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