A patchwork market, not a national one

“Every province runs on its own system [of beverage trade], with different fees, tax structures, listing requirements and even different label regulations,” said Ontario’s Laneway Distillers founder and co-CEO Jessica Chester. “This fragmented approach creates significant cost and administrative burden for suppliers.”

For beverage producers, the challenges of getting their products to local markets, let alone out-of-province ones, are frustrating. “Depending on the province, the system can be prohibitive. In many cases, customers can simply choose to order directly from another province and ignore the provincial regulation. There is no free trade of beverage alcohol in Canada, and direct-to-consumer sales across provincial borders remain highly restricted on paper,” she said.

As producers of quality spirits, including several varieties of artisanal vodka and gin, Laneway Distillers is proud to source its ingredients from across Canada. However, Chester does not hold back in expressing her frustrations upon seeing Laneway on store shelves in other provinces. “The federal government did not include alcohol and food in its push for interprovincial free trade, once again costing billions in lost domestic trade and limiting opportunities for local producers,” Chester said.

New doors, same red tape

“When the gatekeepers at the grocery stores finally relaxed the rules, that was a real opening – that grocery channel,” said Chris Warwaruk. As co-founder, co-owner and now vice-president of sales at Farmery Estate Brewing in Neepawa, Man., Warwaruk has seen many changes in the trade and the associated barriers, both within Manitoba and beyond its borders, particularly in Ontario.

With a vast selection of alcoholic and non-alcoholic drinks in its portfolio, Warwaruk and Farmery Estate Brewery have always sought to expand into markets beyond its home base. “Looking at Ontario, we saw how the [Liquor Control Board of Ontario (LCBO)and its associated provincial liquor store retailers]’s Beer Store handcuffed themselves by limiting the sales of out-of-province products. This was before COVID-19, and we were the first craft brewery to enter the Ontario market.”

Many Ontarians and British Columbians recall the mid-2010s as the first time grocery stores were able to sell beer and wine on their shelves. Albertans saw their liquor sales move to a privatized model as early as 1993. While this brought some satisfaction to consumers in terms of new availability and accessibility, beverage producers were often confronted with new rules and regulations when moving their products into Ontario.

“If you are a smaller beverage producer in one province and have to deal with a tariff on your grain producer for the beverage itself going to another province, it will affect your decision and ability to send that product to the next province. That’s what we saw with Ontario. Saskatchewan had fewer barriers and was more of a wide-open market. These smaller rules and costs hurt provincial trade and Canada as a whole,” he said.

Warwaruk’s engagement with interprovincial regulation has given him a clear understanding of the Canadian beverage industry overall. He views it as a large economic system that has the potential to thrive more if the right opportunity arises. “It’s about easier trade. We are trying to stimulate the economy and give choices to those who like our products. Whenever you add … these interprovincial taxes and tariffs, there’s more added burden. Overall, if there was more governmental reception to interprovincial trade, there would be more trade,” he said.

The fine print of crossing provinces

Like Warwaruk, co-founder and brand director of The Craft Brand Company, Michael Laba, has kept a close eye on interprovincial barriers for the beverage trade.

While The Craft Brand Company began as an agency importing international craft beers into Ontario over a decade ago, Laba has handled many related trade issues through international product offerings and by adhering to regulatory requirements. It’s a balancing act that involves specifics, intricacies, fine print and a checklist of duties, right down to the product’s label.

It is costly and extremely slow to move product across Canada, whether by rail or truck, and each provincial liquor board operates under a different system. The lack of consistency and efficiency makes national distribution unnecessarily complex and burdensome for suppliers.

Jessica Chester, Laneway Distillers

“Any product coming in [to Ontario] needs to be label compliant,” he said. “For example, it requires English and French text, it must have an accurate ingredient or allergen list and it has to be registered and ordered by the LCBO.”

Laba emphasizes the importance of partnership in beverage logistics as a way to overcome some interprovincial trade challenges faced by Canadian beverage producers. “What we’ve seen is that [beverage producers] would also need a reliable and licensed freight partner,” Laba said. “A good freight partner with the right staff would be key to helping move your product across provinces, [getting] it in clients’ hands and [helping] you be competitively priced on the shelf.”

Beverage producers owe it to themselves to stay up to date on changes to provincial beverage regulations, new statutes and industry communications. Laba has been monitoring the regulatory changes occurring within the province that could have an impact. On April 1, the LCBO moved to a wholesale pricing model to streamline pricing for wholesale beverages. “… the hope is that it will create a competitive retail landscape without additional mark-ups to suppliers or consumers,” Laba said.

Where the lines should fall next

Some beverage producers take a firm stance on addressing Canada’s interprovincial trade barriers for their products. “Dismantle the regulations as soon as possible,” Warwaruk said. “Policy-makers need to support businesses, and if we get away from all the regulations, taxes and related obstacles, there will not only be more Canadian product options, but non-Canadian ones as well.”

Chester emphasizes the importance of easing regulatory financial burdens on smaller beverage producers and improving interprovincial liquor board relations. “It is costly and extremely slow to move product across Canada, whether by rail or truck, and each provincial liquor board operates under a different system. The lack of consistency and efficiency makes national distribution unnecessarily complex and burdensome for suppliers,” she said.

With so many localities producing prize-winning beverages, Laba says regulators and policy professionals should always keep fundamental practices and observations in mind. “Craft brewers are 10 per cent of the marketplace and employ 80 per cent of brewing jobs,” he said. “Any time a craft brewer can make more, there are more jobs and a better community economy. Reducing the barriers would be good for producers and communities all around.”

The report, Bottled Up: Small Business Barriers to Interprovincial Trade, reveals that outdated rules and complicated processes continue to block Canadian producers from reaching new markets, even if that market is their neighbouring province. Despite public support for reform and recent internal trade commitments, a lack of energy for change has resulted in a fragmented system that drives up costs, limits consumer choice and stifles the growth of small producers.

“When American liquor products were pulled from store shelves across Canada in response to U.S. tariffs, it opened space that could and should have been filled by Canadian producers,” said Keyli Loeppky, CFIB’s director of interprovincial affairs. “Instead, rigid interprovincial rules and excessive red tape continue to hinder small alcohol producers from expanding beyond their home provinces, leaving significant growth potential untapped.”

Canada’s alcohol industry is built on small businesses, with over 1,500 breweries, wineries and distilleries nationwide. Yet, entrepreneurs face a confusing patchwork of regulatory, logistical and pricing barriers when selling outside their home province, including:

• Excessive red tape and complex regulations
• Poor transparency and communication from regulators
• Wide variability in markup rates
• High shipping costs

“Duplicative lab testing requirements, inconsistent mark-up rates and confusing rules all add to higher costs and fewer opportunities for Canadian entrepreneurs,” said SeoRhin Yoo, CFIB senior policy analyst for interprovincial affairs. “Allowing direct-to-consumer shipment of alcohol would be a significant step forward, but it’s only one part of the solution small brewers, distillers and vintners want to see. Businesses that want to move pallets of their products, not just bottles, still face myriad barriers that make it not worth the hassle.”

CFIB is urging provinces to work together to fully implement the alcohol-related commitments already made under the Canadian Free Trade Agreement and the agreement on direct-to-consumer alcohol sales, including a strategic rollout plan for May 2026.

To create a fairer and more competitive marketplace, CFIB is calling on governments to:

• Expand government commitments on mutual recognition agreements to include provincial rules, regulations and requirements on alcohol
• Increase transparency on listing processes and mark-up structures
• Establish a cross-provincial working group dedicated to alcohol trade reform
• Provide clear, accessible guidance to small businesses on interprovincial requirements

“It’s absurd that Canadians can’t easily purchase alcohol products made in their own country,” said Loeppky. “If we can’t fix barriers at home, how can we expect our businesses to meet goals to expand international trade? Provincial politicians need to put protectionism aside and work towards true free internal trade in Canada.”

The move, announced after a Council of the Federation meeting in Halifax, N.B., aims to reduce internal trade barriers and modernize outdated restrictions.

The plan aligns with commitments under the Canadian Free Trade Agreement and marks a significant win for cross-country beverage enthusiasts.