Fearing cannibalization, beer companies ask Canada for higher cannabis taxes

Luke Harford, president of Beer Canada, addresses the Standing Committee on Finance over Bill C-74.

Canada’s beer industry is expressing concern that the recreational marijuana market is going to cut into its profits, and it wants the government to raise the proposed tax to level the playing field.

“The potential for legal marijuana to cannibalize beer (in Canada) is much more significant compared to the U.S. because of our higher beer taxes and high prices,” Luke Harford, president of Beer Canada, told the Standing Committee on Finance over Bill C-74.

His statements give a rare glimpse into the anxiety the alcohol industry has about the pending legalization of marijuana.

Beer Canada, a trade group, represents 50 beer makers.

Part of Bill C-74 lays out the excise taxes for recreational marijuana sales.

Harford urged the committee to recommend a higher level of taxation for adult-use cannabis sales before the law goes back to parliament for a vote.

“Domestic brewers are concerned that legal recreational marijuana is going to have a negative impact on beer sales, which on a per-capita basis have already declined by 10% in the last 10 years,” he told the committee.

“The implication is clear. Low cannabis taxes will increase cannabis sales, while high beer taxes will decrease beer sales.”

Industry insiders say the concern over “market cannibalization” may prompt more alcohol companies to make forays into cannabis – or marijuana companies to start buying liquor producers.

In October, New York-based Constellation Brands – which owns, distributes and markets 100 beer, wine and spirits brands, including Corona and Robert Mondavi – acquired 9.9% of Smiths Falls, Ontario-based Canopy Growth for 245 million Canadian dollars ($190 million).

In a recent interview with Marijuana Business Daily, Sundial Growers CEO Torsten Kuenzlen – former executive for The Coca-Cola Co. and Molson Coors – said “virtually all alcohol companies are very carefully looking at the cannabis space and looking to partner in some shape or form.”

Beer Canada did not immediately reply to queries from Marijuana Business Daily.

Matt Lamers can be reached at [email protected]

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11 comments on “Fearing cannibalization, beer companies ask Canada for higher cannabis taxes
  1. John Fracassini on

    Why should the Canadian legislature impose higher cannabis taxes in order to protect the profit margins of beer companies? The executives of these companies should know that competition is how the free market works. If domestic brewers are concerned that legal recreational marijuana is going to have a negative impact on its beer sales, these brewers had better adjust their respective business models in order to be more competitive.

    This would be far more effective than asking the Canadian government to influence the market by imposing an arbitrary and unnecessary tax. It’s a good bet that the companies that manufactured typewriters did not appreciate the introduction of laptop computers into the marketplace. Perhaps these companies should follow the example set by Constellation Brands.

    Reply
    • KF on

      Duh, it’s about taxes, not margins. They want an equal tax on both products, which they are arguing it is not. My guess is they would prefer lower taxes on their product so they have the option to lower prices if they need to compete.

      Reply
      • ED on

        I’m cool with having equal taxing for both IF alcohol gets regulated as heavily as cannabis is. Fair is fair. 😀

        Reply
  2. Curt James on

    And right before Little David laid low Goliath with a rock to the head, the giant cried…”.wah, wah, wah, not fair!”

    Reply
  3. Ma Dang on

    It’s not the beer guys that have to worry, it’s the hard liquor and bar industry that will see the playing field equalled from years of them controlling laws and the free market.
    If they don’t allow for smoking lounges, then we’ll just stay home roll one and pop a beer !
    Like the tobacco companies, their time is coming.

    Reply
    • drock on

      lol you mean you will stay stay home…

      people go out to bars to do bar stuff and go out to cafes to do coffee stuff.

      “hey guys they legalized weed so i’m not going out no more”

      Reply
  4. MG on

    What a bunch of cry-babies! Free market is what it is. Customers will decide what they want.

    Beer producers need to adjust to this new reality but oh-no, they’ll lose sales, hence lose profits. Maybe.

    Cannabis and beer are two different products.

    Reply
  5. George Bianchini on

    “The implication is clear. Low cannabis taxes will increase cannabis sales, while high beer taxes will decrease beer sales.”

    Why not tax based on the products danger and cost to society.
    cigarettes, alcohol, opiates, sugar, salt, cars, BIG TAX
    cannabis, tomatoes, kale, vitamins, sunscreen, salami and swiss on whole wheat. NO TAX
    Just a thought!

    Reply
  6. G13Man on

    lol , a new test is needed
    line up the beer. wine , liqueur executives on one side
    Maryjane executives on the the other side
    find 2 towns and force em all to live and drive in there separate towns
    @ the end of 3 monthes , 6 months and 1 year add up the costs of accidents and associated cost
    and figure out the taxes from there

    Reply

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