For craft beer makers, a post-pandemic tax challenge brews

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Craft brewers around the region spent years cultivating their business models, only to see the keg run dry when the pandemic took hold.

It’s enough to drive a brewer to drink.

Craft brewers around the region spent years cultivating their business models, only to see the keg run dry when the pandemic took hold. The economy may be coming back, but it’ll take years for the industry to recover.

Beau’s Brewing Co. told OBJ it lost half of its $30-million annual revenue when bars and events were shut down. Overflow Brewing Company said its profit has decreased by 85 per cent.

“We were really hitting our stride up until March 2019 when everything kind of happened,” Overflow co-owner Brad Fennell said. “The concerts in our taproom were booked out almost every day over the next year. We started building up our licensees with bars and restaurants across Ottawa. Things were going great.”

While things are opening up again, brewers now face a second challenge - this one government-induced. The province temporarily froze taxes for breweries but ended the program and called for brewers to pay their deferred taxes.

“When COVID hit, it really knocked the industry onto its heels,” said Scott Simmons, president of Ontario Craft Brewers.  “It was great the government deferred those taxes, and now that they’re coming due, there’s still a lot of debt to pay back. This will be an issue coming out of the pandemic — the ability to pay the tax burden is going to be a huge barrier for most brewers.”

Simmons said there were 322 craft breweries in Ontario before the pandemic. Industry sales dropped as much as 77 per cent through the early days of the pandemic, with costs still mounting as reluctant drinkers opt to stay home rather than go out. Breweries are working on new business models to boost their revenue as the pandemic’s fourth wave further reduces capacity limits at bars and restaurants.

Overflow set up an e-commerce website to sell its beer just before the pandemic. It didn’t gain much momentum at first, but it did pick up speed during the pandemic and ended up accounting for 95 per cent of sales. 

Online revenue is substantial, Fennell said, but profits are low. The brewery is enhancing its customer base by stocking its products in 180 LCBOs and major Ontario grocery stores.

Beau’s, meanwhile, is looking to the skies for its salvation. It struck a deal with Porter Airlines to be its official beer - a new market that will get its brand in front of more consumers.

“We know that this is going to get our beer into lots of people’s hands,” Beau’s co-founder and CEO Steve Beauchesne said. “That volume alone is going to be big, but then on top, what we’re hoping is that a lot of people who’ve never heard of Beau’s before also get to try it. There’s still a lot of people in Toronto, in Halifax and (places) like that that still need to get introduced to our beer. This is a great way for us to do it.”

In 2019, Porter served 250,000 cans of beer from the previous supplier, Toronto’s Ace Hill brewery. While Beauchesne said it might take a while for volumes to hit that level as the airline industry recovers from the effects of COVID-19, he’s hoping the deal will help put his business on the map with beer lovers beyond its traditional customer base of eastern Ontario.

- with files from David Sali