Ontario’s Buck a Beer Plan

Ontario’s new Buck a Beer plan is an invitation to brewers in Ontario to lower prices to that level, as the new Ontario government announced a reduction of the beer floor price to $1.00 per bottle or small can. It had been 25% higher, or $1.25. A floor was enacted in 2008 with the stated object of minimizing alcohol abuse, see this story in Toronto’s The Star that year for background.

The current change fulfilled a campaign promise by Conservative party leader and Ontario Premier, Doug Ford.

Buck a Beer applies to maximum 5.6% ABV beer. It doesn’t include a refundable deposit on the container, or apply to draft beer.

Part of the plan involves LCBO stores giving discounts or other preferences on floor displays or prime shelf locations for the new cheap beer. As explained in an August 7 story in Toronto’s The Globe & Mail:

To encourage for [sic] brewers to lower their prices, the government is creating what it calls the buck-a-beer challenge, which will provide participating breweries with incentives at the provincially owned LCBO stores. Beers lowered to $1 could receive promotional and advertising support, short-term discounts and more prominent displays in the stores.

Encouraging brewers to sell at their preferred price point above $0.99 per bottle is, in our view, not objectionable (see below). But giving government support for buck a beer via the incentives mentioned seems unwarranted when brewers must pay normal charges for other beer. We need to see the details, but I hope this aspect is short-lived. In this regard, therefore, I agree with the concerns expressed by many beer commenters.

But many in the craft beer community are also opposed to brewers selling beer for a dollar a bottle, or feel the plan is illusory, and there I have another view.

It’s often pointed out that before Ford’s announcement no brewer sold beer at the previous floor price, or $30 a case, so why now?

I think the new floor price, an even dollar, has assumed a symbolic importance for the new government and those who voted for it based on this plank. It recalls the time, about 12 years ago, of low-price beer in Ontario.

As beer is perceived to be expensive here – even if it’s relatively low-cost compared to many other provinces – the government hopes the floor price drop will work a larger change in beer pricing. For some beer.

You can buy a 24-pack for 16 or 17 dollars (U.S.) in New York State – about a buck a beer Canadian. It’s not the best beer by a long shot, but it’s beer. And a case can be bought in Quebec today, I’ve read, for around $28.00. While taxation differences in different places, and other factors, explain some of this, many people just feel that standard beer should cost less in Ontario.

Ford’s plan can be viewed too as in practise encouraging pricing over the minimum but well below current pricing/discounting.

Even if buck a beer is not a regular offering it could be a special, or “kicker” from time to time, even a loss leader, a common business technique.

Some craft brewers state they would be forced to lessen quality in order to compete, that $1.00 per bottle is not feasible when costs of production and taxes (taxes are not being reduced) are factored.

But from a public interest standpoint, lower prices (on some product) are desirable, as for any consumable. Those who can’t afford beer at present should have a better option. They may even graduate to better beer once their economic prospects improve, which is good for the beer business.

In fact, two small brewers have just announced they will sell beer for a buck a bottle once the new rules take effect from August 27.

Of course, no one has to buy this beer, just as they didn’t in 2007, the choice is the consumer’s. But beer is not always or even typically for highly developed tastes. It is for everyone and everyone decides for himself or herself what to buy. The fact that neither I nor, perhaps, you is likely to buy cheap beer is neither here nor there.

Over and above other considerations though, the craft market really stands apart from all this. Buck a beer isn’t its competition. A lot of craft beer exceeds 5.6% ABV. Right there a chunk of the craft market is exempt from the new plan.

Beyond that, those who appreciate the fine products of craft brewers will pay more for them as they always have. Consider how various qualities of cheese, bread, many other comestibles, cars, and of course wine are priced.

If some mass market beer drops in price, current craft prices arguably make even more sense. The reason is that craft and mass market beer can be so different as to be separate products.

I think Ford’s plan was designed mainly to make large brewers drop their prices, through greater efficiencies or whatever it takes, so some mass market lager could be priced more cheaply. This doesn’t mean some craft brewers can’t take advantage of the new plan, as evidently some intend. I don’t think it will be the norm, but some may find a niche for reasons that relate to their type of marketing, or location, or some other specific factor.

Two Buck Chuck, the famously low-priced wine, didn’t kill the Napa Valley. Read some interesting history in Jessica Tyler’s story this year in Business Insider. The category is called extreme value. We need that for beer in Ontario.

So why all the fuss over Buck a Beer?

1 thought on “Ontario’s Buck a Beer Plan

  1. Got some comment privately, and people asked: okay large brewers “should” offer extreme value, but why should they if most craft stays away? Because, imo, the government asks them, they (the two main brewers) supply almost 90 per cent of the Ontario market, and to help retain their privilege of running Brewers Retail Inc. in Ontario.

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