Canada’s Reinheitsgebot

Introduction

Under its excise tax rules between at least 1877 and 1952, Canada enforced in practical terms a regime of all-malt brewing. That is, almost all beer brewed here was all-malt, with an insignificant amount of adjunct beer made. The announced reasons for the policy were twofold: protect the Canadian farmer, and protect the integrity of the beer palate. Below I explain how this occurred. This is not a linear, jot and tittle account of tax changes over the period, but will highlight certain stages to illustrate the government’s scheme.

The Divergence in Tax Treatment Over Time

This 1931 U.S. Congressional trade report, see p. 411, stated that Canada taxed domestic malt (apparently as at 1929) at $0.03/lb, while if beer was made from any other materials in whole or part, the tax was $0.15 cents per (finished) gallon of beer. A rule of thumb, as will be shown below, of the Canadian government held that three pounds of malt made one gallon of beer. Hence, that gallon if all-domestic malt was used gave rise to an excise of $0.09/lb. So, 9 cents vs. 15 for all-malt vs. adjunct beer.

In 1944, as this U.S. Treasury study showed, the prevailing Canadian excise rate on all-malt vs. adjunct beer resulted in a calculated duty of (CAN) $8.68 vs. $11.62 per 31 wine gallon barrel, respectively. So again, a clear advantage to the all-malt product.

Adjuncts like corn, rice, and especially invert sugar syrup are more fermentable than malt, but of course adjuncts are only used to supplement a mash, not for 100%. Neither corn nor rice then, nor sugar cane, was raised commercially in Canada.  

In 1922, Col. Herbert Molson stated in an article that year in the Journal of Institute of Brewing:

The system of taxation for excise purposes existing in Canada differs from that followed by Great Britain and the United States, in that the taxes are levied on the malt used and not on the beer brewed. Should a brewer in Canada desire to use any material other than barley malt, such as corn, rice, glucose, sugars, etc., special arrangements must be made with the Excise Department of the Government, in which case a duty of so much per gallon is placed on the beer brewed. This duty has been kept for many years at approximately double the duty which would be paid on the equivalent amount of malt required to produce the same amount of beer. This has acted as a natural deterrent to any use of other materials, and the amount of beer brewed in Canada from materials other than malt is infinitesimal.

A Canadian federal government report on the brewing industry issued in 1933 confirmed this practise. It showed, see p. 5, that corn and other adjuncts used in Canadian brewing represented a very small percentage of the malt used in brewing in Canada. I calculate about 3% for all the adjunct types, under 3,000,000 lbs, vs. about 87,000,000 lbs of malt.

In 1952, the then $0.45/gal. excise on beer brewed from an adjunct mash was lowered by $0.03, to $0.42. The government stated, per an April 9, 1952 Globe and Mail press story (paywall) on the budget that year, that this put the two types of beer on a parity of excise treatment, but revenues would not change much. I cannot confirm the revenue projection without a fuller study, but the ongoing consolidation of the Canadian beer industry spearheaded by Canadian Breweries Ltd. since the 1930s ensured the savings that did result would be maximized by economies of scale.*

Even in 1891 a divide in the excise rates existed that made brewing adjunct beer in Canada uneconomic. We can see this from an exchange that year in Parliament where House Member Foster (p. 4001 et. seq) stated that Canada wanted to protect its barley farmers, and also, “prevent the manufacture of poorer quality beer”. He argued that rather than ban substitutes like sugar, it was better to increase the tax burden on brewing with adjuncts.

Foster was Sir George Eulas Foster, Minister of Finance under Macdonald’s government. Here is some bio on him, it’s interesting to observe he was a temperance advocate.

Foster introduced a resolution to increase the per pound rate to $0.02 from $0.01, and hence proposed an increase in the adjunct beer rate, to $0.10 per gallon. Under a rule of thumb he used of 3 lbs malt to produce one gallon of beer, that meant $0.06/gal for all-malt vs. $0.10/gal for adjunct brewing.

(I didn’t verify that the change went through but clearly something similar in numbers did that resulted in Canadians continuing to brew all-malt, mostly).

Even after the change in Britain in 1880 to taxing beer based on alcohol content or more correctly its original gravity, so levelling the playing field among fermentable materials and opening the door to economical non-malt options, Canada’s course was different, of which palate protection was an asserted element.

Some of National Breweries Limited’s 1940s annual reports (I cited them in earlier posts) mention malt as a key input but never mention corn, rice, sugar, or syrups. In this February 1944 issue of the company’s house magazine The Review, an article on the in-house laboratory stated, quoting the group operating manual, that only malt and hops (written in upper case) were used. Hence, each brewery in the group followed this rule.

NBL arguably was promoting all-malt as a quality or “PR” measure, as many European brewers did who were trained in all-malt brewing. M. Meyer, NBL’s head brewer in the 30s and 40s, was of Danish extraction by my research. He may have trained at Carlsberg or a similar brewery, and likely would have viewed all-malt as superior beer.

In 1945, the first year Labatt Breweries went public, its annual report states the beers are made with hops, malt, water, and yeast – no reference to adjuncts of any kind.

Col. Molson’s comments in 1922, considering too the full tenor of his article, suggest Molson’s would have used adjuncts had it been able to economically. Probably NBL, and Labatt’s, were no different, but the option wasn’t there, as yet.

To be sure, some adjunct was used in Canadian brewing before 1952, before, that is, the rise of mass-marketed Canadian adjunct beers. After all, various adjuncts comprised the 3% figure I drew from the 1933 report. In their Ontario beer history, Alan McLeod and Jordan St. John showed that Carling Brewery was using rice in 1926 to make lager, not all of which was illicitly exported to Dry America.

Possibly the adjunct beer sold for more than standard beer to allow the brewer to recoup the extra duty paid, but in any case, the amount brewed was very little, as the references I’ve gathered all make clear.

As long as the disparity of tax treatment continued, clearly all-malt brewing was the resort for most brewers, almost invariably.

There was, therefore, a practical Reinheitsgebot in place here until 1952 and/or ongoing industry consolidation made any subsisting disparity acceptable.

When did the Disparity Start?

Certainly by 1877 the regime was in place, as in that year a statute was enacted to provide that the per pound malt rate was $0.02, or $0.06/gal under the rule of thumb, and the per gallon charge where adjuncts were used, $0.08, so a 33.3% difference even though the extra yield from cereal adjuncts was likely less than that percentage.

To boot, as noted in the 1891 debates and reflected in the 1944 Treasury study which used 2.1 lb to get one gallon of beer, many brewers could brew a gallon of beer with less than three pounds of malt.

The Quality of Beer the Regime Encouraged

Considering the typical finishing gravities of beers in the 1930s, and hopping rates used – see A.L. Nugey’s 1930s brewhouse formulas book in toto including his chart at p. 42 – these all-malt beers had to be pretty good, judged by the standards of beer connoisseurship. From the 1950s onwards Canadian beers got ever lighter by using less hops, more adjunct, and lower final gravities, as many studies support.

Enter craft beer, which returned things to 1877-1952.

Coda

A study (in French) of Boswell and NBL history by Quebec academic Nicole Dorion included a chart describing the manufacturing process, see Tableau 1 under Organisation du Travail. I am not clear if this was a document of NBL or Boswell Brewery or was prepared by Ms. Dorion. It states when describing boiling with hops that “sucre” (sugar) is added to the kettle, Epsom salts as well. The date of the chart is not mentioned, if from NBL it appears to be late 40s or early 50s. Two brands are mentioned in the document, Dow and Boswell, clearly their ales.

According to this story in Le Soleil of Quebec City on June 3, 1952, Boswell’s brands were to be withdrawn from the market “in a few weeks” in favour only of Dow and Champlain Porter, in order that the business might produce only the most profitable brands. Canadian Breweries Ltd. probably had taken over by then, as the head office is referred to as Dow brewery in Montreal, which is the new name given NBL by Canadian Breweries Ltd.

I suspect either sugar was employed late in NBL’s arc, perhaps 1950-1952, or Canadian Breweries ordered the change after the takeover earlier in 1952. True, in the first instance, the tax position had not yet changed, but NBL may have been able to save money depending e.g., on the price of sugar. Canadian Breweries Ltd. probably knew, if it ordered the change, that the excise reduction on adjunct beer was coming, indeed it surely helped to lobby for it.

………………………………….

*See my two Comments added below which complete this aspect of the discussion and suggest more specifically how the dovetailing of tax treatment was achieved.

 

7 thoughts on “Canada’s Reinheitsgebot

  1. A short piece in 1956 by Hamilton deF. Lockwood, Jr. in The Analyst’s Journal, a U.S. financial analysts’s magazine (via JSTOR, paywall or institutional access) stated Canadian Breweries Ltd. had Canadian capacity of 3,000,000 bbl to which NBL’s 1,500,000 was added by its purchase in “1951”. Most other accounts have the purchase in 1952, but arguably it started in 1951 as NBL sold Frontenac Brewery in Montreal that year to Canadian Breweries Ltd. The three cent saving per gallon from the tax change would mean approximately $1.00/bbl (3 x 31 using a 31-gallon barrel). Hence group-wide, $4.5M, not a small amount.

  2. The adjustment that assumes two pounds of malt per gallon sounds more realistic than three pounds — that would yield a beer of around 5% ABV compared to around 8%.

    All of that is back of the envelope calculations and depends on how aggresively the yeast ferments. Some older beers had pretty low attenuation, and ABV may have been higher on average way back when. But three pounds per gallon still seems high.

    • Thanks for this. It’s interesting that IPA actually came in, in mid-1800s in Canada, at 8-9% abv, did you see my recent post on this?

      So the original rule of thumb may have had that higher range in mind, but I take your point.

      Certainly by the 1940s, 5% abv beer was the norm, hence the switch I think to a 2 lb rule.

      Appreciate your comment again, and anything else you may add.

      Gary

  3. Gary,
    This is a great revelation about Canadian all-malt brewing. I look at Canada from a US perspective. In the ’70s and ’80s, Canadian beer was thought by most US drinkers as being better and stronger than US beers. Where did this come from? Exclusivity based on the modest price differences (likely)? Or reputation gained from Prohibition drinking? Or the all-malt qualities lasting to the ’50s? Based on my palate, by the ’70s the major Canadian brands didn’t have an edge in taste over US products. The Carling US branch might have been brewing better beer than their Canadian colleagues. Tuborg was brewed by US Carling, beginning in the mid ’70s. According to the label the formula was that of Danish Green Label, and the price was set to compete with Bud. It was certainly better than any of the mainstream Canadian lagers that I tried then. Carling US also brewed solid regional brands that might have been US Black Label clones (Heidelberg, for example).

    • Thanks Arnold. I do feel it’s an important finding, and am not aware of similar commentary elsewhere, but nice of you to say.

      Carling in the U.S. (I know I have written about that, and Heidelberg too) may have brewed better beer than the norm in Canada by the 1970s, but maybe not. It’s possible the downgrading of palate assertiveness in Canada was followed in lockstep by the U.S. branch, I think it was in Ohio.

      Regarding the origin of the famous belief “Canadian beer is better than American beer”, which even now you hear (I just did at a dinner table the other night, by a person clueless of craft developments), I think the main factor was indeed this all-malt tradition. Boolegged beer coming in during Prohibition, yes, since it would trump most illicit-made brew. Cachet from being an import at slightly higher price, yes as well. But the main thing surely was this all-malt tradition.

      Popular beliefs often have a long history and obscure origin. I think this all started once adjunct became standard in US brewing, so dating from the late 1800s.

      Good to hear from you.

      Gary

  4. It appears the excise tax on malt in 1952 had been raised to $0.21/lb from $0.16/lb, the rate in 1944 per the U.S. Treasury study that year. So, if by the 1940s-early 50s the government accepted that two pounds malt could make a gallon of beer (see the 1944 report again), that means the per gallon equivalent was $0.42, exactly the new amount of excise per gallon of adjunct beer announced in the 1952 budget. See viz. the $0.21/lb excise on malt, https://books.google.ca/books?id=DK4kAQAAMAAJ&pg=PA13&dq=canada+malt+tax+1952&hl=en&sa=X&ved=0ahUKEwjCnpX0xbbnAhVJG80KHQ49DwkQ6AEIXzAH#v=onepage&q=canada%20malt%20tax%201952&f=false

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