BUSINESS

Stirring up a batch of trouble

JOHN SCHOFIELD February 17 1997
BUSINESS

Stirring up a batch of trouble

JOHN SCHOFIELD February 17 1997

Stirring up a batch of trouble

BUSINESS

JOHN SCHOFIELD

LORRAYNE ANTHONY

It was the kind of cloak-and-dagger operation usually reserved for international spies. Masterminded by an angry coalition of beer companies, pub owners and hoteliers, the mission had one objective: to blow the bottle cap off British Columbia’s burgeoning brew-it-yourself industry. As part of the investigation, a team of private detectives visited several stores where patrons make their own beer and surreptitiously filmed employees as they performed work that, under B.C. law, should be done by customers. ‘This is not hobby brewing—this is out of control,” charged Ian McConnell, executive director of the Western Brewers Association. The revelations last spring outraged owners of make-your-own beer and wine stores. “How dare these people send spies to entrap hardworking people?” protested Dick Melville, secretary of the Victoria-based Hobby Brewers and Vintners Business Association. “Where are their scruples?”

The escalating battle between British Columbia’s commercial beer makers and the province’s U-brew shops has all the nastiness of a barroom brawl. The breweries maintain they cannot compete with an industry that is virtually unregulated and offers its products tax-free.

Currently, a 12-pack of beer averages $14.60 in the province. Drinkers who use a U-brew store’s equipment and advice to mix, ferment and bottle their own beer pay about $8.60 for the same quantity. “All we want is a level playing field,” says McConnell. “If the government isn’t going to tax U-brews, we shouldn’t be taxed either.”

After months of lobbying by both sides, the province is now stepping in to referee the quarrel. Tex Enemark, a former general manager of the B.C. Liquor Distribution Branch, is reviewing some of the province’s liquor regulations and expects to deliver a report to Attorney General Ujjal Dosanjh late this month. But Enemark’s findings are unlikely to satisfy the commercial brewers’ thirst for reform. Dosanjh has already said that the probe will not focus on whether the product of U-brews should be taxed. As recently as December, Premier Glen Clark promised to keep the tax man at bay: “I

don’t like the idea of whacking people who brew their own beer and wine.”

British Columbia and Ontario are the only provinces that allow beer and wine lovers to make booze outside of their own homes. But British Columbia is alone in not taxing beer and wine made at U-brews, and the lure of tax-free beer has fuelled the tremendous growth of the B.C. U-brew industry. From one store six years ago, the sector now

boasts 350 beerand wine-making establishments. The Western Brewers Association claims U-brewers now account for 10 per cent of the province’s beer market. “It’s not little mom and pop operations any more,” says McConnell. “It’s big business.” Hobby Brewers’ Melville, however, estimates that the U-brews’ share of the market is a modest two per cent.

Melville acknowledges that some U-brew owners break the law by, for example, making beer for their customers. New regulations, he says, should prevent that by clearly defining what store employees can and cannot do. But he warns that any move to tax beer made in U-brew stores would incite a consumer revolt.

Lynda Lawrence, a 34-year-old physiotherapist from Vancouver, endorses that view. She and her husband say they will go back to making beer at home—which is legal everywhere in Canada—if the province

decides to tax U-brews. “It would just be another government tax grab,” Lawrence says. Melville adds that a tax would put many U-brews out of business: “It will hurt the industry to the point that there will be layoffs.” That is what happened in Ontario in 1993, when the province slapped a 26-cent-per-litre tax on U-brew beer. Within a year, the industry shrank from 256 stores to about 150, says Wade Borden, vice-president of the Brewon-Premise Association of Ontario. Surviving stores saw their sales drop by 40 to 60 per cent. Alarmed by the decline, the Ontario government reduced the per-litre tax to 13 cents, where it stands today.

While many U-brews in Ontario continue to struggle, make-your-own wine operations are thriving. About 200 such stores have opened in the past two years. Borden says that wine-making shops enjoy lower overhead costs than U-brews, and that customers show less resistance to the tax because the wine is made in smaller batches.

Still, the industry’s growth has raised the ire of commercial wineries. Although sales of Ontario wine rose 11 per cent last year, the increase ö could have been higher were I it not for competition from doll! it-yourself operators, says I Linda Franklin, executive director of the Wine Council of Ontario. She says she has heard rumors that some store owners are breaking the law by peddling their wares to restaurants. Franklin also objects to the way some shops advertise their services: one store in Oakville, Ont., runs a “frequent drinkers program” that gives customers one free batch of wine for every six batches they make.

Some B.C. brewers vow to take matters into their own hands if the government does not tighten the rules on U-brews. John Sleeman, the chairman of Guelph, Ont.-based Sleeman Breweries Ltd., says he has already instructed executives at his company’s B.C. subsidiary, Okanagan Spring Brewery, to explore the idea of opening their own U-brew shops. “If the government isn’t going to stop these unfair practices,” Sleeman says, “then they should let us all play.”

B.C. breweries push for a clampdown on do-it-yourself beer stores