Bill aims to give leg up to Ontario’s craft distillers

Former Ontario PC leader Tim Hudak is back in the spotlight for his efforts to remove the barriers to the province’s craft distillers, so they can enjoy the same benefits as craft brewers and VQA wineries.

The MPP’s private member’s bill, Free My Rye, would reduce the 140-per-cent markup small distillers pay the LCBO; allow them to sell directly to bars, restaurants, and consumers; allow the micro-distilleries to sell by the glass; and increase the sale of spirits in the LCBO (and possibly grocery stores).

“Somehow when it comes to public policy in Ontario, if alcohol is in beer or wine, it’s a good thing and you promote it,” Hudak said at a news conference. “But when it goes in gin or rye, suddenly it’s a bad thing and public policy works against it.

“There has been some progress made for wine and beer. Why not do the same for distilleries?”

Hudak said craft spirits are part of a growing market, and in the U.S., where similar barriers have been removed, the number of craft distillers has increased from 50 to 769 in the past decade.

“There are some very unique products coming out of Ontario that simply aren’t being made available to the general consumer because the taxes are so high and delivery so convoluted,” Hudak said.

The bill was introduced in the Ontario Legislature in mid-May and passed first reading.

What the bill does

1. Lowers tax rate for small batches

The Bill reduces the current fixed mark-up of 140 per cent that distillers must pay the LCBO. This pro-growth measure will help those producing smaller batches and give them a chance to reinvest the savings, hire more people and expand.

The Bill has a graduated markup system for the sale of spirits made by a manufacturer to the LCBO or at the manufacturer’s own retail store:

• 10 per cent, for the first 50,000 litres of the manufacturer’s spirits sold in the year at the store.
• 20 per cent, for that part of the manufacturer’s spirits sold in the year at the store in excess of 50,000 litres up to 100,000 litres.
• 40 per cent, for that part of the manufacturer’s spirits sold in the year at the store in excess of 100,000 litres up to 625,000 litres.

2. Removes the middle man

The Bill enables microdistillers to sell their product directly to bars, restaurants, and general consumers matching an advantage currently restricted to VQA wines and craft beer producers. It takes an average of four weeks to get a case of spirits from a distillery to a licensee even if they are down the street. The product will go from the distillery to the LCBO warehouse, sit there, then is re-shipped to the licensee. This wastes time, energy, and fuel. Most importantly, the hassle of the LCBO middle man unnecessarily hinders the growth of distillers and the businesses who serve their product.

3. Sell by the glass

The Bill allows distilleries to showcase their product at their on-site tasting room the same way wineries and breweries are currently able to do. Distillers are currently not permitted to sell by the glass or sell a mixed drink on the premises. This will level the playing field, attract more visitors and increase sales.

4. Increased access for customers

The Free My Rye Act directs the Provincial Government to achieve similar market access improvements for spirits that beer and wine will enjoy with the addition of grocery store sales. The LCBO is required to ensure that there is at least a 20-per-cent increase in the number of stores for the sale of spirits over the five years after the Bill comes into force. It gives full flexibility to the Government of Ontario on how to meet the targets. (It allows for but does not mandate grocery store sales).

Source: Tim Hudak