Quebec beer sales hit hard by crowded market, inflation, labour shortage

CTV National News: Beer sales dropped in 2022 Genevieve Beauchemin reports on why Canadians bought less beer over this past year.

Restaurants are open at full capacity, masks are off, and taps are open, but beer sales in Quebec are way down in 2022.

Labour shortage leading to limited hours, inflation increasing transport and raw material costs, and a rise in seltzers and other drinks have contributed to a 13.3 per cent drop in beer sales in the province, according to a Beer Canada report.

In addition, sales are down as new craft brew pubs keep opening, meaning the already cramped market will get even more squeezed.

"Inflation has hit pretty much all spheres of the economy," said Avant-Garde craft brew pub co-owner Renaud Gouin. "On our part, the transport fees for distributing the beer or even the grains and the hops and everything definitely has been affecting our costs greatly."

Gouin said he might have no choice but to raise prices by a few cents as grain prices over the past six months are up, resulting in tighter margins.

In addition, the federal and provincial beer taxes are based on the consumer price index, which measures price change by comparing the cost of a fixed basket of goods and services over time.

Sylvain Charlebois, senior director of the Agri-Food analytics lab at Dalhousie University, explained that inflation affects beer taxes and will cause a sharp increase in costs in the coming year.

"The federal government has an indexed tax formula now since 2017, and that's based on the CPI," he said, noting that typically it is between 1.5 and 2.5 per cent.

With inflation, that number is set to be much higher in 2023.

"They're looking at between 6.5 and 7.5 per cent, making beer less affordable next year, starting in April," he said. "That's certainly not going to help beer sales at all."

These pressures on the beer industry come as it continues to expand in Quebec.

"This is a very competitive market right now," said Gouin. "There's supposed to be about 100 permits for microbreweries in Quebec in waiting. Most of them should open within about a year or so... It's a lot of new competition that's coming in, and definitely, there's not enough space for everyone."

Charlebois said these brewpubs are entering the market at a less than ideal time, as people are drinking different beverages and doing so at home.

"We thought that perhaps because of the end of lockdowns, people going out a bit more, we expecting beer sales to rise compared to 2021, but they've actually dropped," said Charlebois. "People are drinking less beer at restaurants."

One drink people are drinking more of at home is hard seltzers, which has seen a major jump in popularity over the past two years.

"It's really impacting the beer industry in Canada because people are looking for different things," said Charlebois. "The market is a lot more fragmented than it used to be a few years ago."

Gouin said some breweries are following the trend and entering the seltzer market, but he said adding a product is not always a recipe for success.

"There are a few microbreweries that are getting into that market - it got crowded really fast," said Gouin. "I hear mixed results. There was a huge growth over the last two years, but I think it's going to stabilize over the next year."

He added Avant-Garde has no plans to expand beyond beers, ciders and spirits.

NO LABOUR MEANS NO LUNCH

A major reason less beer is flowing into the pint glasses of Quebecers is that local watering holes are cutting hours across the province.

Restaurants and pubs have had to look at staff levels in recent months and decide how many days they can stay open and for how long.

"I wish I could open every lunch, but I can only do it two days," said Gouin. "We're only open five days. I wish I could open Sundays, but I don't have enough staff right now to do that."

He said very few restaurants are open for lunch before Thursdays, and five days a week is becoming the norm.

"Everything's closed Monday to Tuesday and even Wednesday," said Gouin.

As an example, Kahnawake Brewing Company announced on Monday that its kitchen will be temporarily closed due to a lack of staff and will be teaming up with two other local restaurants for food.

With the return of live events in the province, beer sales increased, but again, those taps need to be operated by someone.

"Labour, to actually provide beer, to serve beer, you need people and to get people is very tough," said Charlebois.

It's not all bad news for the Montreal's craft brewers though.

Gouin said the tax hike will likely not affect smaller shops like his and that the Molson strike, in addition to people being eager to go out and support local businesses, has helped his and other shops gain customers and clients.

That, and he says the younger generation loves its craft beer.

"The younger generation is more and more inclined to try out new products and don't favour the big guys," said Gouin.