Alberta craft distillers seek ‘level playing field’, say outdated regulations hurt business

In 2020, Bryan Anderson pivoted his career as an accountant and opened Lone Pine Distilling Inc. in Edmonton.

It was an ambitious move, especially considering the timing. The COVID-19 pandemic caused his new business to dwindle, even though many might have appreciated a soothing shot of Lone Pine’s handcrafted gins and vodkas at the time.

Anderson persevered, and when the pandemic subsided, he emerged with his business intact. But even with a global health crisis behind him, it wasn’t an easy road.

“Standing out on the shelf, getting the customer aware, getting their buy-in that it’s a quality product, it’s tough,” Anderson said of the challenges, noting that every distiller selling in Alberta, from local to international, is competing with 35,000 individual products on liquor store shelves.

Furthermore, distillation is a costly affair and it can take years before a product finally reaches the consumer.

“We have to invest with the mindset that this product may not be in your hands for three, maybe five years, and set aside hundreds of thousands of dollars assuming we’re still here,” Anderson said.

It’s challenges like these that have Alberta’s small-scale distillers calling on the province for what they call a long-overdue regulatory update that will give their fledgling industry a fighting chance. The alternative, says Yannis Karlos, a board member of the Alberta Craft Distillers Association, is that local businesses will eventually be forced to close.

“Our government regulators tell us, ‘We want you to be successful, but not too successful,’” says Karlos, “because if we are too successful, then the taxation of us changes completely and we come under a completely different regulatory regime.”

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The foundation for Alberta’s small-scale distilling industry was laid in 2014 when the province lifted a minimum production requirement for large-volume distillers, a move that allowed small companies to enter the market. In 2016, the province had seven craft distilleries. Today, there are about 70.

One of their biggest challenges, however, is that the distillery industry’s regulations haven’t been revised since 2003. The result is an operating environment that stifles business growth. “We’ve ended up with a system of one-time regulations and high taxes in some places and low taxes in other places,” says Karlos, who is also CEO of Park Distillery in Banff. “(This) creates a very challenging business environment.”

The Alberta Craft Distillers Association, or ACDA, has been calling for changes to the provincial framework for beverage markups since 2015. This is the policy that determines how much the province adds to the cost of the alcoholic beverages it sells wholesale to individual retailers.

Last summer, prior to developing a new framework, the province conducted a stakeholder survey to explore what changes could be made to the marking system and where there might be opportunities for growth.

One idea – basing the storage system on the value of production rather than volume – was generally rejected by industry participants and subsequently by the province.

Looking ahead, ACDA is calling for a couple of reforms to the current system. The first is a gradual, progressive markup system. The goal, Anderson says, is to “help producers who are small grow to the mid-size, maybe the larger size where there’s that incentive to keep growing. That would probably help the industry.”

The second proposal is to increase the annual production limit for small producers from 140,000 litres to 400,000 litres of absolute alcohol.

“We’re trying to level the playing field for everyone. Either you produce alcohol in Alberta or you don’t, and that should be the benchmark,” Karlos said.

“This industry is built on, you know, the entrepreneurial spirit of hardworking Albertans, and we’d like the provincial government to listen to us. We can add a lot to the value-added agricultural part of our provincial economy.”

The provincial government is expected to present proposals for changes to the regulations for small-scale distilleries in the spring.

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