Money

No, beer prices will not go down under Doug Ford’s “buck-a-beer” plan

Ontario’s beer market is controlled by three big brewers — all of whom have no incentive to reduce prices.
August 8, 2018, 3:22pm
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Beer in Canada’s largest province is not cheap — in fact, some estimates put the average cost of a can or bottle of beer in Ontario at 27 percent higher than Quebec, the second largest province in Canada. A case of 24 bottle of Molson Canadian, for instance, retails at the Beer Store for $37.50, while the same case can be purchased in Quebec for just $26.99.

Ontario’s newly-elected premier Doug Ford is pledging to change all of that by reintroducing Ontario’s “buck-a-beer” scheme, legislation that will lower the minimum price of a bottle or can of beer from $1.25 to $1. And Ford says that brewers who get on board will receive “free promotions” in LCBO stores across Ontario, and “respect and appreciation from consumers”.

Breweries, it should be noted, aren’t obligated to reduce their prices. Nor will these lower prices apply to draft beer. So what exactly does “buck-a-beer” mean? Will a can or a bottle of a beer in Ontario now cost just a single buck?

“Absolutely not,” says Stephen Beaumont, editor of Original Gravity Canada, a beer magazine that recently launched in Toronto. “The major breweries have no great interest in selling beer at a dollar per can. They control the market, and they are able to charge high prices because there are just three major breweries controlling a large share of the market. That’s not going to go away.”

Indeed, there are 260 licensed breweries in Ontario, but just three — Molson Coors, Labatt Breweries and Sleeman Breweries control more than 50 percent of the market. In fact, Molson Coors alone controls 28.1 percent of the market in Ontario. Company filings show that in 2018 alone, Molson Coors generated sales of approximately US$1.78 billion in Canada.

Essentially, because of the fact that these three brewers have captured demand for beer in Ontario, they don’t need to reduce prices. Furthermore, Molson, Labatt and Sleeman are majority owners in the Beer Store and are household brand names, making promotional incentives to reduce prices almost “laughable”, Beaumont says.

“Unless Ford does something that lets these breweries make more money from beer in general, like reduce taxes, the government has little control over the profitability or pricing of beer.”

Prior to 2008, Ontario did actually have a “buck-a-beer” program, where the floor price of a can of beer was set at a dollar. The program was pretty ineffective, as the big brewers discovered they could charge higher prices and still maintain demand because of the monopoly they had on the market. Ford’s government’s current argument is that going back to the old floor price will increase competition in the beer space — and maintain provincial revenues from excise taxes.

But because breweries have the option of not lowering their prices, it is unclear as to how Ford’s beer plan will actually result in lower prices. “It’s impact is going to be next to nothing. The biggest selling brands at the Beer Store have zero interest in making less money, and you cannot legislate companies to charge a minimum amount,” Beaumont argues.

For craft brewers, the incentive to lower prices, despite the fact that their marketing budgets might be taken care of by the province, is simply not there.

“The tariffs that were just imposed on aluminum cans coming into Canada have hit us hard,” Troy Burtch of Great Lakes Brewery, one of the largest craft brewers in Ontario told the Toronto Star. “We haven’t even given two thoughts about this,” said Burtch in reference to the “buck-a-beer” plan. “Why would anyone do this?”

“I certainly don’t want to have the same prices on my product as we did eight or nine years ago because the cost to produce that product has gone up significantly,” said Paul Meek, owner of Kichesippi Beer Co told the Ottawa Citizen. “I’d be shocked if you saw a lot of breweries jump on this buck-a-beer thing.”

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