Amid a reported increase in restaurant insolvencies, Canada’s craft brewers say their razor-thin margins are being sliced even thinner by rising interest rates and production costs, such as production materials, packaging, taxes and transportation.
10-20% of the country’s craft breweries could face closure in 2024, according to an expert
Ethan Sawyer · CBC
·
After nearly a decade of brewing beer and serving customers in East Vancouver, Chris Lay faces a sobering reality.
On Dec. 31, Lay and his business partner Diana McKenzie will shutter their business, Callister Brewing Co., citing a sharp rise in their operating costs, particularly rent, which they say is set to increase 45 per cent.
The proposed increase would cost the city’s self-described smallest brewery more than $10,000 a month.
Lay says that’s not sustainable, so instead he’s packing up shop, unsure of whether his business will be able to reopen in a smaller, more affordable space.
“Logically, it’s a no-brainer,” said Lay. “Emotionally, it’s much harder.”
Callister’s closure coincides with rising concern from many of Canada’s craft brewers, who say their razor-thin margins are being sliced ever thinner by rising interest rates and production expenses, such as materials, packaging, taxes and transportation.
Restaurants Canada, which provides advocacy and resources for a variety of food service providers, including bars and restaurants, told CBC the industry saw a 55 per cent increase in insolvencies in the first half of 2023 versus 2022.
And there are concerns that number could climb even higher next year.
“2024 is going to be a really difficult year for many Canadian craft breweries,” said Christine Comeau, executive director of the Canadian Craft Brewers Association. “I’ve heard anywhere between 10 and 20 per cent [of Canadian breweries] could look at closures.”
She and others are calling on the federal government to help alleviate some of the economic pressure, by extending pandemic loan repayments for businesses and “modernizing the country’s Excise Tax Act.”
“We’re looking at a 50 per cent reduction in what Canada’s smaller craft breweries are paying,” said Comeau. “That will help them to invest back into their breweries … and really to stay afloat through 2024 and beyond.”
Rising costs, but not for consumers
The Canada Emergency Business Account (CEBA) was introduced at the height of the pandemic to help out small businesses forced to close or limit their operations due to public health measures. The program offered interest-free loans backed by the federal government.
Following the Jan. 18 deadline, CEBA loans will convert to a three-year term loan at five per cent interest.
“The federal government has been there to support small businesses, both during the pandemic and into the recovery,” the federal finance department said in a statement.
“It has twice extended the partial loan forgiveness of the CEBA program … is lowering credit card transaction fees, has decreased the small business tax rate, and has enhanced the Canada Small Business Financing Program.”
The excise duty rates on alcohol are also “adjusted on an annual basis to account for inflation,” the department said.
“Such an adjustment generally does not represent an increase in real dollar terms, and is a common feature of the tax and benefit systems, used in many other taxes.”
The economic waves, meanwhile, have also crossed the harbour to B.C.’s North Shore.
“Our brewery has had to downsize,” said Ian Ennis, Lead Brewer at North Vancouver’s House of Funk “The staff are wearing a lot more caps … it’s just a lot more work.”
WATCH | Canada’s breweries offer communities more than beer:
Breweries are more than the local watering hole
Featured VideoMany Saskatchewan businesses are trying to provide a social hub and give back to their community on a wider scale.
Ennis, who has brewed beer in Europe and Canada, says he used to have two full time staff members assisting him.
Now he has one, who only works part-time.
“I’ve been in the industry for eight years … and I haven’t seen anything like this,” he said.
But while the cost of creating beer continues to climb, experts say craft brewers are reluctant to pass those added costs to customers.
“Craft beer is a luxury product,” said Ken Beattie, executive director of the BC Craft Brewers Guild. “If your groceries go up, you maybe murmur and pay the extra dollar. We can’t do that … We’ve hit a ceiling where [prices] can’t go any further.”
Pivot to pop?
Beattie noted that brewers are also facing a fragmented marketplace, where consumers have no shortage of new products, including cannabis infused and non-alcoholic beverages.
Indeed, for some breweries, adding other products is the path forward.
Since its inception in 2019, for example, North Vancouver’s House of Funk Brewing Co. has also served coffee and roasted its own beans.
Callister Brewing Co.’s Chris Lay, meanwhile, says he’s seen the trend play out first hand, through the success of their non-alcoholic sodas.
“It is actually kind of challenging to make enough product in this space to be profitable,” he said, pointing at a row of metal brewing tanks.
“Beer and soda are running into each other right now, and it’s hard to get enough of both out the door.”
ABOUT THE AUTHOR
Ethan Sawyer is a Network Field Producer for CBC News. You can contact him at ethan.sawyer@cbc.ca, or by phone at (604) 662-6784.
With files from Georgie Smyth and Lyndsay Duncombe
