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Why are We Subsidizing Fake Canadian Beer?

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David vs. Goliath is one of those rousing Bible tales that, over the course of several centuries, has become the template for so many stories found in fables, literature, and cinema. Thanks to the human proclivity for compassion and empathy, the idea of the scrappy little guy triumphing against all odds by taking on and defeating a big bad bully makes for heart-warming copy. (Cue Rocky theme music here ...)

Yet, the idea that big is bad and small is good isn't necessarily a truism. But another way, sometimes Goliath isn't really such a bad guy... and sometimes, David is, well, a bit of an opportunistic shyster.

Case in point: the ongoing saga in Alberta involving Calgary-based Minhas Craft Brewery. Minhas employs a PR strategy in which it fancies itself as a hometown David going up against a pair of ruthless, foreign-owned Goliaths in the form of Labatt and Molson.

As I reported last November, company co-owner Ravinder Minhas loves to play the victim card. And why not? By doing so, he received a tax subsidy under Alberta's deeply flawed small brewer tax program that amounted to $5.6 million in 2010. (The program was meant to usher in an environment that allows for local craft breweries to flourish; alas, the precise opposite has occurred.)

Indeed, while Ravinder Minhas likes to position his brewery as an all-Canadian little guy taking on the world, when one examines this brewery a little more closely, such is hardly the case.

For starters, as previously reported, all the Minhas brewing jobs are actually located in Monroe, Wisconsin. That wouldn't be so bad if not for the fact that Minhas has its beer taxed at a lower rate than the big breweries (which actually employ Canadians.) Translation: the Alberta government is essentially subsidizing U.S. brewing jobs with taxpayer money.

But a little recent investigative work has uncovered that Minhas also runs a company called Global Distillers SRL. Do a search of Global Distillers and it turns out that it is based in that great Canadian territory known as... Barbados.

In fact, it turns out that all of Minhas's trademarks are registered to a Barbados-based company (See here). So much for wrapping himself in the Canadian flag. Indeed, Ravinder Minhas is apparently funneling all his profits from the Alberta tax subsidy into an offshore tax-sheltered haven.

The bottom line? Minhas beer is brewed in the U.S., subsidized in Alberta, and sheltered from taxes in Barbados. Some local hero.

And it's a good thing Minhas doesn't have to slum it when he goes south. That's because he has a swank resort in the Barbados, too -- the lavishly-appointed Minhas Villa, where rooms go for US$299 to US$675 per night depending on the season. In fact, Minhas Villa is a delightful place for Canadians to seek refuge from winter and soak up the sun. And one can only wonder about how many Alberta government officials have relaxed on the beach revelling in epic bonfire side stories of Minhas' small business heroics against the "big multinationals."

But alas, Minhas' business plan -- i.e., its reliance on Alberta tax subsidies -- has hit a snag. Based on his overall beverage production (which includes beer, soft drinks and spirits), Minhas is very likely over the 400,000-hectolitre limit. If so, according to the regulations, Minhas no longer qualifies for Alberta small brewer subsidies.

Which means the savvy entrepreneur is now employing Plan B: Minhas is supposedly building a new brewery in Calgary that is supposed to be opening in March 2012.

Situated in an industrial space that is less than 5,000 sq. ft., this facility will output less than one per cent of the volume of his 300,000 sq. ft. Wisconsin brewery (which pumps out 351,000 hectoliters of beer, making Minhas the 14th largest brewer in the U.S.).

Announced in a letter widely distributed into the Alberta government in late November, there is no doubt that Mr. Minhas' postage-stamp sized brewery is being played for all its worth. What better way to lobby for continued and increased Alberta government subsidies than touting Alberta "jobs and investment" -- even if the value of both are outstripped by the rich annual subsidies to Minhas' U.S. operations by an order of magnitude.

There are two sides to every story, of course. Except that when it comes to the Minhas file, nobody's talking. Alberta Gaming and Liquor Commission CEO Gerry MacLennan declined to comment. And shockingly, Ravinder Minhas -- who is somewhat of a media darling as long as the questions are softballs -- abruptly terminated our phone conversation without answering a single query.

Even so, the ball is now in the AGLC's court. Namely, will it revamp the regulations and continue to subsidize a brewery that brews all its beer in the state of Wisconsin and is essentially a Barbadian, not a Calgarian company? Or will the AGLC actually show some respect for Albertan taxpayer dollars and turn off the taps?

Stay tuned.

Around the Web

Minhas Craft Brewery

Brewery Tour :: Minhasbrewery.com - Minhas Craft Brewery

Minhas Craft Brewery - Monroe, WI - Beers - BeerAdvocate

Minhas Craft Brewery - Monroe, WI