Written by Dr Jasveen Rattan • Last updated on Monday, June 23, 2025

Ontario Government Proposes Key Changes to Support Local Alcohol Producers

The Ontario government has announced several key proposals to support local alcohol producers, reduce taxes, and streamline the marketplace for both businesses and consumers. These actions represent a significant investment in Ontario’s local alcohol industry, with $100 million in support for 2025-2026 and $155 million in 2026-2027 and 2027-2028. The government’s initiatives are expected to stimulate local economic growth, create jobs, and increase access to Ontario-made alcoholic products.

Here’s a summary of the major changes, including the financial impact of the reductions:

1. Spirits Basic Tax Reduction

  • Tax Cut: The basic tax on spirits will be reduced from 61.5% to 30.75%, effective August 1, 2025.
  • Impact:
    • This change will halve the current tax rate, directly benefiting Ontario distillers by reducing their tax burden and allowing them to lower prices for consumers.
    • Example: A bottle of spirits that costs $50 before tax would now cost $35.38 in taxes instead of $61.50.

    2. Microbrewery Support

  • Tax and Markup Reduction: The LCBO markup and basic tax rates for microbrewers will be reduced by 50%, effective August 1, 2025.
  • Impact:
    • Draft beer markup rate will drop from $35.96 to $17.98 per unit.
    • Non-draft beer markup rate will drop from $39.75 to $19.88 per unit.
    • This will lower the costs for microbreweries, making their products more affordable for consumers and boosting their competitiveness.

    3. Support for Ontario’s Grape and Wine Sector

  • Ontario Grape Support Program:
    • The program will provide $35 million annually to eligible wineries starting in 2025-2026, totaling $175 million over the next five years.
    • This will help wineries and grape farmers by incentivizing the use of Ontario-grown grapes in wine production.
    • VQA Wine Support Program:
      • The program will be extended until 2029-2030, providing an additional $84 million annually, which adds up to $420 million over the next five years.
      • Enhancements: The program will now include ice wines and VQA wine sold in convenience stores and on-site winery retail stores.

    4. Wine Boutique Support Program

  • New Program: The Wine Boutique Support Program will provide up to $16.7 million in funding over five years to support off-site winery retail stores that relocate into grocery stores.
  • Impact:
    • This will help wineries expand into grocery store locations, making it easier for consumers to access local wines and increasing opportunities for wineries to grow their businesses.

    5. Cider Support

  • Markup Reduction: The LCBO markup on cider will be reduced from 60.6% to 32%, effective August 1, 2025.
  • Impact:
    • This will provide a 47% reduction in the markup rate, allowing cideries to offer more competitively priced products and foster growth in the local cider industry.

    6. Reducing Markups for Ready-to-Drink Beverages (RTDs)

  • Markup Reductions: The markup rates for spirit-based RTDs and wine-based RTDs will be reduced to 48% from previous rates:
    • Wine coolers will drop from 60.6% to 48%.
    • Light wines will drop from 64.6% to 48%.
    • Spirit coolers will drop from 68.5% to 48%.
    • Low alcohol spirits will drop from 96.7% to 48%.
  • Impact: These reductions will cut the costs of RTDs, making them more affordable and competitive, benefiting local producers in the rapidly growing market for ready-to-drink alcoholic beverages.

    • 7. Creating an Alcohol Refreshment Beverage Category

  • Proposed Category: A new category for ready-to-consume coolers, hard seltzers, and premixed cocktails will be introduced to streamline the tax and markup treatment of RTDs.
  • Impact: This will simplify regulations and provide clarity for producers, helping them compete more effectively in Ontario’s alcohol market.

    • 8. Targeted Enhancements to LCBO Programs

  • Direct Delivery Program: The government is exploring 100% Ontario non-VQA wines for inclusion in the LCBO Direct Delivery Program, along with other alcohol categories.
  • Supplying Source Program: The government is also exploring enhancements to this program, aiming to improve coordination for fulfilling and distributing alcohol products.

    • Continued Modernization

    As part of the first phase of actions related to the review of taxes, markups, and fees, the government is continuing to work on modernizing Ontario’s alcohol marketplace. This includes exploring the development of a new wholesale pricing model, which is expected to be introduced in 2026, and examining a progressive alcohol tax and markup system.

    The government is committed to continuing to promote and prioritize small producers and Ontario-made products as they work toward implementing these changes.