Drinking Local: This Party Comes With A Hangover

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  • I am informed that that the “Farm Winery Policy” has not been without significant problems in its 30-odd year existence. The NSLC was initially stuck with a politically-concocted and imposed incentive scheme that invited and was open to abuse.In the early years, for example, farm wineries only had to have acreage planted to sell tax free wine, most often sourced from elsewhere. The quality was often low and there was no cap on how big a farm winery could grow (thinking Jost here) before it would be deemed “commercial” (such as Andres in Truro) and not warranting tax-free status. It took years to force local content requirements, make indigenous fruits eligible, and initiate a quality assurance regime (which apparently is still a work in progress). Over the decades the winery group proved adept at lobbying and routinely rolled out claims (as they still do) about all the economic benefits accruing to the rural areas. Successive ministers have been seduced and the LC probably looked self- serving in its calculations of cost and its questioning of the viability of small wineries.Without a doubt the industry has successfully lobbied government for various marketing advantages unavailable to imports and non-farm wineries thereby arguably increasing its dependency on tax and other concessions and, as well, creating trade friction between provinces and inviting international challenges. Liquor authorities have in fact been subject to disputes with the US and EU over preferential treatment of local products and most recently the EU insisted on specific disciplines in the Canada-EU Trade Agreement (CETA) to counter these practices. These trade conflicts and losses,however,have not deterred the lobby from pursuing growth based on preferential treatment. Indeed, it appears that the LC management eventually ” got with the program “, and reluctantly accepted an economic development component in its mandate. This helped pave the way for successive governments to get more easily sucked into the “good news story” with the tourism aspects and explosion of wineries and microbreweries testifying to the apparently infinite potential available, if only government would get out of the way with pesky taxes. There has also been the attitude that it’s all a win-win, that consumption of local product is somehow incremental to what the LC sells, that there is no significant impact on revenues. However, it must be recognized that the reality of overcapacity and amalgamations within the liquor sector it may not be possible to grow and sustain small scale local. operations into the future based on government concessions and a protective blanket.
    The success story must primarily be built on the hard work, investment, and ingenuity of the growers, vintners, and brewers who carve out market niches that are not dependent on disproportionate subsidies and concessions.
    As with the film industry one cannot simply take for granted that targeted tax breaks,etc. are fully justifiable in times of austerity.

    G | January 19, 2017 | Reply

  • I haven’t had a family doctor in five years! Where is the taxation of our alcohol being spent? How about 25 million on the blue nose 2 for starters. I personally know two craft brewers and neither of them has ever received any subsidies. If this province was not so mismanaged, we would enjoy our craft brew at a lower price AND I’d have a family doctor. Besides, craft beer has no additives such as propylene glycol. A quality, naturally brewed beer contains significant amounts of magnesium, selenium, potassium, phosphorus, biotin, and is chock full of B vitamins. Cheers to our local brewers!

    Claude | January 18, 2017 | Reply

  • I enjoyed your column on the tax policies surrounding the support of local wineries and craft brewers. I do think however there are some broader issues when it comes to how the province of NS among others handles policies surrounding the sale of alcohol. By giving themselves the monopoly on liquor sales, initially I suspect to control the sale of a product that was deemed to be dangerous, they put themselves in a compromised position as a regulator. To see this clearly one just has to compare how the government regulates tobacco vs. alcohol. Alcohol is glamorized, with big full colour signs on the side of liquor stores showing fresh faced young attractive people enjoying their drinks. If you compare this to tobacco where you can’t display the product and the packages contain large images depicting every form of cancer. I think you are seeing two extremes and it illustrates the dangers of having government given the monopoly on liquor sales.

    A better system would be for the provincial government give up their role as the monopolistic seller of alcohol so they would be able to regulate the sale of alcohol without the inherent conflict of interest. There would be no need to earn less for the NS taxpayer and the social ramifications of alcohol would be better served. It would be a cost reduction move in a province that surely needs to balance its budget, and it may further promote entrepreneurship, also something that needs to be fostered in NS.

    Warren Maynard | January 17, 2017 | Reply

  • A counterpoint:


    Greg Beaulieu | January 16, 2017 | Reply

  • Your recent article states, “On sales from their own stores, the winemakers and craft brewers keep more than 97 percent of the price”.
    NSLC recently amended its regulations so that instead of the microbreweries paying 50 cents per litre on products sold at their own stores, the fee would change to 5% of the wholesale price, effectively reducing the fee. I don’t know how the math works out in all of this, but it appears that the brewers will be keeping something less than 97 percent of the price.

    Your article ignore the financial benefits that local wineries, distillers, and breweries bring to the economy of Nova Scotia while the imported spirits, beers, and wines contribute nothing other than the markups charged by NSLC. The local breweries, wineries, and distillers employ people in Nova Scotia who earn wages and pay income tax and spend their earnings in Nova Scotia. Further, the breweries, wineries, and distillers spend money on buildings and manufacturing facilities which again support the local economy. And, as you mentioned, there’s the tourism aspect. Although NSLC’s loss in profits on domestic products may be $12 million or more, it does not result in a $12 million loss to the provincial taxpayers. It’s something much less than that. You’re a financial person and you would know that. Why did you ignore it?

    I refer you to a November Chronicle-Herald article quoting Jamie Baillie calling for a reduction in the microbrewery fees.


    Jim | January 16, 2017 | Reply

  • This article is ridiculous, because it ignores the much more valuable contributions of new breweries and wineries, which is real job creation and use of locally grown products. And the tourism contribution is huge – you really downplayed it. PS they are just breweries, not “craft breweries.” I wish media would stop using that meaningless term.

    Craig Pinhey | January 16, 2017 | Reply

  • As a regular reader of Bill Black’s opinions, I always appreciate his rigorous contribution to Nova Scotia’s solvency debate. But in his provocative Drinking Local, absent in his equations are rural job creation numbers as well as tax revenue on payroll and profits, which aren’t trivial, at least not to the Nova Scotian’s who pay them.

    Also not trivial is that the Annapolis Valley has conditions for growing food on par with the Okanogan and Niagara; Canada’s top tier. But competition, profitability, investment, access to workers, aging populations and urban sprawl have all added up to years of lost acreage and uncertain farm economies. To the extent crops used in the process are local, these highest value-add farmed products (cider, beer, wine and spirits) are significant rural job creators that also help preserve Canada’s best food producing lands for that purpose.

    Nova Scotia is a significant global food “Brand” and rightly so, with generations of hard-earned investment in seafood, blueberry and other delicacies that speak to our special place on the planet, our diverse culture and rich history of “cheer”. The point is, we’ve only scratched the surface in terms of developing acreage available for the most value-added sectors of agriculture and aquaculture, and the world wants what we can grow. I give Mr. Black credit for acknowledging the potential for growth in the beverage industry, and tax revenue from it. I also cede that potential doesn’t make up for current lost treasury contributions today. But its also certain that a massive NSLC profit margin that makes it senseless to invest in their future was wrong-headed for rural Nova Scotia’s future.

    I for one, would like to encourage the farm and beverage risk takers who have worked for years against strong financial, technical and political headwinds. I support removing barriers to private sector success; in this case a government monopoly that prevented high-value diversification of farmlands and beverage manufacturing. Finally, I say, tax something else a bit higher if this creates lasting rural employment, attracts tourists and preserves arable land. We can be sure there is no positive economic growth for Nova Scotia coming from the NSLC cut taken on New Zealand wine and British gin, and much less “great fun”.

    Paul Smith | January 16, 2017 | Reply

  • You neglect to consider the positive impact to revenue of having a thriving business making the product in Nova Scotia – other than tax that bottle of Beefeater’s Gin doesn’t do anything else for the government. A craft brewery, distillery, or winery will employ lots of people and by using local ingredients will further help our economy.

    Graham Collins | January 16, 2017 | Reply

  • Congratulations! You have raised the first, serious criticism of Nova Scotian alcohol producers … well, if you don’t count the complaint about patrons peeing on a neighboring building in Halifax last year.

    And I think it is prudent that the high flying sector should come under scrutiny. Really, can things be as good as the media would have us believe about a local business sector?

    Here’s the thing … it is that good and a ticks a couple of really important boxes.

    First, craft beer producers can be found all around the province — rural and city. Pretty good jobs run by (typically) passionate young men and women who are committed to the local community. Attracting and keeping younger people in rural (and urban) areas … hmmm, where have I heard this before?

    And they all work together. Brewers from Cape Breton collaborate with brewers from Western Nova Scotia to develop a product, often using a local ingredient. And then they share the recipes. Breaking down silos across the province … dang, its like this voice is call from the past but who was it?

    Finally, as your article challenged the financial side of local producers, please let me share a personal experience. My wife and I spent a month in Asheville NC in 2015. A city of 80,000 with over 20 craft breweries … how could they all survive? They cooperated — with other brewers, restaurants, the arts, conventions, hotels, etc and turn a $4 bottle of beer into a $500 weekend. Building on our tourism sector…c’mon, you know who was stating all these point, what, 3 years ago?

    Its a matter of choice. As a province we can choose to encourage this sector because it ‘makes sense’ or we can subject it to the same scrutiny as ‘out of province high margin products’ that could well kill the fledgling industry.

    At the fork in the road, which path are we taking?

    Tom | January 16, 2017 | Reply

  • Disappointing article that took a view point without having the numbers on important factors like the investments these entrepreneurs have made in the province and the taxes from the *hundreds* of jobs, many in rural Nova Scotia, that have been created. I don’t think these even got a mention. How many countless millions has the province spent trying to do the same, while the craft beer industry sprung up with no help from the province, and on the contrary has faced headwinds from the NSLC and province?

    As well, holding up the NSLC as an example of efficient tax collecting is gag worthy. This province would be better off breaking up and selling the NSLC, and getting out of the way of (and making limited investments in) growth industries like local wine, beer and spirits.

    Murray Wong | January 15, 2017 | Reply

  • Bang on Bill. There is ample evidence of how difficult it is to get out of this trap if you examine Alberta. On beer, as production grew for Big Rock successive Alberta governments simply kept raising the production limit for the subsidy to the point where it reached 250,000 hectolitres. Keeping the limit low would have priced Big Rock beer the same as all other commercial beers. And governments did not have the courage to do so. This created a distorted market with regard to other commercial brewers.
    Wine industry in NS is now in the trap. They sell virtually none of their production in the Alberta open market because they can make more here by pressuring the government. Craft beer in NS is 4 per cent sales sales but make up 28 per cent of the SKU count(product listings).

    Rick Perkins | January 15, 2017 | Reply

  • This is just what we need— the government sucking another $12M from the citizens of NS. And what would they do with it, send more employees to Hawaii for training!!!!
    Your characterization of this as a subsidy similar to the film Industry subsidy is an interesting one. While technically comparable there are some differences. Most notable is the fact our film subsidy is effectively a cash transfer to large and greedy film firms outside of NS. These local craft breweries and wineries are just that- local, who contribute much more to the local economy over the long term. I say leave them alone and encourage more, especially in rural NS.
    Your characterization of NS health care as `free“ must have been made at a weak moment. If we had all the facts we might realize we pay more for our health care that the Floridians, and we get third world care. I also disagree with the suggestion that profits from Liquor commission sales were ever intended to pay for health care. Those profits have been hijacked from their intended use and that should not be acceptable.
    I believe in taxes that are applied equitably to all. I also believe we are overtaxed, and we should be more concerned with reducing the $240 M as opposed to making it $252M. If the Treasury wants $12M to improve our finances look at the travel and training budgets available to the employees. I suggest we get far better contribution to our society from our local producers then we do spending tens of millions training the employees in far off sunny vacations spots. Let’s focus on the right stuff.

    barry h | January 14, 2017 | Reply

    • Thanks Barry.
      I think what I said was technically correct–what we get for free does cost Floridians a lot. No, of course it is not everything.
      I have experienced health care there and did not find it different than here.


      Bill | January 14, 2017 | Reply

  • Bill, you miss one way in whcih the province benefits from sales of local beer, wind and spirits, other than the fact that they taste so much better! Local producers employ local people who pay taxes here, and makes profits which are in turn taxed – all flow back into the province’s coffers. I don’t have the statistics to say whether that makes up the $12 million which NSLC looses on sales from local producers, but it may come close.

    keith | January 13, 2017 | Reply

  • With respect to your conclusion..’Subsidies should be enjoyed in moderation”…Lets apply this theory to the really big and established “subsidy receivers” of all kinds across all our industries in Nova Scotia… especially those headquartered outside the province who seem to be particularly good at it

    Allan Rodger | January 13, 2017 | Reply

    • Thanks Allan.

      Apart from filmmakers, which out-of-province recipients did you have in mind?

      Bill | January 13, 2017 | Reply

      • I would suggest thoses who benefit from the “mispricing” occasioned by the marketing boards

        Bill F | January 13, 2017 | Reply

  • So you want to stifle progress on a growing local industry by over taxing it??? The taxes generated by the employees engaged in the local wineries and breweries along with the added tourism dollars far outweigh the missed tax opportunity that NSLC are leaving on the table of our new and growing industry!!!!

    Bernie | January 13, 2017 | Reply

    • Bernie thank you for your comment.
      I agree that there are real economic and esthetic benefits. What I am arguing for is that the amount of taxpayer money invested in that be disclosed, and that there be an upper limit on how much an individual winery or distiller can benefit.

      Bill | January 13, 2017 | Reply

      • I usually agree with the lens through which you view the issues in NS but not this one – I’d much rather ask the question – is there a different business model then the NSLC that can still deliver the necessary tax dollars to the government coffers.
        As mentioned, the impact in rural NS cannot be underestimated with these creative enterprises. I’d much rather see the monopolistic NSLC being forced to examine ways to reduce their costs to aid the bottom line – then try to impede these enterprises. I might even be so bold as to try to imagine a population that didn’t accept such high “hidden” taxes on alcohol etc… in exchange for a broken health care system in NS.

        Judy | January 13, 2017 | Reply

  • Governments have to be better at transparency . Economic data about Nova Scotia is very poorly communicated. All these wineries and many breweries are helping rural NS come back to life .They provide a few jobs and many are year long , but they are stability . EI is not the same as employment in the winter that produces product . Look at how weak is our tourism in the winter, and why ??? We are letting the rural areas collapse by not developing every possible asset a rural area may have . What are our best forestry products now ? Cutting trees for biomass ??? What happened to producing lumber?

    peter S | January 13, 2017 | Reply

  • As usual, your point is well made/taken Bill and I’ll drink to that ; another example of perfection being allusive; Thanks for the insightfullness..

    Bob MacKenzie | January 13, 2017 | Reply