The SAQ in the process of drowning microdistilleries

A new cry from the heart des microdistilleries québécoises – launched by the Union québécoise des microdistilleries (UQMD) – resounds regarding the excessive markup pocketed by the SAQ. The Government of Quebec has mentioned that it will table a bill in this regard, promising these small businesses regulatory relief. The future will show us the sincerity of this assertion.

These distilleries that produce local spirits are required to pay a markup of around 50% of the selling price of the bottle at the SAQ, even if the product is sold from the production workshop. So $20 is paid to the Crown corporation for a bottle listed at $40. In other words, despite the complete absence of intervention by the SAQ in transportation, storage or retail sale, the Company reaps the lion’s share of the sale of a product from a microdistillery, even if this sale takes place at the manufacturing site.

Let us recall in passing that the reason for the increase, according to the SAQ, is as follows: “The mark-up makes it possible to assume the costs of selling and marketing, distribution and administration and to generate a net result”. How, then, can its application be justified in this context?

We know Quebec’s strong taste for regulation, but it’s time for action. The government must take note of the situation: 70% of these companies consider that this increase is the main obstacle to their growth. Faced with this state of affairs, the first step would be to remove this excessive financial pressure when the sale of products takes place on the premises of manufacture. Why pay a surcharge to the SAQ when its intervention is not required? Because of the law? Let’s change it!

Encourage the next generation

This situation, which is suffocating these businesses, could well cause many of them to close. Nothing to encourage the next generation to go into business. Will young entrepreneurs who want to get into this sector make the leap knowing that the SAQ will earn 50% of the final price of the product sold at the place of manufacture when they do all the work?

It is the responsibility of the Government of Quebec not to hinder the entrepreneurship of young Quebec start-ups with measures that thus eat away at their profitability, especially since the pandemic has brought its share of difficulties for SMEs: at the start of year, almost one in four thought they would potentially close down in 2022.

Microdistilleries have also become a form of tourist attraction, which makes them players in regional development, making it possible to attract tourists to the region who particularly appreciate this type of product. As the Government of Quebec attaches great importance to the regional development file, it must take action to withdraw this increase that is harmful to businesses.

The solution

Fortunately, the miracle remedy for this nonsense exists: a mixture between the liberalization of the alcohol sector and the removal of the markup on microdistillery sites.

The sale of spirits on these premises would allow small entrepreneurs to offer their product without incurring the expense of an unjustified price increase by the government. In this way, Quebec entrepreneurship will be more abundant and consumers could then benefit from price reductions.

Gabriel Giguère, public policy analyst at the Montreal Economic Institute

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The SAQ in the process of drowning microdistilleries

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