Buck-a-beer bad business, brewers warn
Many brewers in the nation’s capital say they can’t afford to offer customers $1 beers because dialing sale prices back to 2008 levels — when the cost of everything it takes to make the beer have increased — is just bad for business.
“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. “I’d be shocked if you saw a lot of breweries jump on this buck-a-beer thing.” His thoughts are shared by Lon Ladell, brewmaster at Big Rig Brewery.
“I want people to have a fair price but you can’t keep raising the taxes provincially and federally on our product,” Ladell said.
“With the cost of ingredients, everything keeps going up every year. It’s hard. It’s a hard business,” he said. “The margins keep getting tighter and tighter and you want to invest in your company, to grow and create more jobs.”
At a news conference in Prince Edward County on Tuesday, Premier Doug Ford announced he would be introducing legislation to roll back the minimum price that brewers can sell beer for from $1.25 per 341 mL bottle to $1. He said the change will be made by Aug. 27, just in time for the Labour Day long weekend.
“Nobody is being forced to lower their prices and there will be no subsidies or tax handouts,” Ford said at the event.
The PC government is calling the move the “buck-a-beer challenge” and said the move is aimed at creating more competition in the market among brewers.
The $1 price is for 341 mL bottles only. It doesn’t apply to canned beer or draught. The caveat specifying that only bottles qualify for the price comes at a time when the LCBO and the Beer Store are pushing suppliers to ditch bottles in favour of 473-mL cans, which are growing in appeal to consumers.
A check of the LCBO’s website shows that only one bottled beer comes close to the existing provincial minimum price. Stonewall Light from Cool Beer Brewing Co. sells for $1.45 per 275 ml bottle. Despite coming in a small container (76 mL less than a regular-sized beer bottle), it still costs 20 cents more than the current provincial minimum.
Even a brand like Laker, which once prided itself on its $1-a-bottle price point, is retailing at $1.95 for a 473-mL can. A case of 24 341-mL bottles of Laker Light sells for $33.95 at the LCBO, or $1.41 a bottle. Based on the current provincial minimum price of $1.25 per bottle, the lowest a 24-bottle case of beer can be sold for is $30.
The province’s move to try to roll back prices at a time when the cost to produce beer is at an all-time high is puzzling to many across the province.
“The mainstream brands are $35.50 (per 24). It’s interesting that there is nobody at the $30 floor,” said Scott Simmons, president of the Ontario Craft Brewers Association. “Nobody even jumps into that (price) from a promotional standpoint.”
Kichesippi Beer’s Meek sees the government’s announcement as a non-starter.
“I don’t see it being a thing. I honestly can’t see how a brewer can pull that off,” he said. “I don’t see any benefit to this at all. We have product sales from time to time. We have a customer appreciation sale around our anniversary, we do some Black Friday stuff, but it’s never been anywhere near close to that price.”
Taxes on alcohol sales in Canada have been steadily increasing for decades, with the most recent hike happening in April 2018 when the federal government raised taxes on local and imported beer by two per cent.
The price of beer cans has jumped in recent months because of the escalating trade war with the United States, which has slapped a 10-per-cent tariff on aluminum. The minimum wage hike to $14 per hour has also played a role in pushing up beer prices, as have increased prices on the ingredients needed to brew.
For comparison, $1 in 2008 is equal to $1.16 in today’s money, once inflation has been accounted for. The PC government’s “buck-a-beer challenge” is really a challenge to see brewers produce beer more cheaply today than they did a decade ago, despite the higher associated costs.
“There’s definitely no money in it,” said Big Rig’s Ladell. “We would probably be losing at least half of that. The margins are so tight.”
Ontario Craft Brewers’ Simmons said he isn’t hearing much support for the initiative from his members.
“None of our members are going to be interested in participating simply because they can’t afford to,” Simmons said, adding that if the government wants to lower beer prices for consumers it needs to look at lowering the taxes applied against alcohol sales in the province.
“I’d like to pay less for a case of beer when I go into a store. But, I think the first place we need to start is looking at the provincial tax structure, which would be the highest component of the retail price we pay.”