Fearing cannibalization, beer companies ask Canada for higher cannabis taxes

Luke Harford, president of Beer Canada, addresses the Standing Committee on Finance over Bill C-74.

Canada’s beer industry is expressing concern that the recreational marijuana market is going to cut into its profits, and it wants the government to raise the proposed tax to level the playing field.

“The potential for legal marijuana to cannibalize beer (in Canada) is much more significant compared to the U.S. because of our higher beer taxes and high prices,” Luke Harford, president of Beer Canada, told the Standing Committee on Finance over Bill C-74.

His statements give a rare glimpse into the anxiety the alcohol industry has about the pending legalization of marijuana.

Beer Canada, a trade group, represents 50 beer makers.

Part of Bill C-74 lays out the excise taxes for recreational marijuana sales.

Harford urged the committee to recommend a higher level of taxation for adult-use cannabis sales before the law goes back to parliament for a vote.

“Domestic brewers are concerned that legal recreational marijuana is going to have a negative impact on beer sales, which on a per-capita basis have already declined by 10% in the last 10 years,” he told the committee.

“The implication is clear. Low cannabis taxes will increase cannabis sales, while high beer taxes will decrease beer sales.”

Industry insiders say the concern over “market cannibalization” may prompt more alcohol companies to make forays into cannabis – or marijuana companies to start buying liquor producers.

In October, New York-based Constellation Brands – which owns, distributes and markets 100 beer, wine and spirits brands, including Corona and Robert Mondavi – acquired 9.9% of Smiths Falls, Ontario-based Canopy Growth for 245 million Canadian dollars ($190 million).

In a recent interview with Marijuana Business Daily, Sundial Growers CEO Torsten Kuenzlen – former executive for The Coca-Cola Co. and Molson Coors – said “virtually all alcohol companies are very carefully looking at the cannabis space and looking to partner in some shape or form.”

Beer Canada did not immediately reply to inquiries from Marijuana Business Daily.

Matt Lamers can be reached at [email protected]

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Tags: International

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