The Fils du Roy distillery, in Bas-Saint-Laurent, which makes spirits from its market garden products, has been in deficit for a few years now. And it is far from being the only one, according to the Union québécoise des microdistilleries (UQM), since two thirds of the latter are experiencing financial difficulties.
“There are even several distilleries that are on the verge of bankruptcy if an intervention is not made quickly this summer”, indicates Jonathan Roy, president of UQM and of the Fils du Roy distillery. The latter is based on the first results of an economic study carried out on behalf of the group, which has 55 members, or approximately 85% of the province’s microdistilleries.
It is increasingly difficult for Quebec distilleries to find their place on the shelves of the Société des alcools du Québec (SAQ), says Mr. Roy, in particular because of the ever-growing number of products in competition. The SAQ also favors “large volumes and novelty,” notes Mr. Roy, to the detriment of small established producers. Fils du Roy products, for example, were present in 200 branches three years ago, but this number has shrunk to 80 points of sale.
Taxation to review?
In this context, microdistilleries want to bet on sales at their production sites, according to an agrotourism model. “It’s a way to participate in the local economy, to make yourself known. More and more tourists are visiting the distilleries every year. They have to do it, but the profitability is not there,” said Mr. Roy.
The problem is that even in these cases, the SAQ generally collects an amount of more than 50% on the sale price. On a bottle of spirits sold at $40, this amount, called the mark-up, is $20.30, according to UQM. In particular, it covers the costs of sales and marketing, distribution and administration by the SAQ. Thereupon, the SAQ pays $8.15 to the Quebec government, calculated the UQM. After the various applicable taxes, the producer is left with $9.98.
However, in the case of sales at the factory, it is the producer and not the SAQ who must assume the costs of the sale, for example of the infrastructures for welcoming visitors, employees to manage the store or marketing approaches. The UQM is therefore asking for the abolition of the markup collected by the SAQ for bottles sold at the place of manufacture. In return, as these companies wish to continue contributing to public funds, the organization proposes to the Minister of Finance to increase the specific tax on alcohol in this case. For a $40 bottle, this tax would increase by $8.15.
This way of operating would allow the distilleries to survive, to fully develop their agrotourism offer and to continue to win international prizes, believes Mr. Roy.