Red tape puts chill on Alberta-made boozy gelato

A moonshine-maker says bureaucratic red tape is putting a chill on his business plans for an Alberta-made gelato ice cream spiked with alcohol.

After months of regulatory hassles, Rob de Groot plans to sell his new boozy gelato in the United States instead.

"We're essentially being hogtied by policy and regulation and the interpretation of it," de Groot said in an interview Thursday with CBC Radio's Edmonton AM.

"That's what caused us to look south of the border." 

It's like eating a glass of wine or a bottle of Baileys. - Rob de Groot

De Groot, the operator of Edmonton-based Red Cup Distillery, which sells "authentic Alberta moonshine," has worked with Pinocchio Ice Cream for the past three years to perfect the recipe.

Red Cup Distillery is supplying the hooch. 

Each tub contains gelato with six-per-cent alcohol, de Groot said.

"It's like eating a glass of wine or a bottle of Baileys," de Groot said. "We're kind of hitting two birds with one stone."

The recipe was borne out of necessity, de Groot said. Taxes eat up about 75 per cent of his distillery's retail profits — and he wanted to figure out a way to improve his margins.

At the time, he thought the easiest way to do that would be to put his hooch into food.  

"We had to figure out a way to make more money, which meant get rid of taxes, and as a food product, the taxes are reduced," de Groot said. "We did the recipe up for a beer festival three years ago and it's always on the back burner as a way to reduce taxes."

While there is a big appetite for the ice cream at tasting events and beer festivals, de Groot said there are barriers in the marketplace.

Ice-cream headache 

He was granted a licence to manufacture the ice cream, but due to issues with a business partner who was going to manufacture and package the product, the application is no longer usable, de Groot said.

And there are other barriers to business.

De Groot can't sell his ice cream in grocery stores, and AGLC, which regulates gaming, liquor and cannabis in the province, won't let him ship it to liquor stores through mainstream distribution networks, he said.

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According to AGLC regulations, any product which is more than one per cent alcohol must be sold from a licensed facility, either a liquor store or a bar. 

That means extra cost and added hassle, de Groot said.

"We are allowed to produce it with a co-packer," he said. "Then when we sell it, I have to pay for the gelato up front, bring it back to my distillery and I become a distribution network

"So suddenly, I have to have the trucks or use somebody else."

Then there is the issue of keeping the gelato from melting once it hits store shelves.

It costs roughly $1,300 to install a commercial freezer, he said — a cost few store owners want to pay.

De Groot can't cover the cost himself, even if he wanted to. The AGLC strictly prohibits it.

"No liquor suppliers may provide a licensee any furnishings, furniture, refrigeration equipment, as well as a number of other things," said AGLC director of compliance Rob Pape. "And that's to prevent inducements in our industry."

De Groot said current regulations make it too hard to sell the product locally. Now he's looking to to sell it in the U.S. market, where grocery stores are liquor-friendly.

He says he's being courted by distributors there and has plans to make his mark south of the border. He would need to manufacture the ice cream in the U.S. but the alcohol would remain Alberta-made.

I guess we'll just pay back the banks in American dollars. - Rob de Groot 

He's got a packer and distributor in place and has already received an order for nearly 400,000 pints. The first tubs are expected to hit the market around the end of the year.

Moving out of Alberta will save his business, he predicts.

In the meantime, he would like to see Alberta relax its regulations to make it easier to sell food with alcohol. He also thinks he and other craft distillers should qualify for government subsidies. 

Current regulations are freezing small operators out of the market, he said.

"We're competing with very low cost liquor, we're competing with inexpensive liquor from other jurisdictions," he said.