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Tuesday, February 11, 2014

Beer Store blues…

I read this morning that the president of The Beer Store is warning Ontario beer drinkers of higher prices if the province allows convenience stores to sell beer, breaking his company’s long-held monopoly.

Ted Moroz on Monday was apparently responding to the Ontario Tory proposal to allow convenience and grocery stores to sell beer.

Currently, the distribution and retail sales of beer is regulated by the province, giving The Beer Store a de facto monopoly. Curiously, The Beer Store  is owned jointly by foreign-controlled brewers: Molson, Labatt and Sleeman. Moroz claims that, should the province open up beer sales to other retail outlets, beer prices will go up, with a 24-carton costing $10 more.

What a load of rancid hops! This ranks right down there with the head guy over at Canada Post telling us that seniors were in favour of the discontinuance of home delivery because they wanted more exercise. Both men, it seems to me, believe we are idiots, or perhaps just chumps.

I studied economics as a young adult and have read widely on the subject since then, and I cannot remember claims that monopolies keep prices down. When monopolies—or near-monopolies—are busted, prices go down because of the added competition. That’s the norm.

Granted, some government-owned monopolies do offer lower prices, but that’s because of government subsidies. And, as we all know, the Ontario government does not subsidize the price of beer.

I cannot for the life of me understand why the Ontario government persists in giving three beer companies control of the marketplace. These three set the retail price as well as the wholesale/transfer price, and they mark up their products as they will. The mystery only deepens when one considers the three favoured companies are foreign-owned.

Will, I wonder, this province ever grow up when it comes to selling alcohol and allow a free-market? Probably not—at least, not in my lifetime.

Tim Hudak, the leader of the Progressive Conservative party, is reported to be in favour of convenience stores being allowed to sell beer. I’d not count too heavily on this ever happening though, because we’ve heard promises like this before and they’ve come to naught. It’s probably just another election thing.

As to Kathleen Wynne’s Liberal government: they have pretty well told us they favour the status quo. There is no way whatsoever the Grits will allow those overpaid-underworked union jobs to be subject to the vagaries of a free-market economy. Trade union support is, after all, a corner stone of the Liberals’ election strategy.

Here are three news stories of Ted Moroz’s rather lame attempt to scare away any thoughts about a free beer market: Star, Financial Post and Sun. And here’s a must-read for those who are wondering what the fuss is all about.

Decide for yourselves.

9 comments — This is a moderated blog and comments will appear when approved. Please don’t resubmit if your comment doesn’t appear immediately, and please do not post material that is obscene, harassing, defamatory, or otherwise objectionable.

  1. Sympathetic to the philosophy here, but deregulation elsewhere in Canada has always led to price increases and a decrease in available selection.

    I lived in Alberta during the privatization, prices absolutely soared immediately after.

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  2. The study can be dismissed as self serving propaganda for The Beer Store, but since so much of price is comprised of Ont tax, which is strictly controlled by premier mom (even base price regulations are set by government fiat) price is not the main issue to consider. It is convenience, or lack of it in the present case. TBS persists in a 19th century model in many of the older stores. The customer queues up and gives an order, the clerk takes it and runs to the back to deliver a box, then repeats for the next customer. She also looks after all the bottle returns in many instances. What other commodity in 2014 is marketed in such a fashion? Only a monopoly would treat a customer with such indifference in todays market.
    Despite the profits from running a cartel TBS has not updated their stores, or hired enough staff to handle the empties program, or opened new stores. Unionized rates are high, so the company simply scales back on staff, and the customer waits.
    Ont already has about 230 LCBO agency stores retailing beer and wine, a program which has existed for about 50 years. The pilot project is obviously there, it works very well. All these stores have invested in walk in coolers, noticeably absent in older Beer Stores.
    The status quo is favoured by the unions, Liberal and NDP parties and the LCBO and Beer Store management.The agency store program which expanded a decade ago is mysteriously on hold now. Worker unions objected to any further expansion and bargained for it in the latest contracts. Though never publicized, the suspicion is the LCBO/government have agreed to keep that program on hold.
    Too bad for the Ont consumer.



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  3. What I object to about government monopoly in this area is that the price for a bottle of whatever alcohol is the same throughout the jurisdiction regardless of distance from source of supply while milk and other consumables are not and are subject to large price variations based on transport and other factors. In effect, government subsidizes alcohol consumption in remote areas and leaves people to the vagaries of the market in all other areas.

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  4. What I object to is that in government controlled alcohol monopoly the price of a bottle of whatever is the same regardless where you live in the jurisdiction. It may be different in Ontario but here milk and food prices will vary enormously by community but your alcohol price will not. In effect, government is subsidizing alcohol consumption in remote communities and letting people fend for themselves for everything else.

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  5. I guess its all about perception. I lived in Alberta during the privatization and I found that prices were better and I could shop around for 'deals'. Also, rather than a decrease in jobs, employment improved.

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  6. The province sets the minimum floor price for beer, including the wholesale price, not the brewers. Not disagreeing on your theme but I'd ask for a refund on your education if i were you. If you can't get the simple facts straight, your argument is lost.

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    Replies
    1. Only one of the smaller brewers was interested in rock bottom prices, and this horrifying notion spurred the McGuinty regime to regulate a floor price. This brewery has since been swallowed up by one of the giant internationals. There remains plenty of room to move on price; the cheapest beer I know of retails for $16.95/ 12 while the premium brands are up to $24.75 or 45% higher.
      Presumably the brewers can still make a profit on the lower line. Since there is very little difference in most of the national brands, the pricing becomes an arbitrary exercise; the giants are more comfortable competing through advertising and hype, then they are with pricing.
      The real reason for the floor price is because the ad valorem taxes apply to that level, hence more revenue for the Province.

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  7. Beer prices in Canada are kept high because of taxes. Here in Germany I pay about the same for a crate of 20 0.5 litre bottles of Pilsner as I would for a 12 pack of 341ml in BC.

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  8. Frankly the only thing that should concern residents of Ontario is booting out the Liberals at the earliest opportunity.
    Today we have their Finance Minister Sousa blaming the Federal Conservatives for the dire straits they have the province in.

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