Wednesday, August 08, 2018

Buck a Beer? What is Doug Ford Smoking?

A brewer defrocks Ford's beer boondoggle and asks an interesting question - what's this really all about?

Buck a beer! Hey, here’s an issue I am totally qualified to write and complain about.
Mr Smith,
I am a former brewery owner (sold earlier this year) and a constituent of yours in Prince Edward County.

It’s important for me to write to express how appalled I am at your buck a beer announcement this morning. I watched you stand next to Doug Ford as he lied about Liberal red tape and how they are responsible for increasing the pricing of beer as a result of increasing the price floor of beer. This is incorrect and disingenuous. No brewer in this province currently retails beer at the existing price floor so it obviously was not an impediment to lower pricing. No brewer was asking you to lower the price floor because they wanted to sell their beer for less. It’s a non-issue that you have fabricated.
Barley Days, for instance, currently sells its cheapest beer for $2.50 — a price that is fair given the costs that go into making beer. They are not selling it for the current price floor although they most certainly could. Even the famous Laker beer that used to be $1 a beer is retailing for $1.60 — above the current price floor.
What I am most qualified to talk about is the cost of beer and the cost of running a small business brewing beer. It is simply not possible for a business the size of Barley Days to sell beer at $1 without losing significant amounts of money on each can. Here are the direct costs at their scale to make the most basic beer possible:
25 cents packaging (can)
24 cents provincial beer tax
18 cents labour
12 cents HST
11 cents malt
3 cents hops
3 cents water
3 cents federal excise tax
2 cents yeast
2 cents water treatment + cleaning chemicals
Total: $1.03 for a 355ml can. This doesn’t include any profit margin for the brewery. It doesn’t include any non-direct operational costs like rent, administrative salaries, utilities to make the beer and keep the lights on, debt servicing because a brewery is extremely capital intensive, etc. It doesn’t include any retail margin for LCBO.
So when you see a brewery like Barley Days pricing at $2.50 a can, it is because that’s actually what it costs a business like this to make even passable product and pay their employees. I have to wonder if there is some sort of back room deal with friends at Johnvince Foods, who own Barley Days, to convince them to sell their product below cost.
When I ran my brewery we never made beer anywhere close to this cheap because of all the corners that need to be cut were unacceptable to us. It was difficult for us to make beer anywhere less than $2 per short can in costs alone.
At the Molson scale, their costs in taxes alone (provincial beer, HST, federal excise) are $0.60 per short can. Even at their scale it is next to impossible to sell that beer for $0.40 in ingredient, operational, labour costs and profit margin.
So this is why I am disgusted by your “challenge” to breweries across this province who employ thousands of Ontarians to suck it up and eat the cost to provide below-cost $1 beer to consumers. How insulting this is to the breweries across this province who employ so many people in a rapidly growing industry. Will your government be challenging other industries to lower the price of their products to consumers? Will you be "challenging" Galen Weston to lower the price of bread?
Mr Smith, I believe the “incentives” you are offering to brewers through the LCBO in exchange for them to sell product below cost is anti-competitive and illegal under the Competition Act and Liquor Control Act. It distorts the market and will only serve to devalue the product of brewers who price fairly in an open market and do not choose to participate in your challenge because it does not make business sense.
You are also “challenging” brewers to eat their margins at a time when their costs are going up significantly as a result of steel and aluminium tariffs which will impact the costs of equipment and aluminium cans. You couldn’t be more tone deaf on this subject.
If you were serious about lowering the price of beer you would be immediately announcing lower provincial beer taxes across the board. But you are not serious. This is a distraction from issues that actually matter to your constituents.
Finally, I watched you smirking as your boss dismissed concerns about the mental health impacts of buck a beer, which is especially rich considering his own brother’s descent into addiction to alcohol and crack cocaine, and his role in enabling that behaviour, not to mention Doug Ford’s past as a drug dealer.
I watched you smirk and cowardly run away as your constituents protested this proposal and wished to voice their disapproval. Shame on you.
Eric Portelance
[EDIT] Most of the comments are now asking why beer is cheaper in Quebec or the U.S. etc. I’ve addressed this many times in the comments but it keeps coming up. The reason is our beer taxes are higher in Ontario. The government has not proposed lowering them.


Anonymous said...

Meanwhile I read that addiction centres in Ontario will feel budget cuts under Ford's new government. Yet his brother was a major alcoholic and a sometimes crack smoker. Other members of his family also struggle with addictions. However this is lost on Dougy whose aim is to please the working class folks with cheap beer and hopes he win more votes with this tactic. While driving up alcoholism in Ontario (If he were my premier I'd probably drink more too).

mr perfect

rumleyfips said...

Rumours are that under Doug's gentle guidance, Deco is not doing well financially .

Anonymous said...

Doug Ford is smoking his finger. Get the drift?