Reduced Mark Up is Good News for Craft Brewers

On Dec. 20, 2016 Nova Scotia Premier Stephen McNeil announced that changes were coming to the Retail Sales Markup Allocation (RSMA). Whereas the NSLC sets the price of beer sold through its retails locations, and is therefore able to include an appropriate margin of profit, breweries selling from their own locations set their own price (above the minimum price allowed by legislation). Breweries are required to pay the RSMA on all beer sold directly to consumers and licensees, rather than through the NSLC. The current 50 cents per litre provincial markup is a way to recuperate part of that lost revenue, as well as track the volume sold by NS producers directly to consumers. As of April 1, 2017, the reduction of the amount collected on NS beer will be reduced to the same level as Nova Scotia-produced wine and spirits, to five per cent of wholesale costs. With almost 40 breweries now operating across the province, this change will have far-reaching implications.

In the financial year ending March 31, 2016, the amount of RSMA collected on local beer came to just below $1 million. The industry is expected to grow about 20 per cent this year, with an estimated $1.2 million to be collected by the end of March, 2017. When the RSMA is reduced to five per cent of wholesale costs, it corresponds to roughly a two-third reduction in the amount collected, with projected savings to local breweries in 2018 amounting to approximately $1 million, if current growth trends continue. For each brewery, these savings can amount to tens of thousands of dollars, depending on the size of their operation.

Trider’s Craft Beer opened last fall in the Amherst Industrial Park, the first in Cumberland County. When informed of the upcoming changes to the RSMA, Scott Parker, co-owner of Trider’s, was thrilled.

“The immediate reaction was obviously of relief and excitement,” Parker says. “But it was still followed by wondering why is the NSLC still so closely involved?” With the thousands of dollars in savings they will experience from less fees due to the NSLC, they will be able to hire at least one part-time employee, perhaps converting that to a full-time position, to keep up with the increasing summer demand. Says Parker: “It’s fantastic that it was lowered. That’s a lot of money to a small business, especially in the start-up phase.”

For a brewery in the middle of a significant expansion, the changes are even more critical. Nyanza’s Big Spruce Brewing is in the midst of opening a new 24 hectolitre brewery, which will triple their brewing capacity, in the hopes of keeping up with the ever-growing demands of their thirsty fans. Owner Jeremy White wrote an open letter to the Nova Scotian government in October outlining the biggest issues he saw with the beer industry in the province, including the unfair treatment of breweries with regards to the RSMA, versus wine and spirits producers in the province.

On the South Shore, Emily Tipton of Boxing Rock Brewing, and President of the Craft Brewers Association of Nova Scotia, also welcomes the coming reduction. According to Tipton: “We will be able to invest in extra staffing over the summer, and plan to use this to develop our offering to visitors and tourists.”

Boxing Rock will extend the hours of its Shelburne location to open seven days a week, with longer business hours, and deepen the experience for those who drop by the brewery for tours and hosted events. In the midst of their own expansion, Tipton says: “The RSMA reduction will alleviate some of the pressure that expansion causes on cash flow, for sure.”

When the RSMA was set a decade ago, there were fewer than 10 breweries operating in the province. Now, with just shy of 40 breweries open in the province, and the Craft Brewers Association of Nova Scotia and other groups working to implement change for the industry in the province, the positive impact from the lowering of the fees collected will help create more jobs, further distribution, and increase the variety of great beer produced right here.

by CBANS