By Patrick Flanagan
One of the few priorities that Doug Ford addressed during our recent election campaign was the price of beer. A regulation under the provincial Liquor Control Act sets minimum prices for various alcoholic beverages, including beer. Ford promised to reduce the minimum beer price, and he has made good on that promise. Starting later this month, brewers will be allowed to sell their product for as little as $1.00 per bottle (plus the deposit). So those of you who voted for Ford will be able to toast him on Labour Day weekend with a buck-a-beer bottle in your hand.
Or will you?
Let’s look at current beer prices. Most of the beer sold in Ontario comes from the three big brewing companies, and their best-selling brands cost $37.50 for a case of 24 bottles. However, the Beer Store website lists about 60 brands under the “value” category. Almost all of them sell for $35.50 for 24 bottles, though a few are a bit higher or a bit lower. All sell for more than the currently permitted minimum price, which brings into question why a lower minimum would have any effect?
The prices quoted above include the bottle deposit, which is 10 cents per bottle or $2.40 per case. Also included in the price are a federal excise tax, a provincial beer basic tax and a provincial beer volume tax, all of which are based on volume, not price. There has been no talk of lowering any of those taxes. In fact, they are increased from time to time to reflect inflation, automatically in the case of the provincial beer basic tax, which will rise on November 1 by 25 cents per case of 24. The price also includes, of course, the HST, which would go down if the price were lowered.
For a typical value beer sold by a big brewer for $35.50, here is the price breakdown currently and if the price were reduced to $26.40 (i.e. $24.00 plus the deposit):
So a brewer that accepts Ford’s challenge to bring back buck-a-beer would see its revenue per case drop by 45 per cent (i.e. from $17.86 to $9.81). It’s no mystery as to why has the beer industry has not enthusiastically endorsed this change.
I am not a political pundit, but I see great potential for similar vote-getting proposals in the next election. How about a minimum gasoline price of 50 cents per litre, or a minimum price of $5,000 for a new Cadillac? The possibilities are endless.
Patrick Flanagan is a retired actuary, currently enjoying life in the Huntsville area.
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