Yet, it is still caught in a prohibition-style web of outdated rules, regulations and heavy taxation. The strength and resilience of the industry and those who dedicate their work to it is not because of the laws and regulations, but despite them.

It goes without saying that smart regulatory frameworks are essential for maintaining order and safety. Still, others perpetuate the current system’s complexity and inconsistency, creating a challenging environment along the entire supply and value chain from farmers to distillers, bar owners, consumers and everything in between. Among all the challenges that may come with creating distilled spirits, there are three topics that the industry agrees can all use some change.

The hidden issue: Provincial markups

While federal excise taxes remain a colloquial topic in spirits, most of what contributes to the high cost of spirits are provincial markups. As of April 1, 2024, the federal excise tax is approximately $13.57 per litre of absolute alcohol. A standard 750-ml bottle of 40 per cent ABV spirits amounts to $4.07. Significant, yes, but provincial markups are a far larger culprit in the retail price of spirits.

High provincial markups drive consumer prices and squeeze margins, especially for smaller distilleries that can’t absorb these additional costs. In some provinces, a bottle of spirits has an approximately 140 per cent mandatory minimum markup. Believe it or not, this is on the low end of normal. It can go as high as an effective tax rate of nearly 200 per cent in some provinces. These markups are applied not only on the product, but also on top of the federal excise tax. On average, a bottle of spirits carries a 75 per cent tax, which becomes even more pronounced with higher-end bottles.

The margins for suppliers on a “reasonably priced” bottle would be around seven dollars, but after environmental levees, bottle deposits and provincial-specific taxes, that number gets smaller and smaller when compared to the total price. With minuscule margins like these, it’s par for the course producers can have difficulty operating efficiently.

Monopoly: It’s not just a game

Imagine the classic board game, but instead of properties and railroads, you’re dealing with government-controlled liquor boards. Welcome to “Monopoly: Spirits Edition.” As you land on “Imported Spirits Avenue,” you’re ready to start bidding on the tile (the correct way to play, according to the rules).

Still, the government, wearing the hats of rule-maker and banker, simply states, “We’ve got partners abroad, you can’t bid on this tile, take it or leave it.” You sigh and pay up, watching your stash of money shrink. Then, you draw the “Price Hike” card. The minimum price legislation has kicked in, increasing costs again. The producers down on “Distillery Row” are slicing their margins to slivers, essentially giving away their goods so that players remain in the game.

Circling the board, it becomes clear that every strategic maneuver is blocked by taxes and red tape. The coffers of the “banker” swell as innovation and competition languish. In this skewed game, you have to wonder: Is winning even possible, or is it just a fantasy in a game where the house always wins?

Trade within Canada

Selling spirits across provincial borders within Canada is so complicated that Canadian producers making premium Canadian spirits find it more accessible and preferable to export to the United States. The Canadian Free Trade Agreement’s Action Plan on Trade in Alcoholic Beverages acknowledges how unharmonious interprovincial trade is currently.

First, stringent personal use exemptions restrict the number of alcoholic beverages individuals can transport across provincial boundaries. Second, there is a widespread prohibition of e-commerce platforms in many provinces, which limits market accessibility for everyone. Third, it is impossible to create new sales channels because administrative burdens, inefficient special-order systems and complex sales procedures bog down current processes.

Finally, there is a pressing need for greater transparency and accessibility of information, as producers often struggle with opaque pricing structures and unclear listing practices. With all these barriers to trade in Canada, proudly made Canadian products often need to find homes outside of their own backyard.

Conclusion

As far as regulated industries go, the spirits sector has one of the shortest sticks you can draw, and yet the industry has continued to show time and time again that Canadian spirits is something worth fighting for. The open and continuous collaboration of public and private sector can drive data-driven and evidence-based regulations that support Canadian distillers and welcome modernization, fair market access, liberalization of trade and a better economic impact.

Beyond recognition for cleaner production, the spirits industry is modernizing. The phrase “going green to see green” can mean many different things to many different players in the world of spirits, and the industry has been adjusting on all levels to meet the increasing demand for sustainable products and the imperative of ecological responsibility.

Guided by the will to improve operational excellence through sustainable practices, the “grain to glass” process is expansive, which means that more communities beyond distillers are affected by the Sustainability Development Goals (SDGs) for Canada (which was a blueprint created by the United Nations Sustainable Development Group and adopted by all UN Member States).

Those involved in the value chain are, to the best of their ability, moving the needle with their resources and expertise to comply with these ambitious and, let’s face it, costly targets. From grain farmers supplying raw material, to the responsible consumption of the end product, addressing sustainability is not always the easiest and most linear process for spirits.

While the laundry list is endless when it comes to what can be done, below are a few of the main SDG goals that have catapulted innovation from some Spirits Canada members in areas such as water, renewable energy, emissions reporting and packaging. It would be remiss not to also mention some of the gaps and pain points that call for broader support and clarity from regulators and government bodies to get the spirits sector across that green-ribbon finish line.

Water stewardship

One SDG the spirits industry has prioritized is “Water and sanitation for all,” a large part of which is ensuring proper water stewardship. Several actively functioning programs and many initiatives are aimed at improving water management throughout the industry. One such program is a water recycling program that reduces distilleries’ freshwater consumption by 20 per cent, saving upwards of 900 tons of carbon dioxide emissions annually. Large distillers aim to replenish more water than they use in water-stressed areas by 2026 and plan to reduce water usage by 30 to 40 per cent in local sourcing areas.

Re-thinking energy

Beyond water stewardship, the spirits industry’s dedication to environmentally-conscious development extends to broader sustainability goals. SDG 7 ensures access to affordable, reliable and sustainable modern energy for all. Some Spirits Canada members are committed to transitioning to renewable energy, such as cleaner energy sources, and using closed-loop control systems. By 2025, some of the most significant players in the spirits game aim to have 100 per cent renewable electricity usage in all aspects of their work.

Promoting sustainable business models and consumer choices

SDG 12 highlights the importance of sustainable consumption and production patterns, a principle the industry has embraced in manufacturing and retail. Within the spirits industry, substantial efforts have been devoted to implementing sustainable practices in waste management. For example, each year, approximately 70,000 tons of spent grain, a by-product of the distilling process, are recycled, with 99 per cent being repurposed, primarily as high-quality animal feed sold to local farmers (these could be the same farmers that grow high-quality grain to supply to distillers).

Leading stakeholders have set ambitious targets, aiming for zero waste to be disposed of in landfills throughout the supply chain by 2030. Additionally, the industry has embraced circular packaging technologies, ensuring 100 per cent of packaging is widely recyclable, reusable or compostable. This initiative has also led to a 10 per cent reduction in packaging weight and the incorporation of 60 per cent recycled glass and 40 per cent recycled plastic, demonstrating a steadfast commitment to sustainable innovation.

Other SDG successes that Spirits Canada members have been able to achieve are tied to reducing poverty, creating economic growth, enhancing infrastructure, addressing life below water and above land, and ensuring local communities benefit from these efforts.

Along with these positive strides, the spirits industry faces significant challenges in the fight for sustainability. One of these challenges is the push to report Scope 3 emissions, primarily due to the complexities of responsibility attribution and measurement. Scope 3 emissions, also known as value chain emissions, encompass all indirect emissions from the process of manufacturing a product.

Consider the production of a bottle of whisky

Emissions could be linked to the distillery, the glass manufacturer, the transportation company and even the agricultural process for sourcing grains or botanicals. The distilleries do not control any of these affiliates, so how can they be sure how much climate pollution is created for each item bought? The difficulty in estimating those figures is more than challenging, and due to the high margin of double counting along the supply chain, it is likely representative of the carbon impact. The same is true for plastics reporting.

Environment and Climate Change Canada’s new plastics reporting initiatives are equally as complex to navigate. Primary, secondary and tertiary packaging all need to be reported, but it remains unclear who is responsible for that reporting, whether it be the manufacturer, importer, retailer, etc. This plan, like others, causes doubt in the industry.

Each stakeholder in the spirits industry has the potential to contribute positively to climate action. Yet, without clear guidelines, robust measurement mechanisms and support from the government, navigating new regulations and requirements remains a daunting task, demanding significant resources and labour. As the spirits industry in Canada grapples with this challenge, it also grapples with what areas of support need to be prioritized. It is clear that the spirits industry is willing to innovate, but sometimes partnerships and incentives are needed to create a unified movement forward.

This is the time to identify opportunities for support, incentives and, more importantly, a two-way partnership with regulatory and government bodies to fill the necessary gaps. From ensuring that industry associations are at the table when policies are being created, to sustainable sourcing practices, to providing aid for farmers for continued growth of high-quality Canadian grains, or to simply educate consumers towards a conscious and responsible drinking culture, everyone plays an important part in embedding sustainability in the protection and promotion of the craftsmanship that is spirits.

Spirits Canada is working to help suppliers understand the regulatory environment, which is often tumultuous and ill-defined. While there is a long way to go, the resilience of the spirits industry in Canada continues to forge its path forward. Through advocacy and data services, Spirits Canada ensures that the voices and concerns of the industry are effectively communicated to policymakers, fostering a clearer understanding of regulatory complexities and promoting an environment conducive to the protection of the industry.

It would be no surprise that some may find him a familiar face and name, because for almost 40 years, Westcott has played a critical role as a relentless and passionate policy and public affairs leader within the beverage alcohol industry. His leadership has spanned from serving as the president and CEO of the Canadian Wine Institute in 1984 to then becoming the founding CEO of the Brewers of Ontario, a provincial body representing both licensed brewers and their distribution channel, Brewers Retail Inc. (The Beer Store), in 1989.

“I am eternally grateful to have had this opportunity; it has been the experience of a lifetime.”

Jan Westcott, Spirits Canada

Over the years, Westcott has forged strong relationships with industry and government partners from all over the world, emphasizing the importance of the spirits sector as a wealth creator contributing to strong and continuous economic growth across Canada for those involved in the “grain to glass” process.

Westcott’s thought leadership in the public affairs space did not go unnoticed. In October 2023, he received the Award of Distinction from the Public Affairs Association of Canada (PAAC). PAAC presents the Award of Distinction to a member of the public affairs community who, over their career, has made a significant contribution to public affairs in Canada.

“At Spirits Canada, I’ve had the privilege of working with fantastic people across the spirits industry, all while representing great companies alongside incredible world-renowned brands,” said Westcott. “I must also thank my talented Spirits Canada colleagues who, over the decades, contributed hugely to what the association achieved. I am eternally grateful to have had this opportunity; it has been the experience of a lifetime.”

Spirits Canada welcomes Cal Bricker, incoming president and CEO

The board underwent a diligent and extensive search, and was delighted to announce Cal Bricker’s appointment as incoming president and CEO of Spirits Canada on Jan. 1, 2024.

“I am honoured to lead Spirits Canada and contribute to the continued success of Canada’s distilled spirits industry,” said Bricker. “I look forward to working collaboratively with our members, stakeholders and government partners.”

He is no stranger to the beverage alcohol industry, having worked in the beer industry for over 13 years as director and VP of public affairs for large Canadian brewers.

Bricker brings with him a wealth of knowledge and has held prior positions in regulated industries as former CEO of Ontario Cannabis Stores and former senior vice president of horse racing at Ontario Lottery and Gaming Corporation. He is also a senior fellow at the Munk School for Global Affairs and Public Policy at the University of Toronto, serves as a captain (naval) in the Royal Canadian Navy Reserve, and sits on the boards of the Royal Canadian Navy Benevolent Fund and the Toronto Zoo Wildlife Conservancy.

His experiences and leadership over the years make him a uniquely qualified leader for Spirits Canada.

“On behalf of the board of directors, we are tremendously grateful for [Westcott’s] contributions to Spirits Canada over the years,” said Nicolas Krantz, president and CEO, Corby Spirit and Wine Ltd. and president of the board of directors, Spirits Canada. “His work has led him to become one of the most respected public affairs leaders in the beverage alcohol space, and we thank him for his institutional knowledge that places Spirits Canada on a path for growth and innovation for the years to come. We thank [Westcott] for everything that he has helped us achieve and wish him the very best in his retirement.

“I am delighted to welcome [Bricker] as our new CEO. His diverse background and proven executive leadership make him the ideal choice to guide our industry into its next chapter of growth and innovation.”

With this organizational change, the staff at Spirits Canada kick off a new year with the same passion to advocate for grain farmers, distillers, liquor boards and government agencies to promote the economic growth of the industry, and to encourage moderate and responsible consumption of alcohol.