Manitoba's craft brewers hazy and a little bitter over U.S. tariff threats and potential impacts

CBC

25-02-2025

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The U.S. tariff threat on aluminum is brewing up concerns for some Manitoba craft beer makers, who say a small increase in prices could make a big impact on already-slim profit margins.
"In manufacturing, it's all about the cents. It's all about the efficiencies — margins are really, really tight," said Kevin Selch, founder of Winnipeg-based Little Brown Jug Brewing Co.
If the prices increase for the supply of their aluminum cans, most brewers say they will try to absorb it for a while to avoid passing it on to customers in the price of their beers.
"Everybody's dealt with inflation, I don't think there's a lot of appetite from consumers or from anybody to see more of it," Selch said.
Tyler Birch, founder of Winnipeg's Barn Hammer Brewing Co., echoed those remarks.
"We'll probably eat that cost for as long as we possibly can," he said.
The foaming question is, how long?
"For some small breweries, that could be devastating," said Perry Joyal, head brewer and operations manager at Winnipeg's Torque Brewing.
If tariff-boosted input costs last too long, a business might have to finally raise prices and risk a drop in sales that could also thump profits.
"It would be a shame to see anybody go out of business because of this," Joyal said.
At the moment, U.S. President Donald Trump is threatening two actions: a worldwide tariff of 25 per cent on steel and aluminum starting March 12, and it has also paused, until March 4, the threat of an economy-wide 25 per cent tariff on Canada and Mexico while it works on border-security deals with both countries.
Canada makes a lot of aluminum but the supply chain sends it to the U.S. where it is rolled and then shipped back to Canada as cans.
There are no domestic can producers, according to the Manitoba Brewers Association, so there's few options when facing a twist in the supply chain. There are 26 physical breweries in Manitoba and another 12 contract breweries that share equipment with one of the 26.
Large brewing companies will also be impacted in some way, but to a lesser degree because they have the market share to force suppliers to keep prices a little lower, said Selch.
Smaller brewers don't have that luxury.
"We're price takers," said Selch, who estimates he orders about 1.3 million cans annually.
The last time there was an aluminum tariff, in 2018, it was 10 per cent and the price of cans went from about 10 cents to 40 cents, according to Joyal.
Cans now are about 20 cents each, and he worries they could jump to 50 cents.
At present, it costs Torque $30,000 to $35,000 per shipment of 155,000 cans, which can last a few months, or less in summer when demand is higher.
Torque is in a "wait-and-see" situation but will have to make a decision soon on whether to order more cans before they even need them, Joyal said.
"It's a large investment, on the scale that we're dealing with, to bring a lot of cans in all at once. So we have to make sure that's a smart move financially," he said. "Do we want to jump the gun?"
The brewers association met last week to consider the options, such as pooling costs and bringing in as many cans as possible now and then figure out later how to distribute them, Joyal said.
"Everybody's in the same boat, so everyone's thinking, 'hey, what can we do to help our industry?' It's not everybody out for themselves."
Some moves, though, can result in different expenses, Selch said. For instance, if you stock up on cans but don't have space to store them, you'll end up paying for space at a warehouse.
"It creates uncertainty for the business … in terms of where you're going to invest in," he said about the threats.
Selch was looking at possibly expanding his business by tapping into the Minnesota and Wisconsin markets this year "but that's definitely on hold for now."
Instead, he's going to look for opportunities to grow his business across Canada. But for that to happen, something has to be done interprovincial trade barriers to open up domestic trade, said Selch, who is chair of the board for the Winnipeg Chamber of Commerce.
Many Manitobans have cottages in Kenora, just over the border in Ontario, but they have to buy their Manitoba craft beers before they head to the lake. They're not readily available across the border.
Although Manitoba is open to other Canadian brewers selling their products in the province, Ontario is less welcoming, Selch said. It's possible, but the barriers make it difficult and costly, he said.
Manitoba, however, has work to do as well, Selch said. The markups — taxes applied before locally-brewed beer even gets into stores — are twice those in Ontario and B.C., and eight times higher than Alberta.
Reducing those would lower costs and allow local brewers to more easily invest in equipment and grow their business, Selch said.
For his part, Birch — who also owns Mammoth Canning, a mobile canning company contracted by several other local breweries — is calling Trump's bluff and not getting overly worried.
"I just don't think it's going to happen, to be honest. I think it's just bluster and trying to scare everyone," he said.
The Trump administration was elected on a promise to reduce costs "and the first things they're going to do is increase the costs of everything by 25 per cent?" Birch said. "I think there's going to be a big problem if that happens."