Thank you, Mr. Chair.
I'm Jan Westcott, the President and CEO of Spirits Canada. To my colleague, C.J. Helie, our Executive Vice-President, go all of the hard questions, just so we're clear.
Thank you very much for taking time to hear us. We'd like to share our views and experiences related to the sale of certain beverage alcohol products, products somewhat loosely referred to as highly sweetened, high-alcohol beverages sold in single-serve containers for immediate consumption.
Spirits Canada is the sole national organization representing Canadian spirits manufacturers, marketers, exporters, and consumers. Spirits Canada members adhere to a strict industry code of responsible advertising and marketing. Our code of conduct was recently updated to explicitly include all forms of digital activities, including social media sites. Our social responsibility code is rather comprehensive and deals with all aspects of the business, including those related to mixing or promoting alcohol with energy drinks, therapeutic claims, or appeal to youth.
We have provided the clerk with some copies of our entire code of conduct for referral by those interested.
The issue, of course, is that not all alcohol producers or marketers adopt such high standards of behaviour. In fact, some companies view themselves as market disrupters and build their entire business plan on bringing products into the market that push the envelope, and then choose to advertise and promote them in a manner inconsistent with established norms of socially responsible behaviour.
I'd like to begin my detailed comments with the issue of caffeine and its association and use in beverage alcohol.
Unlike the case in many other jurisdictions, products described as either caffeinated beverage alcohol products or alcoholic energy drinks have not been a significant health or safety problem in Canada.
Almost a decade ago, Health Canada, alcohol manufacturers, and provincial liquor boards came together to adopt a range of measures within their respective spheres of responsibility and competence to address this emerging health threat at its very inception. I won't go into all the collaboration and hard work and good will demonstrated by all parties in that challenging period, but I think it's important to summarize a few of the key outcomes.
One is that Health Canada banned the sale of alcoholic energy drinks in Canada.
Two, the Canadian Association of Liquor Jurisdictions—all the liquor boards—and individual liquor boards adopted a maximum voluntary limit of 30 milligrams of caffeine per serving in any alcoholic beverage. To be clear, no caffeine whatsoever can be added to an alcoholic beverage in Canada unless any level of caffeine is due to the use of an ingredient with naturally occurring caffeine, such as chocolate, coffee, tea, carbonated beverages such as a cola—the classic rum and cola, for example.
Three, we undertook education and server training efforts to discourage the self-mixing by consumers of energy drinks and alcohol by individual consumers in their homes or in bars, and we forbade the use of any of our brands in any joint promotion with an energy drink.
The results of these measures have been very effective. Laboratory testing of products reported in the media as caffeinated alcohol products has shown them to contain very little caffeine whatsoever.
It seems clear, however, that there have been a number of beverage alcohol drinks available in Canada in recent years that convey the impression that they are in fact alcoholic energy drinks. It's also clear from our perspective that CFIA and provincial regulators chose to take very little enforcement action against such false and misleading claims, despite numerous representations by both us and other interested parties.
Canadian consumers have seen on liquor board shelves—and more typically private store shelves—products using the same brand name and imagery as energy drinks, products with labels and packages with performance claims such as “a source of energy”, or have seen claims that a company's alcoholic beverage had “the kick of an energy drink” on a corporate website.
The unfortunate consequence of the lack of effective enforcement against such false and misleading claims, in addition to the fraud perpetrated on the consumer, is that its effect has been to undermine concerted communication efforts to warn consumers of the health risks associated with the mixing of energy drinks with alcohol.
The presence of such products on the shelves of liquor stores conveys the impression that alcoholic energy drinks are in fact legal and authorized for sale in Canada and thus safe for Canadians to drink. They're not.
Many health officials have identified a distinction between products such as Four Loko and...I'm just going to call it the Freddy, because I'm not going to say that here, versus other higher-alcohol products with relatively high sugar levels.
As we have just discussed, and contrary to some media reports, it is not the elevated levels of caffeine that are the real concern.
World-renowned icewines, Canadian icewines, and many spirituous liqueurs also have elevated sugar and alcohol levels but do not raise elevated health risks.
We should perhaps take a few moments to talk about the manufacturing processes used to produce these products, the ones that are of concern to health officials.
Historically, the only cost-effective method on a commercial scale to produce pure and more concentrated alcohol.... By the way, my colleague from the CCSA misspoke a bit. Ethanol is ethanol is ethanol. It doesn't matter whether you make beer first, whether you make wine first, or whether you make spirits. We in fact start with beer. Ethanol is ethanol.
Historically, the only cost-effective method on a commercial scale to produce a pure and more concentrated alcohol than that obtained solely through the fermentation of grapes, fruits, or cereal grains, which is our case, was distillation. You couldn't do it any other way except distillation.
However, with the very considerable incentives to have products classified as either a beer, a cider, or wine, for policy purposes manufacturers have looked to mimic the effects of distillation through other means, and they've been very successful in achieving this. Producers can now treat their fermented base goods to one or more non-traditional additional processes, such as reverse osmosis, crystallization, ion exchange, centrifugation, and ultra-filtration, to obtain a neutral, higher-alcohol product.
To this concentrated alcohol base, any flavour compound whatsoever can be added to produce a final beverage product, so a product like Four Loko or FCKDUP is born and, because it is at least ostensibly malt-based, is provided access to corner stores and, in some markets, to grocery stores, benefiting from a much lower tax and minimum price than those imposed on spirits products, the latter having been produced through distillation.
In Quebec, rather astonishingly, these products were actually subsidized by the government through a reduction in that province's specific tax on alcohol that was made available to smaller-scale local producers.
We note with sorrow that the Government of Quebec's own expert had advised them in 2015 to eliminate the subsidy, noting that “the specific tax on alcoholic beverages was implemented to take into account the negative externalities that alcohol consumption”—over-consumption—“can engender and such externalities”—people using them improperly—“exist for both small and large producers”. Whether you're a big producer or a small producer, how the consumer is using the product doesn't change.
Hopefully, now that the Supreme Court of Canada has ruled in the recent Comeau case that such protectionist schemes are unconstitutional, Quebec will withdraw such financial support for products like these.
At this point in the brand creation process, a producer would have a product that would normally be classified—at least in Canada—as a “flavoured malt beverage”—a “beer blend” under Quebec's alcomalt regulation.
The most dangerous health and safety issues associated with brands like Four Loko and FCKDUP are largely linked to corporate decisions that followed the creation of the “liquid” itself, as I described above.
First, there was the very unfortunate decision to package the product in a large-volume, single-serve, non-resealable container that encouraged immediate consumption of the entire contents, a package that contained more than four standard drinks. In Canada, we define a standard drink as one that contains 17.05 millilitres of pure alcohol, whether that alcohol comes from beer, wine, or spirits. Moreover, the recommended daily limit under Canada's low-risk drinking guidelines is for no more than two standard drinks for women, and three for men. Thus, a single container designed for immediate consumption contained more than the daily limit for either a man or a woman.
In closing, I wish to address the tragic circumstances related to the death of the young Quebec teenager. Details are still scarce, but we do wish to extend our sympathies to the family and friends of Ms. Gervais.
There were a number of errors that may have contributed to the final outcome, including by the producer, who now admits it was a mistake to introduce a product such as FCKDUP into the market; those retailers that not only listed the product, but in fact showcased and promoted the product in huge displays at deeply discounted prices; and, the provincial regulator, which chose not to enforce the relevant sections of the liquor advertising regulations that prohibit advertising that induces a person to consume alcoholic beverages in an irresponsible manner.
We have four specific recommendations—this keeps changing—as follows.
One, Health Canada should prohibit the use of the brand name of an authorized energy drink by any alcoholic beverage.
Two, in recognition of the opening of new sales channels outside liquor boards, Health Canada should formalize by regulation or industry guidance the maximum 30 milligrams per serving of caffeine in alcoholic beverages.
Three, all beverage alcohol labels and packages sold through private sales channels, including manufacturer on-site stores, should be subject to provincial regulatory review prior to entering the market.
Four, the elimination of exemptions for small producers for all federal or provincial health or safety regulations or policies should be eliminated. We note with concern, for example, that some differentiated health and safety standards have been proposed by Health Canada for smaller-scale recreational marijuana producers.
Thank you.