Previously...

Even cooler Cali pinot
Terrific deluxe meritage from Two Sisters
A cool California chardonnay
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Frame-up: The Beer Store, beer tax and beer prices


Previously

Frame-up: The Beer Store, beer tax and beer prices

While the Liberals and their advisers were putting together a modest liberalization proposal last year, which got more modest as the discussions progressed, The Beer Store produced a multi-page spin of statistics, facts and opinions that strangely lead to the conclusion that the Beer Store is Ontario’s best option. In its Alcohol Retailing Deregulation report, produced by an "independent" advisor,  statistics and observations about alcohol sales are massaged so as to conclude that sticking with TBS is the best way to “keep” prices here low. It relies heavily on dark stories about high prices in Alberta and B.C. From my work with wine, I know that wine in both provinces is noticeably more expensive than wine in Ontario, so it’s not altogether surprising that the same premium would be attached to beer out West.  So the report's focus is on the pricey West, and the issue of taxation levels - a very important part of the pricing debate - is treated like an immovable force of nature.

But never mind the westernmost provinces, let’s keep things “local”. How much does a 6-pack of Budweiser cost in Ontario versus neighbouring jurisdictions?

My methodology: Google “6-pack Budweiser [city]” and take the first advertised price I found. For Manitoba, the Liquor Mart is their version of the LCBO, and Manitoba does not allow sales of beer in supermarkets. In each case I chose cities within 10km of Ontario, except for Manitoba, which has no liquor stores next to Ontario, but has standardized pricing through its monopoly. The U.S. figures would also be subjected to state sales tax, which would add the following amounts: MN: 6.875%, MI: 6%, NY: 7%. In each case, the American price would remain below that of The Beer Store. (exchange rate: 1 CAD = 0.73 USD. February 2016)

So, we have the ugliest stores, a much smaller number of them per capita, and we pay the most.

And yet the (private, for profit) managers at the Beer Store have just inked a ten-year deal to keep their tight grip on the market, with so few supermarkets being allowed to sell so little beer that, at most, the new retailers will take about 10 percent of the market after an intentionally slowed approval process that will take up to five years to grant all the 450 licences, giving The Beer Store more revenue for longer. For more depressing reading, check out this snapshot of where you can now buy supermarket beer in Ontario.

Why would this be?

One reason the government and the private, for-profit Beer Store are so cozy is precisely that gulag of bare-bones Soviet-style depots Ontarians have had to put up with, for decades: it allows TBS itself to make a profit and pay that to the big beer companies that run it (they get the wholesale and the retail profit: only in Ontario!) even as the government grabs a monumental amount of revenue through a “beer tax”, which TBS pays without even letting the public know: its owners get to favour their own brands over others, a trick worth a couple of hundred million dollars according to an article in the Globe and Mail, and there’s no need to fix up their stores when there is no competition for the important 12, 18 and 24-pack market (and they get to set their few competitors’ prices anyway). So The Beer Store happily hands over a shockingly high tax per case while making sure prices are only a little higher than (all) the neighbours so as not to stir the beer drinkers to action.

Other places also levy a beer tax – here’s what’s charged on 24-pack cases (US in USD): NY: $0.33, MI: $0.47, MN: $1.10, QC: $4.27, ON: $9.95. I’ll bet you didn’t know that Queens Park was taking that much from your beer purchase! And to mollify the Beer Store further, and help fix up its dumpy stores, that same tax that is about to rise higher.  

Don’t get too excited about the “renovations” though. Check The Beer Store's website, which attributes its new look to management having "talked to our customers" rather than being forced to change with the threat of loss of monopoly. It says "over time our stores will look different with a refreshed interior décor." So, lipstick on a pig with regard to the existing squeeky rollered beer ration stations, with customers squinting at the ridiculous “label wall”... by far the majority of outlets.

Exciting new look: here's a large-format, self-serve Beer Store in White Oaks, London.

 

There’s no attractive “merchandising”, no chance for promotions of new beers to entice customers, no chance for craft beer, no music, no nice display fixtures, the staff is as surly as ever, and the static structure of the stores and the warehouse approach remains stacked in favour of the big brands owned by the owners of the Beer Store.

The Globe and Mail noted that Ed Clark, who started out tough and then granted concession after concession, accused TBS of prominently displaying only the owners’ brands in the few places in a typical outlet where it’s possible to have a display. This meant that while 74% of the LCBOs beer sales were of TBS owners’ brands, at TBS itself, that number rose to 80%. The Beer Store has at least been ordered to grant a small percentage of all listings to craft brewers. But bear in mind that those small brewers will still have to pay a listing fee... per brand, per store, raising costs to them and profits to The Beer Store.

Things could be worse: TBS does of course beat cold war era communist countries’ retail options, and there are a lot of brands available. But things could also be better, like in our neighbouring jurisdictions Quebec, New York, Michigan and Minnesota. And if the people of Ontario honestly would prefer to stay restricted like Manitoba, we should be paying less (a 6-pack’s a buck cheaper in Winnipeg!), with the profits to the government rather that giant global corporations.

The Beer Store cannot survive (true) competition

If you can wade through the Beer Store’s lengthy justification, one question that should arise is, if they’re so good at distributing and selling beer more effectively than private retailers, why don’t they just fight them fairly? Target marched into Canada like the conquering hero of discount department stores a few years ago and lost billions after being soundly beaten by incumbents Walmart, Costco and Canadian Tire, which are stronger than ever now. The incumbents beat the challenger, so it can be done. If you’re good at what you do, that is.

Instead The Beer Store has rigged a deal to keep lining its pockets, knowing full well that in a truly free market, Loblaws, Metro, Longo’s, et al would soon take most of the business. The whole “framework” is a shameful rip-off, and we’re now stuck with it for ten more years.  In the meantime, I'll be driving past three Beer Stores on the way to the only supermarket allowed to sell beer near me (Loblaws in Leslieville, 4km away) to buy 6-packs of my beer.


 

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