For these businesses, lower-than-expected alcohol tax still hard to swallow

Some wine, spiritand beer producers in Ottawa say while they're happy the federal government has capped an alcohol excise tax increaseat two per cent,it will do little to help with other costs associated with running their businesses.

"It seems like it's one hit after another for the breweries and for small businesses in general," said Rob McIsaac, co-owner of Beyond the Pale brewery.

In last week's budget, the federal government temporarilycapped "inflation adjustment for excise duties on all alcoholic products at two per cent" for a year, starting April 1.

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The excise tax has been tied to inflation since 2017,but high inflation rates over the past year would have pushed this year's tax increase to 6.3 per cent a historic high.

McIsaac said the tax is just one part of rising costs affecting businesses like his.Brewing ingredients like grains and hop pellets have also gone up, he said, ashave transportation costs.

The brewery recently hikedsome of its prices for the first time in seven years, by about six per cent, but McIsaac said it won't cover the increased costs and in such a competitive market, prices can't be raised much higher.

"The beer business is tough at the best of times," he said, adding that he'slooking forward to patio season, whenthings usually turnaround.

Minimum wage hike also a factor

Costs have been "tremendously" high in the industry in recent years, said Adam Brierley,owner of Ogham Craft Spirits micro-distillery.

Everything fromraw distillingmaterials like grain, apples and potatoes to bottles, labels and corks have shot up in price, he said.

The rising costs of labour with Ontario's minimum wage set to rise to $16.55 an hour on Oct. 1 also comeinto play, Brierley added.

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"That's something that's been much needed in the economy for quite some time, but it is a contributing factor for the rising costs of goods," he said.

More often than not, alcohol producers will choose to eat those costs themselves, Brierley said, in order to keep their customers.

"We need the business. Sometimes increasing your bottle cost by one dollar, two dollars is enough for people to decide to buy another more affordable product," he said.

For now, Brierley said prices of products on the shelf at his Kanata distillerywill stay the same, but new batches will go up by at least a couple of dollars.

"It's unfortunate because I think a lot of customers are going to see it as a knee-jerk reaction to this tax hike," he said. "But it's actually something that's been building up for quite a while and unfortunately if it's not today, it's got to be tomorrow."

Pushing for tax changes

Blair Berdusco is the chair of the Canadian Craft Brewers Association, and said she's happy the excise tax hike is only a third of what it was going to be this year.

But she's still pushing to have it changed, and would like the tax to be based on how much a business produces, rather than pegging it to inflation.

"It's a lot more predictability and a lot more ability to forecast what your growth could look like," she said.

Not indexing the tax to inflation would also help breweries with their growth, allowing them to hire more staff or develop new products.

"I think we really just need every level of government to pay attention to the fact that inflation is really affecting these small businesses," she said.