How a 4-litre jug of vodka fuelled debate on Alberta craft spirit regulations

A large plastic jug of vodka on sale for a discount price at an Edmonton liquor store thrust Alberta's distillery industry into the spotlight this week, but some business owners say the incident highlights how the province's burgeoning craft spirits scene still doesn't have the right mix of regulations.

It's only been about a decade since craft distilleries began opening in Alberta — growing to dozens of producers since 2013, when the provincial government lifted a minimum annual production requirement that shut out small operators.

But in March 2020, Alberta Gaming, Liquor and Cannabis (AGLC) changed some of the policies that liquor manufacturers must follow.

That included eliminating what was known as the 80/20 rule, which required producers to distil at least 80 per cent of their spirits on-site, and make sure blended or flavoured products didn't exceed 20 per cent of their annual production.

St. Albert-based T-Rex Distillery highlighted the change this week, after the company faced public criticism over a four-litre jug of vodka spotted on liquor store shelves for $49.95.

In a statement Monday, the T-Rex owners said the AGLC approved the product and pricing, but they would stop production after public feedback.

Service Alberta and Red Tape Reduction Minister Dale Nally told reporters on Tuesday that he's pleased with the move.

"This is about social responsibility, and Albertans spoke very loudly that a four-litre plastic judge of vodka for $49.95 does not meet that definition of social responsibility," he said. "I agree with them."

But the T-Rex owners, who didn't attach their names to the statement, said craft distilleries have been trying to cope with "a lack of responsible pricing" since the end of the 80/20 rule.

"When this rule was unexpectedly removed by AGLC, it meant that anyone can just blend and sell bulk-purchased vodka without even owning a single piece of distillery equipment. This forced T-Rex and other craft distilleries to lower their prices to stay in business, especially after making heavy investments into their distillery equipment."

In a statement Wednesday, an AGLC spokesperson said the change was among a series of policy amendments aimed at reducing red tape and "giving small manufacturers more flexibility to meet the needs of the evolving liquor industry."

'We have to work harder to educate our customers'

Other distillery owners say that without guidelines for how much blending is allowed, there's nothing to stop mass-produced spirits from being packaged as a craft product.

With the end of the 80/20 rule, they say the door is wide open for using grain-neutral spirits, which can be acquired cheaply, and potentially from outside Alberta.

"It essentially wipes out the craft side of distilling if you're going to solely go into that market," said David Scade, co-owner of Black Diamond Distillery in St. Albert.

"That's where we see a shift happening in the vodka market in Alberta."

He said the result is a pricing race to the bottom, and small producers who are doing all their own distilling in-house end up in a difficult position.

"We have to work harder to educate our customers so they know that our stuff is actually craft."

In Calgary, Bridgeland Distillery founder Jacques Tremblay estimated that sourcing mass-produced spirits for vodka and gin might reduce costs to $1 per bottle, while craft distillers managing their own production are looking at costs of $20 to $25 per bottle.

Given the challenge that distillers already face to turn a profit and keep their business alive, he said it's understandable why producers might consider at least some outsourcing to help their bottom line.

"I don't want to tell anyone how to run their business," Tremblay said.

"But I think if labels were clear about where the alcohol is coming from, then I think people would know and be able to appreciate the pricing that comes with a quality product, rather than a product that is made on the mass-produced side."

No plans to set floor prices on liquor

Scade and Tremblay said they'd like to see the 80/20 rule for distillers return — something T-Rex Distillery also called for — but Nally ruled it out on Tuesday.

He said removing the restriction was a measure to help small businesses and spur investment, "and I would suggest that it worked."

A bill Nally tabled this week would give the minister the power to regulate liquor prices in Alberta, but he said the province won't be setting floor prices on alcohol.

"We're not looking to get in between the retailer and the consumer in any way."

There isn't consensus about the 80/20 rule among craft beer and spirits producers.

The AGLC ran online consultations on liquor manufacturing policies in 2019, and of the 51 brewers and distillers that weighed in on blending rules, most said it should change. But an AGLC report on the feedback notes "mixed support" on whether a blending limit should exist.

Dan St. Pierre, executive director of the Alberta Craft Distillers Association, said there are more options to regulate the risk of price wars on certain types of alcohol, and there's a broader need to "modernize" regulations for liquor producers.

"Time is of the essence to get it right. And we appreciate that four-litre jugs of vodka, and what to do about 80/20 rules and all of those things are going to be part of the conversation," he said.

"But we want to create a space where Alberta producers have maximum flexibility to put forward the best product possible."