U.S. tariffs on Canadian goods and the resulting push to buy local has B.C. craft distilleries booming.
But provincial regulations penalize producers that get too big, and industry representatives say the B.C. government needs to seize the moment and make changes now while U.S. liquor is off the shelves.
"We were hoping to see that before Canada Day, before the high sales time of year, but that didn't happen, and we've been waiting and waiting and waiting and waiting," said Tyler Dyck, president of the B.C. Craft Distillers Guild.
Two major issues hamper craft distillers in B.C., according to Dyck.
First, craft distillers must pay mark-ups of 124 per cent or more if they want to have their product sold in the provincially run B.C. Liquor stores. This is the same markup commercial distillers pay, but with smaller batches and the need to get higher margins per bottle, it is hard for small producers to sell at those rates profitably.
B.C. wine once faced the same issue, but now Vinters Quality Alliance (VQA) rebates allow wineries producing 100 per cent B.C.-grown wine to get a larger share of the price of each bottle at provincially-run stores.
Second, distilleries get a respite from markups for sales to private liquor stores, restaurants and bars, but only if they meet certain conditions, which include producing fewer than 50,000 litres per year.
The VQA rules date to the 1990s, but the current markup exemptions for private sales 鈥� and the related production caps 鈥� were introduced by the B.C. Liberal government in 2013. At the time, there were fewer than 50,000 litres of craft liquor produced in the entire province, and this was a boon to distillers that were suddenly eligible for markup-exempt direct private sales.
Since then, the craft industry has grown considerably, with the number of distillers quadrupling and demand at new highs as British Columbians respond to U.S. President Donald Trump's tariffs by buying more local products. Dyck said many distilleries, including his own, Okanagan Spirits, are now pushing up against the caps and will exceed them before the year's end.
Staying under the cap
Once a craft distillery starts producing more than 50,000 litres per year, it begins to face graduated markups for private direct sales. These increase by just over 20 per cent for each 10,000 additional litres produced up to 100,000, when the rate hits 124 per cent and the distillery loses its "craft" designation, becoming a commercial producer.
At whatever level reached in a single year, the distillery must pay the full rate on all of its production for the next fiscal year. For example, if a distillery sells between 70,001 and 80,000 litres in 2025, it needs to pay a markup of 62 per cent on every litre of private sales for the fiscal year from April 1, 2026, to March 31, 2027.
For sales to B.C. Liquor stores, the markup starts at 124 per cent regardless of the production amount. Because of this system, only 10 out of the province's 85 craft distillers sell products in B.C. Liquor stores.
To maintain the full "craft" distillery designation, a producer must also make its base spirit with traditional methods and use 100 per cent B.C. agricultural products.
While these rules limit the size of craft distilleries, they do give small businesses an advantage while they get going.
"We were a craft distillery for years, and it was a great place to start, a great place to work and build our company, our business," said Jason MacIsaac, co-founder of Sheringham Distillery.
Sheringham opened in 2015 and sells several types of liquor products, but is primarily known for gin. As it became more successful, the company began to be forced to pay markups on private sales.
After Sheringham exceeded the 100,000-litre-per-year threshold in 2021, it became a full commercial distillery and had to begin paying the 124 per cent mark-up for private sales. It was suddenly faced with the prospect of needing to sell three bottles to make the same amount of money as the company previously made on one.
This meant Sheringham needed to alter production methods and sourcing to keep costs down. Instead of making the base spirit in-house 鈥� as the craft rules required 鈥� the owners did what most other commercial distillers do and began buying alcohol elsewhere.
MacIsaac said that when Sheringham made the switch, they decided to source from a Saskatchewan co-op that uses sustainable production techniques to make the "highest quality product you can get."
And he pointed out that those products are still from within Canada, even though they are no longer sourced from within B.C.
But Dyck is concerned about the impact on B.C. agriculture from all of this, saying local grain producers have been trying to alter this dynamic for years.
"It really hurts the grain growers and all other associated businesses," he said.
Calls for change
Dyck wants to make the system more "fair" so craft distilleries can sell more product while still using 100 per cent B.C. inputs.
He wants the same advantage his counterparts in the wine industry have, which enabled wineries to sell products competitively in both private and provincial liquor stores.
"If you make your alcohol from grapes, you get this benefit," he said. "If you make it from green or apples or peaches or pears that are grown in B.C. and helping B.C. farmers, too bad you don't get it."
Dyck said he has had discussions with Agriculture and Food Ministry staff and believes Minister Lana Popham is supportive of changes.
"This is a bad policy created by a previous government that Lana Popham gets the chance now to correct," he said.
Dyck's calls for change were amplified on Aug. 14 by Jobs and Economic Development critic Gavin Dew, who slammed the government for not acting more quickly to fix regulations long known to hamper industry growth.
"We are actively punishing success, and we are actively discouraging our distillers from investing further growth, hiring more people to grow, selling more product in B.C. and elsewhere," Dew said.
While Popham has not taken action to change regulations yet, she has directed the Liquor Distribution Branch to reduce barriers for craft distilleries.
"I am committed to working with the sector on reducing these barriers for their amazing B.C. products," she said in an emailed statement.
