‘Kind of disturbing’: Craft brewer takes exception to NSLC’s reason for reduced profits

NSLC says reduced markup on local products is part of the reason it’s Q3 profits are down

Jack Julian · CBC News ·

The head of Nova Scotia’s craft beer association says he’s unhappy the NSLC is linking a dip in profits to booming sales of local alcohol and cannabis.

The NSLC’s third-quarter financial statement showed a 2.4 per cent increase in sales to $215 million, while profits fell 1.3 per cent to $74 million.

Sales of Nova Scotia craft beer were up 11.3 per cent, local wine sales increased by 13.9 per cent and sales of local spirits rose by 15.7 per cent — all while total alcohol sales grew by only 1.1 per cent.

“Local is absolutely dominating the landscape. It’s what’s keeping each of the categories relevant right now,” said Brian Titus, executive director of the Craft Brewers Association of Nova Scotia and a founder of Garrison Brewery in Halifax.

“So we’re happy with the growth, it’s fantastic and clearly it’s consumer driven.”

Besides reduced markup on local products, the NSLC attributed its lower profits to increased shipping costs and payroll increases. (CBC)

Meanwhile Nova Scotia cannabis sales surged by 46.9 per cent, against total cannabis increases of 13.7 per cent.

The NSLC says Nova Scotia cannabis now accounts for 26 per cent of the local market.

“Earnings were down due to increased sales of cannabis and local products, which both carry lower mark-ups, increased freight costs, and payroll increases,” the NSLC said in a press release announcing its latest quarterly results.

Titus did not like the NSLC’s wording.

“That’s kind of disturbing,” he said.

Titus said saying local products are a drain on the NSLC’s profitability is ironic, given the NSLC puts a 40 per cent markup on local craft beer, far higher than any other jurisdiction in Canada.

NSLC spokesperson Bev Ware says the company has a mandate to support local producers. (CBC)

NSLC spokesperson Bev Ware said it pays more for local alcohol and cannabis products, which reduces the NSLC’s profits.

“It’s extremely important to support these local businesses, because they’re located in communities where they’re creating jobs … you’ve got the local grapes, you’ve got local hops,” she said.

“So a lot of the agricultural business is connected to this, as well as the direct jobs that they’re supporting.”

Ware said the NSLC has a mandate to support local producers.

Titus said the new Progressive Conservative government of Tim Houston is committed to promoting loyalty to local products as a strategy for economic growth.

“This is a key plank of this new government, so I think it’s really important that the executive for the NSLC sort of get on board with that idea, as opposed to pointing to local as the problem,” Titus said.

Price slashing

Lower profit margins on cannabis sales are a national phenomenon, said the head of a Nova Scotia cannabis producer.

Myrna Gillis, CEO of Aqualitis Inc. of Liverpool, said the cannabis market is being flooded by some industrial producers in other regions.

“They’re slashing their prices very aggressively, selling product at prices that they’re not even making profit on,” she said.

Gillis said Nova Scotians are looking for high-quality products.

“Part of the buying local also is recognizing, you know, if there’s a dollar or two difference, or a $3 difference in a product, you can buy one that’s local and has superior quality,” she said.

“It’s a decision that the consumer is prepared for and happy to make to support that.”

Craft beer industry ‘is quite young’

The co-founder of the Tatamagouche Brewing Co. in Tatamagouche thinks Nova Scotians are liking what they taste while on jaunts around the province during the COVID-19 pandemic.

“People are still looking for something new, so they’re going out on these day trips, and then when they realize they’re really enjoying this local product, they’re searching it out through NSLCs,” Matt Kenny said.

And he doesn’t expect that growth to slow.

“The industry still is quite young overall in Nova Scotia, and even Atlantic Canada, so it’s going to continue to grow, and hopefully catch up to Quebec and Ontario and B.C. and some of these bigger markets,” said Kenny.