Something’s brewing in the craft beer industry
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A person grabs a mug of beer.Craft breweries are much loved in Nova Scotia. They tend to be mainstays of their small towns and neighbourhoods, offering people fresh, local drinks in a friendly atmosphere.
But everything is not as smooth as a lager in the craft brewery business. Several craft brewers – all of whom asked to be unnamed, for fear of reprisal by the Nova Scotia Liquor Commission – say the NSLC causes many problems. These include a lack of access to market, an out-of-date system, and high fees.
One brewer (let’s call him Larry) owns a company funded by his family and bank loans. He has sent his beer to competitions across North America; its quality is proven by a mantel full of medals. Passion for brewing craft beer is what got Larry started, and passion is what keeps him going.
Passion is key, he says, “probably for all small breweries.”
At 5 a.m. Larry starts his day. If there are no big problems, most days he clocks out at 6 p.m. And he is one of the fortunate ones. In 2023, across this country, 70 craft breweries closed – about one every five days.
His industry, Larry said, is “struggling right now.” And in Nova Scotia, he said, craft breweries all deal with an extra problem: the NSLC is the sole distributor. “They own the monopoly in the province,” Larry said. “I kind of call them the mafia.”
An independent voice
In Nova Scotia there are five independent liquor stores: Rockhead Beer and Wine, Bishop’s Cellar, Westside Beer Wine Spirits, and Harvest Beer Wine Spirits, all in HRM, and Liquid Asset in the Halifax airport.
There are 110 NSLC stores across the province and an additional 64 “agency stores” in rural areas. These are privately owned stores that are allowed to sell alcohol in areas where there is no NSLC.
All provinces have a crown corporation that oversees alcohol and cannabis. In most provinces there are both private liquor stores and government-run stores. Recently, the Ontario government legalized the sale of low-alcohol beverages in corner stores. In Alberta and Saskatchewan, there are only privatized liquor stores.
Sylvain Charlebois, a director of the Agri-food Analytics Lab in the Faculty of Management at Dalhousie University, thinks it’s time for Nova Scotia to change its system and allow for more privatized liquor stores. “Privatizing is not necessarily about increasing sales, like in terms of volume,” Charlebois said. “The intent would be to provide more convenience and access to people.”
If other provinces offer more options for consumers, why don’t we? Charlebois says it’s because provincial liquor boards are in a delicate position. “You are seeing many public liquor boards becoming addicted to revenues so they (the provincial government) can actually look good before the electorate,” he said.
All breweries in Canada are facing this decline, but Nova Scotian craft breweries also cope with the provincial monopoly. “You can only distribute through them,” Larry said. “There are no other avenues to go.”
“They have a monopoly on retail,” said another microbrewer. Let’s call him Michael. “So I have to cut them in.”
Michael points out another problem brewers complain about: not enough access to market. In other words, there are not enough NSLCs and agency stores to support our growing population.
Craft breweries also struggle with NSLC’s pricing periods. NSLC has two pricing periods, in fall and spring. These are two opportunities to change your pricing.
These pricing periods unevenly affect local craft brewers who sell predominantly in single-serve cans, compared to bigger breweries who predominantly sell larger pack formats.
“NSLC is seeing a decrease in single-serve sales. And there’s an increase in larger pack formats,” said Michael. “But that’s all being driven by the insanity of the pricing they’ve been doing.”
To avoid this problem, some craft brewers let their product prices increase until they see a decrease in sales. That product may stay on the shelf for a year or more until it’s priced out of the market. They then swap it out for a similar beer at a cheaper price.
The Commission
“Our role comes with great responsibility,” said Terah McKinnon, a Senior Communications Advisor for NSLC. Over the years, McKinnon says, NSLC has increased the number of listings and shelf space for local microbrewery beer.
To support local beer, NSLC expanded its community listing program in 2022. NSLC also provides marketing and in-store display support. NSLC decides the price of products, McKinnon said, by keeping in mind the high cost for suppliers to produce, distribute, and sell. She said any increase in revenue from price adjustments is shared with producers.
She ended an emailed response by saying that NSLC cannot change the system. Naturally, any change to the current system needs to be made by the provincial government.
Michael believes NSLC still has the power to change some aspects of its system, including the markup structure.
“We should absolutely expect better from NSLC,” he said. “The NSLC will tell you that their markup structure is provincially legislated. And that’s where we get into the Spider-Man meme where everybody’s pointing at everybody… the province has told us that the NSLC is more than able to change.”
Completely getting rid of NSLC and switching to a privatized system is not something all micro-brewers interviewed for this article want. But many do agree that an improved NSLC could help them succeed.
The Craft Brewers Association of Nova Scotia acts as a unified voice for craft breweries. Debbie MacDonald, the executive director, says that craft brewers want more access to market, fewer mandatory price increases, and to be able to sell at lower prices.
MacDonald says that of the 62 craft breweries in the province, only 39 sell in the NSLC. They don’t have to, and some don’t. Cross-selling (ie. selling your
products in other breweries, distilleries, and wineries), selling in more private liquor stores, selling in grocery stores, and changes to licensing could be the fix to accessing markets.
1,100 employees
MacDonald says that compared to other provinces, Nova Scotia has the worst system. For markup rates, Alberta or Saskatchewan have the best.
In Nova Scotia, after brewing 15,000 hectolitres (4,237,610 standard drinks), brewers need to pay double the markup rate (84.5 per cent, instead of 40 per cent) because they are no longer classified as a microbrewery. This discourages brewers growing past 15,000 hectolitres.
In Alberta there is a graduated structure, with 60 categories.
MacDonald said our provincial system has been in place for 25 years – when in all of Nova Scotia there were only three microbreweries.
“In 2023-2024,” she said, the 62 microbreweries had “more than 1,100 employees, gave mentorship opportunities to more than 350 students and gave back $568,000 in funds raised for local Nova Scotian charities.
“They accomplished that with many challenges. Just think what they could do if doors were opened for them: more access to market and less costs to sell their products.”
Instead of having a legislated monopoly, Charlebois of Dalhousie suggests a hybrid model, like in Quebec. If you want cheap alcohol in la belle province, convenience stores or grocery stores are the place to go. If you want higher-end alcohol, you go to a government-run liquor store.
Such a system, Charlebois believes, would be good for all. “It’s balanced. The government’s still involved, but you also actually give a chance to stores in rural Nova Scotia to really generate some income and revenues.”
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