December 27, 2017 by Allen George
“Striking the Right Balance” for Craft Distillers
Anyone curious about the Ontario government’s attitude towards craft distillers need only read its Striking the Right Balance report. For all its talk of “Modernizing Wine and Spirits Retail and Distribution in Ontario”, the report focuses almost exclusively on wine, beer and…cider.
Its major gift for craft distillers? A recommendation that the already-usurious markups on spirits not be raised. Thank God for small mercies.
I’m being slightly disingenuous, but only slightly. My sense is that this government:
- Has a puritanical approach to spirits (wine drinkers are just classier, y’all)
- Doesn’t want to reduce the LCBO’s dividends, most of which derive from spirits
- Doesn’t really care about independent spirits producers
- Supports wine and cider producers because of their ties to farmers
The report makes for accessible and interesting reading. It does mention that:
- Tax and levy differences between alcohol types distort market competition
- Spirits have the highest LCBO markup
- Craft distillers do not enjoy the same benefits as craft wineries or breweries
- Unlike wineries and breweries, the LCBO is the only channel for spirit sales
- Spirit producers are disadvantaged by the current system
Much verbiage to beer/wine later, the report then suggests that:
- “the LCBO … continue to find customer-focused ways to offer new and innovative merchandising and promotional opportunities for this important product category”
(Hah. The LCBO has completely ignored this recommendation since the report’s release almost two years ago. A spot-check of multiple locations showed that Ontario craft spirits weren’t highlighted and were given little shelf space. The website isn’t any better. Hell – I can’t even “Buy Ontario” on lcbo.com)
- Craft distillers should be allowed to sell directly to bars and restaurants
- Commissions on on-site sales of craft spirits by producers should be lowered
(I’ll let you a guess. Yah – nope again)
- Promotional use of craft spirits by producers should not be taxed
(That happened at least: 1250L)
Dark humor aside, craft distillers in Ontario are hamstrung by indifference and an incredibly unfavourable tax, regulatory and distribution regime. When you add up a tone-deaf spirit-markup scheme that penalizes small producers, large spirit markups, liquor taxes, and a centralized retailing system that favors multinationals, it’s unsurprising that Ontario – with a population only 32% smaller than New York – has over 77% fewer craft distilleries. As someone who loves craft spirits, and wants to see Canadian spirits more successful globally, this rankles.