In 2020, Bryan Anderson pivoted in his corporate accounting career and opened Lone Pine Distilling Inc. in Edmonton.
It was an ambitious move, especially given the timing. The COVID-19 pandemic was tilting the odds further away from his new company, even though many might have appreciated a comforting shot of Lone Pine’s hand-crafted gins and vodkas in those days.
Anderson persevered and, as the pandemic receded, emerged with his business intact. But even with a global health crisis behind him, it hasn’t been an easy road.
“Getting noticed on the shelves, getting the customer awareness, getting their buy-in that it is a quality product, it’s tough,” Anderson said of the challenges. He noted that every distiller who sells in Alberta, from local to international, competes with 35,000 individual products on liquor store shelves.
Moreover, distilling is a costly business and it can take years for a product to finally reach a customer.
“We have to invest thinking that this product might not be in your hands for three, maybe five years, putting away hundreds of thousands of dollars, on the premise that we’re still there,” Anderson said.
It’s precisely these kinds of challenges that have Alberta’s small-batch distillers calling on the province for what they say is a long-overdue regulatory update that will give their young industry a fighting chance. The alternative, says Yannis Karlos, a board member of the Alberta Craft Distillers Association, is that local businesses may eventually be forced to shut down.
“Our government regulators (are) telling us that ‘we want you to be successful, but not too successful,’” Karlos says, “because if we’re too successful, then the taxation changes completely on us, and we are under an entirely different regulatory regime.”
The foundation for Alberta’s small-batch distilling industry was laid in 2014 when the province lifted a high-volume minimum production requirement on distillers, a move that allowed small companies to enter the market. By 2016, the province was home to seven craft distilleries. Today, they number around 70.
One of their main challenges, however, is that regulations on the distilling industry have not been overhauled since 2003. The result is an operating environment that is stifling business growth. “We have ended up with a system of one-off regulations and high taxation in some places and low taxation in other places,” says Karlos, who is also CEO of Park Distillery in Banff. “(This) leads to a very challenging business environment.”
The Alberta Craft Distillers Association, or ACDA, has been asking for changes to the province’s liquor markup framework — the policy that determines how much the province adds to the cost of the liquor it wholesales to individual retailers — since 2015.
This past summer, in advance of developing a new framework, the province surveyed stakeholders to explore changes to the markup system and where opportunities for growth might exist.
One idea — basing the markup system on the value of production rather than volume — was generally dismissed by industry participants and, subsequently, by the province.
Going forward, the ACDA is calling for a pair of reforms to the current system. The first is a graduated, progressive markup system. The goal, Anderson says, is to help “producers who are small, start to grow into the middle size, maybe get into the larger size where there is that motivation to continue to grow. That would probably help the industry.”
The second proposal is to increase the annual production limit for small manufacturers to 400,000 litres of absolute alcohol, up from 140,000 litres.
“We’re looking for an equal playing field for everybody. Either you’re producing alcohol in Alberta or you’re not, and that should be the benchmark,” Karlos says.
“This industry is built on, you know, the entrepreneurial spirit of hard-working Albertans, and we’d love for the provincial government to listen to us. We can add a lot to the value-added agriculture piece of our provincial economy.”
The provincial government is expected to present proposed changes to regulations governing small-batch distillers in the spring.