B.6 ALCOHOL

LEGAL SOURCES AND LEGAL DISTRIBUTION

The majority of the alcoholic beverages consumed in Canada are manufactured here. More than 95 per cent of the ale and beer consumed by Canadians is brewed in Canada and, with the exception of scotch whisky and a few other imported beverages, the distilled liquors consumed in Canada originate in this country. Over one-half the wines consumed in Canada are domestically produced.

The Federal Government, through the Excise Act, regulates the manufacture and importation of all beverage alcohol through the issuing of licences or permits to all distillers, brewers and importers. Manufacturers or importers of beverage alcohol are required to pay an excise duty on all products sold, and they must report all phases of their operations to the Federal Government. The contents and quality of alcoholic beverages, including the permissable range of alcohol concentration, are regulated by the Food and Drug Regulations.

The distribution of alcoholic beverages is regulated by the provincial governments and the governing bodies of the Yukon and Northwest Territories which hold a monopoly on the sale of beverage alcohol in their jurisdictions. Distribution is legally regulated by provincial liquor control acts, and their sale in such outlets as cocktail lounges, beverage rooms and licensed dining rooms is regulated through these acts or, in some provinces, liquor licensing acts.

Liquor control acts empower provincially appointed boards to determine the prices at which bottled beverage alcohol is sold in retail outlets, as well as hours of sale and, in some provinces, those private entrepreneurs who may operate as special agents for the sale of bottled beverages. These include, for example, independent grocers in Quebec who may sell beer or, in a few other provinces, private merchants in remote areas whose premises are utilized as retail outlets for liquor.

Liquor licensing acts govern the conditions under which liquor or beer may be dispensed for on-site consumption. Hours of sale are closely regulated, and sanitary and hygienic requirements are specified in the regulations to these provincial acts. Licensing boards also stipulate the number of outlets which may be operated in a given area, and determine who shall be permitted to operate these drinking establishments.

Provincial statutes specify drinking age limits, with penal consequences for persons who sell alcoholic beverages to persons under the legal age. At the present time, the following legal ages apply: 18 years of age—Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island and Alberta; 19 years of age—Nova Scotia, British Columbia, New Brunswick, Newfoundland, the Yukon and Northwest Territories.

In all provinces the sale of alcoholic beverages to intoxicated persons or to "interdicted" persons, that is, persons who, in the opinion of provincial authorities, use alcohol excessively to the detriment of their family or others, is prohibited.

The distribution of alcoholic beverages in Canada is of significant economic proportions. During 1970, more than 16,000 persons were employed by distilleries, breweries and wineries in Canada, sharing a total payroll of more than $140 million.6, 8, 9 Table B.10 shows the dollar value of all alcoholic beverages sold (i) by liquor authorities to the final consumer and to holders of licences to resell, (ii) by wineries and breweries to holders of licences to resell, and (iii) by wineries' and brewers' retail outlets.' The dollar volume of such sales is increasing annually. Between the fiscal years ending March 31, 1967 and March 31, 1971, the dollar volume of these sales increased by over 37 per cent. Total sales for fiscal year 1970/71 were in excess of $1.85 billion. This figure does not represent the final retail selling price of all alcoholic beverages, as mark-ups by licensees, on the sale of alcoholic beverages to final consumers, are not included.

Commerce in beverage alcohol is a significant source of revenue for federal, provincial and territorial governments—the Federal Government, through the collection of taxes and excise and import duties and the issuing of licences and permits, and the provincial and territorial governments, through the sale of permits, the collection of taxes and the profits accruing from sales through government monopolies. Table B.11 lists the revenues of all governments in Canada specifically derived from the control, taxation and sale of alcoholic beverages during fiscal years ending March 31, 1967 to 1971 inclusive. It will be noted that during this four-year period the revenue of provincial and territorial governments from these sources increased by more than 42 per cent, and the revenue of the Federal Government increased by almost 32 per cent. During the fiscal year ended March 31, 1971, the total revenue of all governments from the control, taxation and sale of alcoholic beverages was almost one billion dollars.

LEGAL SOURCES AND ILLEGAL DISTRIBUTION

While alcoholic beverages are probably more accessible in Canada presently than ever before, high taxation of these products and the regulation of sales (particularly age and temporal restrictions) continue to invite the illegal distribution of licitly produced beer and liquor. In some cases the alcohol is diverted (usually through theft or smuggling) from its legitimate distribution channels, and in other cases alcohol is sold to persons, in places, or at times, prohibited by provincial statutes.

Despite the recent reduction of the legal drinking age in several Canadian provinces, it is likely that under-aged youths continue to imbibe alcoholic beverages. For most, the age restrictions can be evaded by simply borrowing an older friend's or relative's identification document or by purchasing or preparing passable counterfeits. If the alcohol is desired for residential consumption, an older friend may agree to purchase the beer or liquor and transfer it to an under-aged person. Furthermore, nearly every Canadian city contains a few bars, taverns or discotheques with a reputation for "not checking I.D.'s", so that, in many instances, there is no need to resort to the strategems mentioned above.

Provincial regulations regarding the times during which alcohol may be purchased and the lack of retail liquor outlets in some communities have probably contributed to the persistence of various bootlegging operations throughout the country. In most large Canadian cities nearly anyone can buy alcohol 'after hours' or on Sundays, at approximately twice the cost of a legal purchase, by simply contacting taxi-cab firms that are known to provide such services.36 Similar distribution operations exist in 'dry' communities where a local resident may stockpile alcoholic beverages for illicit resale at any time of day or night.

In some small towns, where an individual—for various reasons—may be refused service in licensed liquor premises, there often exist houses where he may illegally purchase and consume beer or liquor for about twice the legal fare.26 Similar bootlegging ventures (some of which are controlled by organized criminals) are apparent in most large cities where they are generally known as 'bottle houses', 'after-hours places' or 'blind pigs'. As in the smaller communities, the alcoholic beverages are legally obtained from provincially controlled retail outlets and then resold (in violation of various provincial statutes) at approximately a 100 per cent price mark-up.15, 26

The most dramatic diversions from legitimate distribution channels, however, involve the theft of considerable quantities of alcohol from trucks or warehouses and the smuggling of duty-free liquor. The smuggling operation is most popular in Newfoundland where some outporters travel the seven miles from Burin Peninsula to the French island of St. Pierre to purchase duty-free liquor (rum, for example, costs less than two dollars for a 26-ounce bottle) which they then smuggle back to Canada for resale.34• 43 One particularly profitable item is a pure alcohol known as 'steam', which can be purchased in two and one-half-gallon cans for $25. Each can, according to an article in Time magazine, "produces 15 bottles, which in turn can be cut three-to-one"." This enterprise is said to generate between five hundred thousand and one million dollars a year for those who participate in the smuggling." The theft of liquor, particularly through the hijacking of trucks, is another source of illicit diversion. Most recent thefts of this nature have occurred in the Province of Quebec where several shipments valued in the neighbourhood of one hundred thousand dollars have been stolen.11, 29• 29' 44 The size and sophistication of these thefts suggest organized criminal involvement but, at the moment, there is no data to substantiate this claim or to explain how the stolen liquor is eventually distributed.

ILLEGAL SOURCES AND ILLEGAL DISTRIBUTION

The production and distribution of illicitly distilled alcohol in Canada continues to flourish in spite of the increased accessibility of legal liquor. The production of 'moonshine' is often considered a relatively innocuous ethnic custom or a delightful and satisfying evasion of government attempts to control or tax pleasure. These factors help to make moonshine production difficult to detect. However, the impurities in some illicitly produced alcohol, the involvement of organized criminal elements, and the significant amounts of tax revenue lost yearly constitute a serious problem.

According to the Deputy Commissioner of the R.C.M. Police more than 2,300 'stills' were seized between April 1960 and April 1971. Most of these stills,

... were of the pot or drip type variety having a daily capacity of one to fifty gallons of spirits [but approximately ten per cent] were of the large commercial type with a daily capacity ranging from fifty to 275 gallons of spirits."

The most recent Annual Report of the Solicitor General of Canada indicates that between April 1st, 1971 and March 31st, 1972, 237 stills were seized under the Excise Act.5 Eleven of these stills were of the large commercial type, and it is estimated that their combined daily output was nearly 1,500 gallons. Table B.12 presents a summary of illicit alcohol and still seizures from April 1966 to March 1972.

According to the R.C.M. Police, since the excise duty on one gallon of proof spirits is $14.25 and illicit spirits normally analyse at 150 proof or higher, it is estimated that the federal revenue loss on one gallon of illicit spirits is at least $20.5, 42 The Federal Government's tax revenue loss for the 5,407 gallons seized during 1971-72 can thus be estimated at just over $100,000, and the loss for the six-year period stretching from 1966 to 1972 at approximately $670,000. Provincial and territorial governments' revenues are also affected by this illicit production both in terms of liquor control administration and general sales taxes. Furthermore, these revenue loss estimates are based solely on actual seizures; the total tax and sales losses attributable to this illegal activity cannot even be estimated.
More illicit alcohol appears to be produced in Quebec than any other province. In western Canada, Manitoba appears to be the greatest centre of such production.1, 4 It has been estimated that 600,000 Quebecers, or one out of every seven persons over 15 years of age in that province, consume illicit alcohol.38 The high rates of illicit production and consumption in Quebec are probably attributable to both the provincial popularity of 'Alcool' (an unflavoured legal alcoholic beverage which diluted 'moonshine' closely approximates) and the likelihood of organized criminal involvement in the distribution of illicit alcohol to criminally controlled nightclubs, bars and `after-hours' establishments.22, 26 Table B.13 indicates the seizures of illicitly produced spirits and beer as broken down by provinces for fiscal years 1970-71 and 1971-72.

Most Canadian stills are of the low production variety supplying local markets. This type of operation is particularly prevalent among certain ethnic groups and in small towns or rural areas without retail liquor outlets. The extension of alcohol prohibition into the 1950s in some provinces (particularly parts of the Maritimes) has also probably contributed to the maintenance of illicit production, as has the high potency of 'moonshine' and its relative inexpensiveness. According to one Manitoba R.C.M. Police sergeant, "When you pay $4 for [an illicit] 26 [ounce bottle], you're getting the equivalent of almost two government 26's, which is one reason for its popularity".1

While the profit motive probably underlies every illicit distribution venture, it is probably only of paramount concern in regard to the large-scale commercial operations. These stills are capable of producing up to several hundred gallons of illicit alcohol a day.12 Based on a $15 to $20 per gallon retail selling price and a conservative daily production figure of 100 gallons, the operators of such an enterprise can expect a gross income of between $1,500 and $2,000 a day. According to an article in the R.C.M.P. Gazette, these "large scale commercial operations may involve an initial financial outlay of $50,000" to cover such expenses as farm rental or purchase, the drilling of wells, the erection of a still, the installation of hydro, the purchase of supplies and vehicles, and the hiring of operators.42

There is some evidence that criminal organizations have been involved in the establishment of these costly but lucrative enterprises.23 Montreal based criminals have been known to establish and operate their own stills in rural areas in Quebec and eastern Ontario to supply their distribution outlets (primarily criminally controlled clubs and bars in Montreal) with inexpensive alcohol which (after dilution, flavouring and rebottling in discarded 'empties') is sold at regular prices to unsuspecting customers.", 26 In most cases the distilled spirits are sold to a wholesaler for between $15 and $20 per gallon. The wholesaler dilutes the spirits to approximately legal proof, allowing him to produce one case of twelve 25-ounce bottles from every gallon, which he then sells to a local distributor for around $35 (or at a profit of between $15 and $25 per gallon). The small-scale, local distributor (who has a " 'milk run' of customers to whom he delivers a designated quantity regularly"42) sells the product for between four and five dollars a bottle, allowing himself a profit of between $12 and $24 a case. According to the R.C.M. Police,

It is these small scale distributors who are most frequently apprehended by the police; the "higher-ups" remain in the background and are more difficult to apprehend. Thus, the financial backers who supply the capital for alcohol production and distribution, as well as for bail bonds and fines incurred by still operators or bootleggers, cannot always be convicted for the illegal activity."

Occasionally illegally distilled alcohol will be sold as though it were a legal product (although not in provincial liquor outlets), having been bottled in discarded 'empties' (obtained from legitimate bottle salvage firms) bearing genuine or counterfeit labels or, in some cases, the labels of non-existent foreign companies.3, 18, 32, 33, 35, 42 During fiscal year 1971-72, the R.C.M. Police seized eight illicit bottling plants, "the contents of which included genuine liquor bottles, counterfeit labels and seals".5 Dry gin appears to be the easiest product to imitate, but illicit alcohol distributors have produced most types of liquor and have used the name of nearly every major licensed distiller.42

Although it is impossible to even estimate the extent of illicit alcohol production and distribution, it is clear that only a very small fraction of the total production is ever confiscated. 'Moonshine' remains a lucrative, though rarely discussed, Canadian industry.

References

1. Allen, T. `Juice-making' follows tradition and may top $1,000 daily. Winnipeg Tribune, February 23, 1970.
2. Beaumier, J. C. Clandestine stills are a public menace. Le Nouvelliste (Trois-Rivieres), August 16, 1963.
3. Canada, Department of the Solicitor General. Annual report, 1969-70. Ottawa: Information Canada, 1970.
4. Canada, Department of the Solicitor General. Annual report, 1970-71. Ottawa: Information Canada, 1971.
5. Canada, Department of the Solicitor General. Annual report, 1971-72. Ottawa: Information Canada, 1972.
6. Canada, Statistics Canada. Breweries: 1970. Catalogue 32-205. Ottawa: Information Canada, 1972.
7. Canada, Statistics Canada. The control and sale of alcoholic beverages in Canada: 1970. Catalogue 63-202. Ottawa: Information Canada, 1972.
8. Canada, Statistics Canada. Distilleries: 1970. Catalogue 32-206. Ottawa: Information Canada, 1972.
9. Canada, Statistics Canada. Wineries: 1970. Catalogue 32-207. Ottawa: Information Canada, 1972.
10. Canadian Press. Alcohol seized. Globe and Mail (Toronto), December 5, 1972: 4.
11. Canadian Press. 1,150 cases of liquor stolen in Montreal hijacking. Toronto Star, October 4, 1971: 34.
12. Canadian Press. Tipsy sheep: Police led to huge still in Laurentians. Ottawa Citizen, June 14, 1972: 85.
13. Carriere, J. R. R. (Assistant Commissioner, R.C.M. Police, Ottawa.) Letter to the Commission, June 23, 1971.
14. Croll, B. Raid by Mounties in Eastern Townships bares still. Gazette (Montreal), November 10, 1956.
15. Dowell, J. Time to pay. Ottawa Journal, March 19, 1971.
16. Foley, D. Moonshine for bootleggers. Ottawa Citizen, December 7, 1965.
17. Gazette. Maker of contraband alcohol draws fine; potion dangerous. Gazette (Montreal), January 12, 1967.
18. Gazette. Moonshine, phoney labels sought by police in bars. Gazette (Montreal), November 10, 1971: 3.
19. Gazette. Moonshine ring broken in Eastern Townships. Gazette (Montreal), November 3, 1972: 38.
20. Gazette. Police still dig for stolen booze. Gazette (Montreal), August 11, 1971: 3.
21. Gazette. RCMP raid still, seize 400 gallons of moonshine. Gazette (Montreal), October 27, 1972: 4.
22. Gazette. R.C.M.P. raids moonshine operation. Gazette (Montreal), October 15, 1971: 21.
23. Globe and Mail. Cass rejects one independent authority for all police. Globe and Mail (Toronto), March 20, 1964.
24. Globe and Mail. Police charge three over methyl alcohol. Globe and Mail (Toronto), April 27, 1971.
25. Globe and Mail. R.C.M.P. raid uncovers still, 2,000 ounces of moonshine. Globe and Mail (Toronto), May 15, 1972: 27.
26. Green, M. Field notes: Illicit alcohol distribution. Unpublished Commission research project, 1971.
27. Hughes, E. D. What doctors should know about moonshine. Resident Physician, November, 1967: 78-86.
28. Kilner, E. Moonshine: Its history and folklore. New York, Bobbs-Merrill, 1971.
29. La Presse. Vol de $63,000 de whisky. La Presse (Montreal), October 20, 1971.
30. Le Soleil. Condamnations: Alambic et fraudes. Le Soleil (Quebec), April 8, 1971: 7.
31. Montreal Star. Liquor still churned out 1,200 gallons a week. Montreal Star, July 20, 1972: A-2.
32. Montreal Star. Police seize moonshine, arrest women. Montreal Star, November 23, 1972: A-3.
33. Montreal Star. Police warn against buying cut-rate booze. Montreal Star, December 17, 1971.
34. Mowat, F. The boat who wouldn't float. Toronto: McClelland and Stewart, 1969.
35. Noel, A. Huge moonshine cache seized. Gazette (Montreal), December 22, 1971.
36. Ottawa Citizen. Cabbie, dispatcher fined for bootlegging. Ottawa Citizen, November 29, 1972: 3.
37. Ottawa Citizen. R.C.M.P. seizes big still in Quebec farm raid. Ottawa Citizen, December 20, 1972: 1.
38. Ottawa Journal. Costs government millions. Ottawa Journal, September 4, 1969.
39. Palmer, A. R.C.M.P. fearful lye in moonshine. Gazette (Montreal), October 24, 1963.
40. Palmisano, P., Sneed, R., & Cassady, G. Untaxed whiskey and fetal lead exposure. Journal of Pediatrics, 1969, 75: 869-872.
41. Perry, W. F. G. (Chief Prevention Officer, R.C.M. Police, Ottawa.) Letter to the Commission, November 17, 1971.
42. R.C.M.P. Gazette. Illicitly distilled spirits. R.C.M.P. Gazette, September, 1970: 13-18.
43. Wilde, 0. T. On the steam run to Saint Peters. Time, September 20, 1971: 10-11.
44. Zolty, A. La police retrouve a Laval des caisses de scotch volees dans le port de Montreal. La Presse (Montreal), October 15, 1971.