Distilleries and spirit makers are likely to be the hardest hit among Canadian alcohol producers as the United States proposes a broad ban on Canadian booze starting later this month.
Craig Johnston, chief economist at Farm Credit Canada, said distilleries ship more than half of their overall product to the U.S.
"If you think about different categories of the alcohol industry — distilleries, wineries and breweries — it's really distilleries which have significant exposure to the U.S. market," he said.
Johnston said it will be challenging for many distilleries that sell in the U.S. market to find alternative homes for their products domestically, in Europe or elsewhere.
Canada's retaliatory duties earlier this week prompted U.S. President Donald Trump to ban most imports of Canadian alcohol, among a long list of other items, starting Sept. 29.
Canadian whiskey and liqueur in bottles larger than four litres will be exempt from the ban; however, Cal Bricker of trade association Spirits Canada said there are not many four-litre bottles that get sold anyway.
"For all intents and purposes, it's more or less a ban on Canadian whiskey," he said in an interview.
Spirits Canada represents manufacturers, marketers and exporters in the industry.
The solution for distilleries is not as easy as moving production south of the border because of legal agreements, Bricker said.
"You can only make Canadian whiskey in Canada. You can only make American whiskey, bourbon, in the U.S. And you can make tequila in Mexico," he said.
So far, Bricker said he hasn't heard from any of the 11 distilleries and spirit makers represented by the association about moving production to the U.S.
Andrew Oland, chief executive of Moosehead Breweries, said he wasn't surprised but still "very disappointed" to see alcohol further dragged into the latest trade escalation.
Oland, who heads the Saint John, N.B.-based brewery, said 15 per cent of its beverages get shipped south of the border, which are already facing steep duties after trade negotiations between the two countries fell apart last month.
The brewery is currently absorbing the cost of 50 per cent tariffs and focusing on shipping as much beer as possible over the next three weeks to preserve its shelf space and relationship with U.S. retailers.
While some brewers could face challenging times ahead, Luke Chapman said Canadian beer is overwhelmingly a domestic industry.
Last year, for instance, more than 90 per cent of all beer bought in Canada was brewed within the country with domestic ingredients, Chapman, vice-president of federal affairs at the trade association Beer Canada, said.
“Canada's brewing industry is far less dependent on the U.S. market than many other Canadian industries,” he said in an interview.
Meanwhile, the wine industry is also expected to escape the worst effects of the potential ban, said Norman Beal, board chair of Ontario Craft Wineries, which represents more than 110 wineries in the province.
Beal said only about one per cent of all wine sales come from the U.S.
"Canadian wine producers, we're relatively small," Beal said. "Most of our products are sold right here in Canada."
Picture Courtesy: THE CANADIAN PRESS/Justin Tang
