columbia, Alberta and Saskatchewan, defined craft brewing at 400,000 hectolitres. That spurred a renaissance of rural brewers setting up shop in small communities across those provinces.
To take some more sticker shock away, MNP’s work on our revised excise schedule shows a meagre net reduction in tax revenue for the Government of Canada of $4 million. The more craft brewing grows, the more people we hire, the more we spend and the better off Canadian communities are.
I know that this committee has heard from sectors that are contemplating paying excise for the first time. Our industry has done a lot of the heavy lifting when it comes to excise, and now we need the government to choose to invest in our sector to help us grow through these challenging times.
Thank you.