The Canadian Brewery Industry
Canada has a lengthy history in beer-making. Molson, Carling and O'Keefe all had commercial breweries in operation before Confederation. Today the industry produces a wide variety of beers, including lager, ale, porter and stout, as well as draught and seasonal beers produced by a range of firms from multinationals to micro-brewers.
An estimated ten million Canadians drink beer and an estimated 21.9 million hectoliters are produced annually Footnote 1, making it the number one alcoholic beverage in Canada in terms of both production and consumption.
Reductions in trade barriers to imports accompanied by the development of a more global beer industry have increased competition in the Canadian beer market.
The Agreement on Internal Trade (AIT), signed by both the federal government and the provinces in 1994 to facilitate inter-provincial trade, resulted in the reduction of some trade barriers between provinces, particularly in western Canada. A more unified Canadian market paved the way for a major restructuring of production during the period 1995 to 2005. The largest brewers with production establishments across the country were able to achieve greater economies of scale during this period by closing smaller plants and consolidating production in fewer but larger establishments.
The Canadian brewery industry is the largest component of the alcohol beverage sector, followed by the distillery industry and the wine industry. In 2009, sales of goods manufactured by the Canadian brewery industry were valued at $4,671.2 million Footnote 2, of which $4,431.0 million were consumed in Canada. In 2009, exports were valued at $240.2 million and imports totaled $641.6 million. (Figure 1 and the statistics page.)
Three of the largest Canadian breweries are foreign-owned. The industry is primarily dominated by two major multinational companies. These two leading breweries control approximately 85% of Canadian-made beer sold domestically. The third largest brewer controls roughly 6% of the market, while the balance of domestically-produced beer is supplied by micro-breweries. Footnote 3 Footnote 4
Statistics Canada data Footnote 5 indicate that there were 209 establishments (plants) brewing beer in 2009. The bulk of the brewing industry establishments were located in Ontario (92), British Columbia (49), and Quebec (42), with the remaining establishments located in Nova Scotia (6), New Brunswick (5), Newfoundland and Labrador (4), Manitoba 4), Saskatchewan (3), Alberta (3), and Prince Edward Island (1). Separate Statistics Canada data for Canada's north also indicate that there was one brewing establishment in the Yukon in 2009.
The Canadian industry has rationalized considerably through mergers, acquisitions and new microbrewery start-ups, and continues to do so. Over the years, the industry structure has changed as the number of conventional plants has decreased while the number of micro-breweries has increased considerably. As of 2009, both conventional and micro-brewery plants operate in all ten provinces, and one is located in the Yukon.
According to Statistics Canada's Business Patterns Database, the largest firms could have more than 500 employees at one establishment while a small brewery may consist of one establishment with less than 50 workers.
Statistics Canada data indicate that, from 1999 to 2009, sales of goods manufactured by the Canadian brewery industry increased 15.2% from a value of $4,054.9 million to $4,671.2 million. Sales of goods manufactured peaked in 2005 at $4,763.5 million, but have decreased since then.
The domestic market continues to be the industry's major sales channel, accounting for 87.4% of Canadian beer sales in 2009. Domestic market penetration has been almost steadily declining since 1999 when sales of domestic beer accounted for 94.3% of the Canadian beer market.
Domestic beer sales are divided into three categories: bottled, canned and draught. The Brewers Association of Canada (BAC), whose members represent over 97% of all domestic beer sold in Canada, states that in 2009, measured by volume, sales of bottled beer accounted for 49.7% of total beer sales, while sales of canned beer accounted for 28.3% and sales of draught beer accounted for 7.9%.
While competition among brands for market share is high, some nationally-brewed beers have seen a decline in sales while there has been an increase in local or regional favourites. This trend has been seen in the past as well, since many popular national brands evolved from local popularity.
Consumer thirst for variety has fuelled the growth of new products and, as a result, there has been a proliferation of new domestic offerings. Today, there is a demand for specialty brews and premium brews, particularly among older and more affluent consumers. While some of these products are imported, others come from domestic micro-brewers where product creativity has been an important strategy in obtaining market share in a market exhibiting little growth in recent years.
Although beer remains the alcoholic drink of choice for Canadians in terms of volume and sales, its dominance continues to decline as consumers are increasing their wine consumption.
Per capita consumption Footnote 6 of beer in Canada was at its peak in 1975 at 106.50 litres, but slowly decreased to 77.10 litres in 2002. Between 1999 and 2009, per capita consumption of beer decreased 3.4% from 79.16 litres to 76.45 litres. In 2010, per capita consumption of beer decreased further to 73.86 litres.
According to the BAC, approximately 80% of beer consumption in Canada takes place in the home. The remaining amount is consumed in licensed premises.
In 2009, the Canadian market (excluding exports but including imports) was valued at $5,072.6 million, an increase of 28.1% from 1999 to 2009.
During the past decade, annual beer sales in Canada continued their upward trend, reaching $9,174.1 million in 2010, which was an increase of 36.5% since 2000 when they were valued at $6,722.9 million. Footnote 7
In 2010, the volume of beer sales in Canada totaled 2,351.0 million litres. Footnote 8 From 1999 to 2009, beer sales by volume had increased by 11.8%. In 2010, imports accounted for 14.0% of beer sales by volume at 328.5 million litres, and have doubled their market share since 2000 when they accounted for only 7.1% of the Canadian beer market.
Over the past decade, the brewing industry in Canada has had to react to significant changes. Some of these changes have included a decrease in per capita consumption of
"brand name" products, while
"niche" markets supplied by micro brewers have experienced an increase in demand for specialty products. There has also been some interest in discount brands in Ontario, Quebec and Alberta. These changes, combined with continued economic prosperity early in the decade, permitted the industry to continue to experience significant positive growth between 1999 and 2009.
The recent consumer shift away from more expensive imported product to less expensive domestic beer has helped the Canadian industry during the 2008 recession. Companies offering products in a range of prices have been thriving during the recent economic downturn.
Value-added is a measure of the value of an establishment's outputs minus the cost of inputs. The brewing industry represents a high value-added sector. In 2009, the share of value-added was 79.5% of Canadian brewery sales of goods manufactured, compared to an average share of 36.4% for the food and beverage manufacturing industry overall. In part, this is also a reflection of the brand equity that consumers recognize in the industry's leading products.
After the signing of the Canada-United States (U.S.) Free Trade Agreement, there was concern that large U.S. breweries with much larger scale production facilities located near the border would make significant inroads into the Canadian market with many well-known U.S. brands. This has not proven to be the case as Canadian brewers have been successful in signing license agreements with U.S. brewers and, to a lesser extent, with overseas brewers to produce and market leading foreign brands in Canada using domestic ingredients and maintaining jobs in this country.
From 1999 to 2009, employment in the Canadian brewery industry decreased 20.3% from 10,517 people to 8,377 people (Figure 2). This decrease in employment was mirrored by an increase in sales of goods manufactured per worker over the same period. Between 1999 and 2009, productivity, as measured in terms of output per production worker, increased 44.6% from $386 thousand to $558 thousand. Increased productivity was necessary for the industry to remain competitive within a free-trade environment.
Breweries tend to be highly automated which contributes to higher productivity on a per worker basis. As in many capital-intensive industries with high worker productivity, brewery production worker wages are among the best in the food and beverage processing sector.
Data from Statistics Canada on investment in the Canadian brewery industry is not available. The industry is highly capital-intensive, and because bottling facilities are highly automated, capital investments are estimated to be valued in the hundreds of millions of dollars.
With the opening of the inter-provincial Canadian market under the AIT, large firms have undergone substantial rationalization through the closing of less efficient plants, with a few of these facilities re-opening as micro-breweries. In addition, over the past ten years, there has been tremendous activity among cottage and micro-breweries, although these still account for only a small portion of industry sales.
A number of factors have impacted upon the profitability of the Canadian brewery industry. In order to maintain profits, domestic brewers are under increased pressure to improve productivity and to cut costs. The value-added per production worker provides some indication of profitability. For this industry, profitability has increased between 2004 and 2009 (Figure 3).
Decreasing domestic per capita consumption of beer combined with increasing competition from imports has impacted this industry. Some firms have adapted to increased competition by introducing discount products to protect and build their market shares.
In addition, there are cost pressures from increased prices of malting barley and corn, aluminum (for cans) and energy, which are having a negative impact on profits. In Australia, recent droughts between 2007 and 2009 followed by heavy rain in the spring of 2011 impacted wheat and malting barley prices and, in the U.S. and Canada, increasing demand for corn as fuel ethanol, have influenced grain costs.
In 2010, Canada exported 336.8 million litres Footnote 10a of beer and ranked as the fourteenth largest exporter in the world while the U.S. ranked thirteenth, exporting 344.4 million litres. Between 2000 and 2010, Canadian beer exports fell 27.0% to a value of $244.6 million. The rising value of the Canadian dollar, a difficult economic climate, and declining beer consumption contributed to declining beer exports during this period (Figure 4).
In 2000, Canada exported 8.5% of its beer production, but by 2009 the share of exports decreased to 5.1% of domestic production.
Canada's main export market for beer has been the U.S. In 2010, exports to that market accounted for 97.9% of total beer exports valued at $239.4 million. Beer exports to the U.S. decreased 27.7% from 2000 to 2010. Although beer imports from the U.S. have almost tripled between 2000 and 2010, and accounted for 22.0% of total beer imports in 2010, Canada's beer exports to the U.S. exceeded the rise in beer imported from that market, resulting in a trade surplus with the U.S. valued at $99 million in 2010.
In 2010, Canada imported 340.7 million litres of beer and was ranked as the sixth Footnote 10b largest importer in the world. Brewery products imported into Canada made significant gains from 2000 to 2010 (an increase of 195.6%), reaching a value of $639.4 million in 2010.
In 2010, the Netherlands was Canada's largest supplier of imported beer accounting for 21.5% of the total imports, followed by the U.S. (21.3%), and Mexico (18.4%). These three countries accounted for the bulk of the value of Canada's beer imports. Other European countries placed high on the list of the top exporters to Canada as beer production is very prominent in several EU countries (i.e. Belgium, United Kingdom, Germany, Ireland, Denmark and France). These countries have brewed beer for centuries and have earned extremely favourable international reputations.
Exports, which had been in Canada's favour until 2002, have been surpassed by imports since 2003, as shown in Figure 4. The negative global trade balance of $394.8 million in brewed products for the Canadian brewing industry in 2010 was due mainly to an increase in imports from new markets such as Mexico and countries in Western Europe.
Canada has maintained a strong positive trade balance with the U.S. for more than a decade. In 2010, the Canada-U.S. trade balance was worth $99.0 million. If Canadian brewers continue to produce American brands under licensing agreements, positive bilateral trade balance figures can be expected to continue.
Canadian-brewed products have an excellent reputation that should help to strengthen their presence in global markets. The demand for new products, especially those produced by micro-breweries, seems to be increasing in the U.S. (and in global markets). The micro-brewery trend started in the mid-1970s in response to the
"homogenization" of the American beer market by the big brewers. Beer produced by micro-brewers has cultivated a following among certain consumers, who support them for offering variety as well as a distinct taste. Some of the major beer companies are now also offering specialty beer products, such as low-carbohydrate and organic beer.
Linkages to Agriculture - The Malting Barley/Beer Value Chain
Water, malting barley (which has been converted into malt), hops and yeast are the basic ingredients used in the manufacture of beer.
Barley is one of the country's most important grain crops and is the primary agricultural input for the manufacture of beer. One of Canada's major competitive advantages in beer-making is the internationally-recognized quality and availability of suitable barley. For beer, special varieties of barley, known as malting barley, have been developed through plant breeding efforts. These include two-row barley (which has two rows of kernels on the head of the plant) and six-row barley (with six rows of kernels on the head of the plant) varieties.
Malting barley is produced primarily in the three western prairie provinces. On average, approximately 70% of all barley produced in the west is malting barley varieties (as opposed to feed barley varieties). In a typical year, over seven million tonnes of malting barley is produced, of which only 2 to 2.5 million tonnes is purchased by Canadian and international maltsters. In the international market, the remaining malting barley is exported in its raw form to be malted in the country of destination, or it is exported as malt from Canadian malt houses.
Four malting firms, primarily foreign-owned, produce malt for domestic and export brewery customers. The majority of Canadian-based malt-house capacity is also located in the prairie Provinces.
For barley producers in western Canada, the export business is extremely important. In a typical year, domestic maltsters buy approximately 1.1 million tonnes of malting barley. Of this, the domestic brewers use approximately 270,000 tonnes of malt (approximately 360,000 tonnes barley equivalent), and the export market consumes approximately 507,000 tonnes of malt (approximately 650,000 tonnes barley equivalent).
From a producer perspective, being successful in having malting barley selected for malting has traditionally meant receiving a price premium of about one-third more than that for barley that is not selected. Barley not selected goes into the lower-priced animal feed market. The extent to which malting barley is usually seen as a premium product over feed barley in normal market conditions is illustrated in Table 1.
|Year||CWB Payments* CDN $/t Special Select 2 Row||CWB Payments* CDN $/t Special Select 6 Row||Lethbridge Feed Barley (in-store Lethbridge in Cdn $/t)||Ontario Corn 'No. 2 C.E. Chat. Elev. (Cdn $/t)|
|* Canadian Wheat Board Payments (in-store Vancouver / St. Lawrence in Canadian $/tonne)|
The prices for feed barley and malting barley both increased in 2008-2009. Feed barley and malting barley prices were influenced by severe droughts in Australia over the past five years, including the drought of 2006-2007 which severely curtailed production in that country. (Australia is the largest exporter of feed and malting barley.) Also, sharp rises in corn prices as a result of strong ethanol demand in the U.S. supported increased barley prices. In 2008-2009, corn prices declined slightly, narrowing the traditional price gap between malting barley and feed barley. Malting barley prices could decline in 2009-2010 if Australian weather and growing conditions return to normal and North America has a good crop.
International recognition of the high quality level and plentiful availability of Canadian malting barley has been a major contributing factor in enabling Canadian-based breweries to obtain licensing agreements with leading U.S. and offshore breweries to manufacture their brands in Canada. This has been a key factor in maintaining brewery capacity and high-paying jobs in Canada over the past decade when domestic beer consumption has been flat.
Barley must pass rigorous testing and evaluation before it is accepted as suitable for malt production. On average, only 25-30% of malting barley grown is sold to make malt. Grades for malting barley in Canada are established under the Canada Grain Act and Regulations which is administered by the Canadian Grain Commission.
The Canadian grading system is a visual system where barley is allocated on the basis of grades for payment.
"Special Select" and
"Select" are grades reserved for those barleys meeting the stringent criteria of maltsters and brewers. Key quality factors include: varietal purity, barley protein and moisture, germination, plumpness (an indication of starch content), maturity, low incidence of peeled and broken kernels, and the absence of disease, foreign material, and heat and frost damage.
Malt made from high-quality barley provides starch and the enzymes necessary to break down that starch into fermentable sugars, which yeast then convert into alcohol. Malt also provides yeast with nutrients, as well as colour and flavour compounds in the beer.
Quality improvement is an ongoing process in which the entire malting barley/brewery value chain works together for the mutual benefit of all participants. Canada has a long history as a world leader in barley breeding. Work to retain and improve this quality position is ongoing. In order to register a new variety of malting barley, it must be equal to or better than existing varieties in agronomics, disease resistance, and processing quality as regulated by the Seeds Act.
In the brewing industry, research and development are driven by the need for new products which are capable of responding to changes in consumer tastes. Companies and countries are using new technology and innovation which provide a competitive edge. From a technological standpoint, the Canadian brewery industry is as advanced as any in the world. Research in Canada has been conducted in microbiology and biotechnology. Developments have included yeast strains which produce low-calorie beer and those which are more alcohol-tolerant. Low-alcohol beer, as well as different products (such as ice brands which employ unique brewing processes), seasonal beers and low-carbohydrate beers, have been among new product developments.
It is also interesting to note that Canadian companies pioneered two of the most important developments in brewing techniques: continuous malting and continuous brewing. However, to date, no Canadian company uses these techniques due to their need for constant monitoring of microbial content.
There have been experiments with new package formats such as polyethylene terephthalate (PET) plastic in place of glass bottles, as well as efforts to improve the preservation properties of plastic to meet those of glass bottles. However, bottles and cans still remain the packaging of choice in the retail market. One company has introduced temperature-sensitive thermochromatic ink to its cans to indicate that the beer is the correct temperature for consumption while another has wrapped its bottles in a high-tech insulator to reflect heat from the hand, keeping the beer cold.
The Canadian brewery industry has been involved in developing and implementing a voluntary Hazard Analysis Critical Control Point (HACCP) system, funded in part through Agriculture and Agri-Food Canada's Canadian Food Safety and Quality Program. HACCP is an internationally-recognized system in which critical points in a process are identified and controls are put in place to ensure food safety hazards are eliminated or mitigated as much as possible.
Because of the importance of high-quality barley for malting and brewing, the Canadian brewing and malting industries established the Winnipeg-based Brewing and Malting Barley Research Institute (BMBRI) in 1948 as a non-profit organization to evaluate new malting barley varieties, to fund research assisting malting barley development, and to provide information to breeders, researchers and producers on the general malting barley quality requirements of its members.
The non-profit organization known as the Canadian Malting Barley Technical Centre (CMBTC) based in Winnipeg was created to conduct applied research and pilot-scale malting and brewing tests of registered Canadian barley varieties, as well as to carry out market development activities. This organization commercially evaluates malting and brewing characteristics of new and existing varieties.
Food and Drugs Act
Health Canada is responsible for establishing standards for the safety and nutritional quality of all foods sold in Canada. The department exercises this mandate under the authority of the Food and Drugs Act and pursues its regulatory mandate under the Food and Drug Regulations.
All health and safety standards under the Food and Drug Regulations are enforced by the Canadian Food Inspection Agency (CFIA). The CFIA is also responsible for the administration of non-health and safety regulations concerning food packaging, labelling and advertising.
The Food and Drug Regulations set out conditions regarding health, quality, composition and labelling requirements that would apply to breweries just as they would to other food and beverage manufacturers so that consumers will have confidence in the safety of the products they purchase.
The Canadian Food Inspection Agency (CFIA) and the provincial liquor boards work together to ensure that alcoholic beverages, including beer, conform to Canadian safety standards (for alcohol content, toxins, etc.) under the Food and Drugs Act before being approved for sale in Canada.
Consumer Packaging and Labelling Act
The Consumer Packaging and Labelling Act, also enforced by the CFIA, requires that pre-packaged foods either imported or made in Canada, must not bear any false or misleading information regarding their origin, quality, performance, net weight or quantity.
Mandatory Nutrition Labelling
On December 12, 2007, nutrition labelling became mandatory on most pre-packaged products. Exemptions (including beverages with an alcohol content of more than 0.5%) can be found in section [B.01.401(2)] of the Food And Drug Regulations. Products lose their exemption status if a health claim or nutrient content claim is made.
For more information on food regulatory issues visit Food Regulations.
The Canadian Wheat Board (CWB)
Under the authority of the Canadian Wheat Board Act the Canadian Wheat Board has been an important element in the malting barley/brewery product value chain as the exclusive seller and price-setter in Canada of malting barley on behalf of producers in western Canada. The Canadian government plans to eliminate the CWB monopoly in 2012.
Agreement on Internal Trade (AIT)
The Agreement on Internal Trade (under Chapter 10 - Alcoholic Beverages) has laid out a framework for non-discriminatory treatment of alcoholic beverages which has resulted in a number of inter-provincial trade barriers being addressed and efforts to avoid the creation of new barriers.
Importation of Intoxicating Liquors Act
Along with federal regulation, Canadian breweries are regulated provincially. This provincial authority stems from a federal statute, the Importation of Intoxicating Liquors Act, which requires that all liquor (including beer) imported into Canada be brought in through a provincial or territorial liquor board located within each province and territory in Canada. (See the list of provincial and territorial liquor boards at the end of this document.) The provincial and territorial governments are also responsible for regulating and controlling the sale of liquor within their respective jurisdictions. Provincial and territorial governments, through their liquor control acts, issue licences to brew or sell beer in their jurisdictions. Applications are available through provincial or territorial liquor control boards.
The provincial and territorial liquor boards collect federal and provincial duties and taxes on alcohol products, and then add their own mark-up prior to sale of the product. Advertising and marketing of beer are also closely controlled. However, these regulations vary between provinces and territories.
Most provinces in Canada have established minimum prices for all alcoholic beverages, including imports, to prevent the sale of alcohol at prices that would encourage over-consumption.
Taxes comprise both a federal excise duty, which is a federal levy imposed at the production stage on domestically-produced products such as spirits, beer and tobacco, and provincial ad valorem and volume taxes. These taxes and duties represent the single largest cost category to a brewing operation. Provincial sales tax and the federal goods and services tax are added at retail.
The federal excise tax system for alcoholic beverages presently in effect in Canada imposes duties on beer produced in Canada when it is shipped from the brewery to provincial liquor board warehouses or industry-owned stores. The excise duty on imported beer is calculated from the point where beer is imported and received into liquor board ‘bonded' warehouses, but does not become due until the beer is shipped to the point of retail sale. This imposition point eliminates competitive distortions between domestic and imported beer, and between beer and other alcoholic beverages.
The Excise Act, 2001 came into force in July 2003 to replace the previous Excise Act. Although certain production and distribution provisions relating to spirits and tobacco products were removed from the new legislation, the existing provisions for the manufacture of beer or malt liquor remained unchanged.
With respect to environmental issues, breweries, like all food and beverage manufacturing firms, must meet all federal laws (e.g. the Canadian Environmental Protection Act, the Canadian Environmental Assessment Act and each province's legislation and regulations.
One environmental issue that food and beverage manufacturers in general have faced is waste remaining from packaging after it has fulfilled its intended purpose. Waste reduction is important everywhere and particularly for large urban centres that are rapidly using their landfill capacity and are experiencing difficulty and expense in finding, developing and ultimately being able to use acceptable new landfill sites. Reduction of materials in secondary packaging (e.g. cartons) can potentially provide both financial and environmental benefits. There are some difficulties with reducing bulky packaging. Plastics and cardboard can help protect foods during transportation. There is a trade-off between the volume of packaging materials (complete with graphics, etc.) neededto identify brands and increase the attractiveness of a product on the one hand, while minimizing packaging requirements from an environmental and cost control point of view, on the other hand.
Provincial government regulations generally favour the use of returnable/refillable bottles, and some small brewers which use non-standard bottles rather than standard refillable bottles are subject to a handling fee.
Through provincial bottle return deposit systems, the brewing industry maintains a good environmental record. Minimal quantities of packaging end up in municipal waste sites.
According to the BAC, the national average for recycled bottles is 97%. In addition, bottles are sterilized and reused 15 to 20 times.
The Canadian marketplace is characterized by high bottle usage, reflecting consumer preferences, environmental regulations and industry systems to facilitate re-use. Some provinces impose a levy or a deposit on non-reusable containers (i.e. cans), deterring their use.
Prior to plant construction, food and beverage manufacturers must meet municipal zoning requirements. A proposal to build a new state-of-the-art plant or to substantially enlarge an existing facility could result in hearings to assess environmental impacts before construction may proceed. For example, breweries use substantial amounts of wash water which must be adequately cleaned so that it does not pollute streams and water tables with organic material that could cause unacceptable levels of biological oxygen demand.
Provinces and municipalities have to be satisfied that systems will be put in place for waste water treatment. Some manufacturers take a pro-active approach by developing
"best practices" with respect to the environment in both field and plant, for example, reducing their energy and water usage and creating less solid and water waste.
Organic beer represents an emerging market that is showing potential for growth. Capitalizing on Canadian consumers' growing desire for organic foods and beverages that are environmentally friendly, some Canadian breweries have extended the organic food movement to beer which is marketed as a high-quality product produced in a way that encourages sustainable agriculture.
As producers and retailers continue to raise awareness about organic beverages to gain market share, the coming years may see more breweries tap into this niche market as the trend toward organic and green products continues to expand in Canada and abroad.
The Organic Products Regulations came into force on June 30, 2009. These regulations aim to protect consumers against false or misleading organic claims and to support the continued growth of the Canadian organic industry. Certification to the Organic Production System standards is mandatory for organic products that are being used in interprovincial and international trade, and for products bearing the
"Canada Organic" logo. Such interprovincial/internationally-trade products must be certified by a CFIA-accredited certification body and must bear the name of the certification body.
The Organic Products Regulations allow for the following organic claims:
- Only products with organic content that is greater than or equal to 95% may be labelled as
"Organic"or bear the organic logo shown below;
- Multi-ingredient products with 70-95% organic content may have the declaration:
"contains x% organic ingredients."These products may not use the organic logo and/or the claim
- Multi-ingredient products with less than 70% organic content may only contain organic claims in the product's ingredient list. These products may not use the organic logo.
The following web sites provide additional information:
- Organic Products Regulations
- CFIA accredited certification bodies
- Organic Production Standards
- Organic Production (Agriculture and Agri-Food Canada)
Challenges and Opportunities
The Canadian brewery industry has an overriding challenge in terms of an aging and slow-growing population which is more concerned about health, and increasing cultural diversity in Canada. These changes may continue to contribute to declining per capita consumption. Increases in exports will be needed to maintain and build the performance of this industry.
As of January 2000, import duties on all foreign beer were removed, creating an additional challenge to the domestic brewery industry.
Imports of barley and malting barley are subject to tariff rate quotas (TRQ). A lower tariff is applied to imports that come into Canada up to a certain quota level and a much higher tariff is applied to imports entering after the quota is filled. Among grain products, TRQs apply only to wheat and barley - they do not apply to corn, oats, rye and other grains. The TRQ for barley is 399,000 tonnes and the TRQ for barley products is 19,131 tonnes. Imports under the barley TRQ fluctuate significantly every year but have never reached the maximum volume. The barley product TRQ has been completely filled since 2005. As a result, the Department of Foreign Affairs, Trade and Development has been issuing supplementary import permits under the barley products TRQ.
The fluctuating value of the Canadian dollar can place pressure on Canadian exporting competitiveness which in turn could result in multinationals reassessing their continued manufacturing in Canada. A weaker U.S. dollar adds to the potential of increased competition from imports in the future.
Despite increased international focus, Canada is still a relatively small player in world markets. With excess capacity in North America in a relatively flat market, competition for market share is intense in both Canada and the U.S. In fact, static demand in most developed countries has motivated major brewers to grow their businesses through mergers and acquisitions rather than to rely on organic sales growth. As a result, these global producers now benefit from economies of scale and promotional budgets which far outweigh those of Canadian firms.
A significant share of the Canadian market is held by foreign brands brewed under license. Licensing agreements are the most economical and efficient way for American brewers to get their products into Canada since transporting heavy bottled products is extremely expensive. Canned products are more economical to ship but they face an environmental levy.
Rising energy costs also threaten to offset productivity gains in this industry. It is not unusual for a brewery to use five litres of water to produce a litre of beer. Some of this water usage is a result of the washing of returnable bottles. Reducing water usage is not only an important environmental initiative but provides opportunities for further cost savings.
Brewers must overcome consumer perception that beer contains significantly more calories than other products. Also, to counteract declining beer consumption, brewers need to educate consumers about the differences between various types of beer, and about beer and food pairings in order to increase consumer appreciation for brewery products. Home consumption of alcoholic beverages, including beer, may also offset on-premise consumption.
Malting Industry Association of Canada
Suite 448, 900 Greenbank Road
Ottawa, Ontario K2J 4P6
Brewing and Malting Barley Research Institute (BMBRI)
Suite 303, 161 Portage Avenue East
Winnipeg, Manitoba R3B 2L6
Internet Site: www.bmbri.ca
Canadian Malting Barley Technical Centre (CMBTC)
1365-303 Main Street
Winnipeg, Manitoba R3C 3G7
Tel: (204) 984-4399
Fax: (204) 984-5843
Ontario Craft Brewers
1-75 Horner Avenue
Toronto, Ontario M8Z 4X5
Tel: (416) 494-2766
British Columbia Craft Brewers Guild
Tel: (250) 717-1091
Internet Site: http://bccraftbeer.com
Association des Brasseurs du Québec
2000 Peel Street, Suite 888
Montréal, Québec H3A 2W5
Tel: (514) 284-9199
Toll free: 1 (800) 854-9199
Internet Site: http://www.brasseurs.qc.ca
Association des Microbrasseries du Quebec
Tel: (513) 543-9501
Agriculture and Agri-Food Canada Contacts
Sector Development and Analysis Directorate
Agriculture and Agri-Food Canada
1341 Baseline Road, Tower 5
Ottawa, Ontario K1A 0C5
Appendix A - Provincial and Territorial Liquor Boards
Yukon Liquor Corporation
9031 Quartz Road
Whitehorse,Yukon Y1A 4P9
Internet site: www.ylc.yk.ca
Northwest Territories Liquor Commission
Suite 201, 31 Capital Drive
Hay River, NWT X0E 1G2
Nunavut Liquor Commission
P.O. Bag 002
Rankin Inlet, Nunuvut X0C 0G0
British Columbia Liquor Distribution Branch
Ministry of Small Business, Tourism and Culture
2625 Rupert Street
Vancouver, British Columbia V5M 3T5
Internet Site: http://www.bcliquorstores.com/en
Alberta Gaming and Liquor Commission
50 Corriveau Avenue
St. Albert, Alberta T8N 3T5
Internet site: http://aglc.ca/
Saskatchewan Liquor and Gaming Authority
P.O. Box 5054
2500 Victoria Avenue
Regina, Saskatchewan S4P 3M3
Internet site: www.slga.gov.sk.ca/
Nova Scotia Liquor Corporation (NSLC)
P.O. Box 8720, Station A
Halifax, Nova Scotia B3K 5M4
Internet Site: www.mynslc.com/
PEI Liquor Control Commission
P.O. Box 967
3 Garfield Street
Charlottetown, PEI C1A 7M4
Internet Site: www.peilcc.ca
Newfoundland Labrador Liquor Corporation
P.O. Box 8750, Station A
90 Kenmount Road
St. John's, NL A1B 3R1
Internet site: http://www.nlliquor.com/
- Footnote 1
Brewers Association of Canada website: www.brewers.ca.
- Footnote 2
Statistics Canada Annual Survey of Manufacturing and Logging.
- Footnote 3
Beverage Marketing Corporation.
- Footnote 4
Federal and provincial government definitions of a microbrewer or small brewer variy. According to the BAC, a microbrewer produces up to 250,000 hectolitres of beer.
- Footnote 5
Statistics Canada: Annual Survey of Manufacturing and Logging, by North American Industry Classification (NAICS).
- Footnote 6
"Food Stats."Per capita consumption data are based on the population aged 15 years and over.
- Footnote 7
"The Control and Sale of Alcoholic Beverages in Canada, 2010".
- Footnote 8
- Footnote 9
Statistics Canada changed its survey methodology in 2000 and again in 2004 such that data prior to 2000 cannot be directly compared to subsequent years. This change in survey methodology mostly affects the number of establishments and employment.
- Footnote 10
Global Trade Atlas.
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