Producers aren’t toasting tax change for small distillers

The province’s craft distillery sector doesn’t use a lot of grain, but if it’s getting a tax break, it should buy local, says Alberta Wheat and Barley.

Province changes rule so small-scale distillers no longer have to source grain from Alberta

A provincial government decision to allow small distillers to source grain from outside Alberta is having “unintended consequences” on the province’s cereal growers.

“In any value-added strategy, you need to have a focus on acquiring your product from the local producers,” said Tom Steve, general manager of Alberta Wheat and Barley.

“So if we’re going to have a feasible value-added strategy in Alberta, it has to be based on the industry acquiring their raw product from Alberta farmers.”

In 2017, the NDP government slashed the markup on distilled spirits to $2.46 a litre (from $13.76) for distillers selling less than 250,000 litres of product annually. At the time, there wasn’t a real issue with that, though the decision essentially created “two classes of distillers,” said Steve. (Large distillers must still pay the full markup.)

“That was designed to help the craft distilling industry — the smaller producers — get a leg up to try and jumpstart the industry,” he said.

But in March 2020, the current UCP government changed the policy: Small distillers could source grain from anywhere instead of only from Alberta.

“Ultimately, if we’re going to have an effective value-added strategy in Alberta, value-added has to be adding value to Alberta crops,” Steve said. “In this case, there are a few questions around whether or not the current policy is doing that, as it does allow non-Alberta produced grain to be used in the distilling process.”

That was the crux of a letter that Alberta Wheat and Barley sent to Finance Minister Travis Toews and Agriculture Minister Devin Dreeshen in April. The letter requested the change be repealed and that the subsidy only be made available to small distillers using 100 per cent Alberta grains.

“I have yet to hear back from Ministers Toews and Dreeshen on the letter that I sent in April raising these points,” said Steve, adding his organization wasn’t consulted on the policy change.

“When the previous government brought in those measures back in 2017, we were not consulted, and when the current government updated the measures that allowed distillers to bring in product from out of the province, we were not consulted either.

“We would like to have the producer voice at the table.”

That’s what happened in the craft brewing sector, which has seen explosive growth in Alberta over the last five years, he added.

“Our experience with the craft brewing industry has been absolutely positive, where the industry is using barley produced in Alberta,” said Steve. “There are many linkages between the producers and the brewers, and even some farms that are integrated and operate their own malting facilities.”

Steve hopes the province can balance the interests of large distillers, small ones, and growers.

“It’s worthy of a review by the Alberta government in terms of how we balance those competing interests,” he said. “We absolutely want the craft distilling industry to grow in Alberta, but at the same time, we have a fairly mature distilling industry at a commercial scale that has a different set of rules than the smaller-scale distillers.”

In the grand scheme of things, he said, Alberta’s distilling industry isn’t using huge volumes of grain — only about 45,000 tonnes of wheat, barley and rye a year. But the principle is important, said Steve..

“We’ve been talking about value-added in Western Canada for the last 40 years and trying to come up with a model that works for the processors, for the farmers, and ultimately for the end-users,” he said.

“But for the most part, we’re still exporting 80 per cent of the wheat that’s grown in Alberta. Can we build a viable value-added processing sector in Alberta?

“I absolutely think we can — but not when government gets involved and develops rules that may have unintended consequences.”

About the author

Reporter

Jennifer Blair

Jennifer Blair is a Red Deer-based reporter with a post-secondary education in professional writing and nearly 10 years of experience in corporate communications, policy development, and journalism. She's spent half of her career telling stories about an industry she loves for an audience she admires--the farmers who work every day to build a better agriculture industry in Alberta.

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