There are plenty of ways to im­prove the busi­ness of beer. On­tario’s plan isn’t one of them

The Globe and Mail (Alberta Edition) - - REPORT ON BUSINESS - STEVE MAICH

Doug Ford’s plan amounts to a type of cor­po­rate wel­fare that con­ser­va­tives would nor­mally rail against

A busi­ness writer in Toronto and the for­mer edi­tor of Cana­dian Busi­ness mag­a­zine

Some bad ideas are well in­ten­tioned but dumb. They’re good-faith at­tempts to use the weight of the state to fix some prob­lem or other, but end up fail­ing or fall­ing vic­tim to un­in­tended con­se­quences. Make too many of th­ese mis­takes and vot­ers will even­tu­ally get sick of your ex­cuses and kick you out. Then there are the bad ideas that aren’t re­ally ideas at all. They’re slo­gans. Th­ese are brand­ing ex­er­cises that don’t re­ally solve prob­lems; they’re in­tended to send mes­sages. They are al­ways waste­ful, of­ten pa­tron­iz­ing and usu­ally short-lived. Make a habit of them and vot­ers will even­tu­ally re­al­ize you were never fit to gov­ern in the first place. This is a story about the lat­ter kind. It’s a story about the plan of On­tario’s new Pro­gres­sive Con­ser­va­tive gov­ern­ment to bring back the golden days of $1 beer, ful­fill­ing the pledge Doug Ford made last May, in the wan­ing days of his cam­paign for pre­mier. “For too long, beer con­sumers have been forced to pay in­flated prices for beer in or­der to in­crease the prof­its of big cor­po­ra­tions,” Mr. Ford said, at the time. And now, this imag­ined in­jus­tice will be rec­ti­fied in time for the Labour Day ben­der/week­end. True free-mar­ket con­ser­va­tives should have smelled trou­ble as soon as Mr. Ford al­luded to a dark con­spir­acy be­tween bureau­crats and cor­po­ra­tions to drain the wal­lets of hard-work­ing drinkers. But, to many of the party’s sup­port­ers, it sounded as if it were an­other tax cut. Not the smartest tax cut, per­haps, given the size of the provin­cial deficit and the clear costs that al­co­hol abuse im­poses on the health­care and le­gal sys­tems. (But all tax cuts are good, right?) Then, Mr. Ford took of­fice and re­vealed the de­tails, and sur­prise! It’s not a tax cut. It’s a rule change, wrapped in a sub­sidy pro­gram, in­side a price-fix­ing scheme. Back in 2008, the Lib­eral gov­ern­ment raised the min­i­mum price for a can of beer from $1.00 to $1.06 as part of their ef­forts to en­cour­age “a cul­ture of mod­er­a­tion.” In the years since, this so­called so­cial-ref­er­ence pric­ing has grad­u­ally in­creased to $1.25 a can, in­clud­ing a host of em­bed­ded taxes. So now, the low­est price in On­tario for a case of 24 cans is a lit­tle over $30, about half of which goes straight to gov­ern­ment. Ford’s plan is to roll that min­i­mum price back to ABuck-A-Beer TM. But just be­cause brew­ers are al­lowed to charge less, doesn’t mean any­body can stay in busi­ness do­ing it. Thanks to in­fla­tion, $1 in 2008 is now equal to about $1.16 and the in­dus­try’s mar­gins vary widely. Mol­son Coors, for ex­am­ple, made a pre­tax profit mar­gin of a lit­tle un­der 12 per cent in Canada last year. A 20-per-cent price cut is an in­vi­ta­tion for com­pa­nies to give up much of their bot­tom line, which is why a long line of in­de­pen­dent brew­ers in­stantly said they want no part of the plan. So how can the gov­ern­ment get a few brew­ers to play ball? With money, of course. Of­fi­cials have said there will be “in­cen­tives” such as prime shelf space at provin­cial liquor stores, lim­ited-time dis­counts and free ad­ver­tis­ing to en­cour­age brew­ers to cut prices or launch new bar­gain brands. They say th­ese are not fi­nan­cial in­cen­tives, which is ris­i­ble. Free ad­ver­tis­ing is a sub­sidy. Re­served prime shelf space is a sub­sidy. If this all sounds like the kind of hare-brained, mar­ket-dis­tort­ing cor­po­rate-wel­fare pro­gram that con­ser­va­tives would nor­mally rail against, that’s be­cause it is. There are a lot of ways freemar­ket con­ser­va­tives might want to re­form the beer busi­ness. Maybe the prov­ince should stop try­ing to leg­is­late “mod­er­a­tion” and scrap the min­i­mum price al­to­gether. You could eas­ily ar­gue that beer is over­taxed and add one more cut to the pile of tax re­lief al­ready promised dur­ing the elec­tion. But this plan doesn’t do any of that. In­stead, we have a new Pro­gres­sive Con­ser­va­tive gov­ern­ment, fac­ing years of bud­get deficits ahead, which has al­ready cut back poverty-re­duc­tion and school-re­pair pro­grams in the name of aus­ter­ity, us­ing pub­lic re­sources to give drinkers a price cut. Why? Be­cause, beer! Con­ser­va­tive politi­cians love to talk about open mar­kets, free en­ter­prise and small gov­ern­ment. Yet, two of Mr. Ford’s first acts were to in­ter­fere in the gov­er­nance of Hy­dro One, a pub­licly traded elec­tric­ity dis­trib­u­tor in which the prov­ince owns a mi­nor­ity stake, and to use his bully pul­pit to co­erce beer com­pa­nies into cut­ting their own mar­gins. Imag­ine how dif­fer­ent the prov­ince and the coun­try might be if we elected gov­ern­ments that un­der­stood and ad­hered to true free-mar­ket prin­ci­ples. It never hurts to dream. For now, On­tar­i­ans will have slightly cheaper booze to help numb our senses while we wait.


Packs of beer, in­clud­ing On­tario craft beers, are shown at a gro­cery store in Ot­tawa on Thurs­day. A price cut of 20 per cent is an in­vi­ta­tion for com­pa­nies to give up much of their bot­tom line, which is why many in­de­pen­dent brew­ers want no part of the provin­cial gov­ern­ment’s buck-a-beer plan.

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