Ontario government ends buck-a-bottle beer pricing
Published Sunday, December 21, 2008 3:55PM EST
OTTAWA - Say goodbye to buck-a-bottle beer in Canada's most populous province.
The Ontario government last month quietly hiked the minimum price that can be charged for beer, to $25.60 from $24 for a case of 24 bottles.
That 6.7 per cent increase in the floor price of a case, bottle deposit excluded, has nothing to do with supply-and-demand, production costs, overhead or distribution expenses.
Instead, the Liquor Control Board of Ontario sets minimum prices as part of its "social responsibility" mandate established in 1993. Translation: If alcohol is too cheap, you may abuse it.
But documents obtained under Ontario's freedom-of-information law show that the Ministry of Finance, not the LCBO, pressed for higher beer prices -- raising questions about the arm's-length relationship between the two bodies.
"The Ministry of Finance recommends an increase to the minimum retail price for beer effective November 24, 2008," says a memo distributed to board members for their Oct. 15 meeting in Toronto.
With only 30 minutes to approve a dozen legal issues, including the minimum price increase, the matter appears to have received limited debate.
"After due deliberation and consideration of the materials and recommendations as set out in them, a motion was made, seconded and carried," say the meeting minutes.
The written materials distributed to board members provide no explanation of why the new minimum was required, how it fit with the social responsibility mandate, how the increase was calculated and why it was required by Nov. 24.
Instead, the documents merely set out the mechanics of the change, which also affects coolers and low-alcohol spirits, and cite the recommendation of the Ministry of Finance. The last time the minimum price for regular-strength beer was adjusted was October 2005.
A spokeswoman for the LCBO insisted the board calls its own shots.
"When considering such pricing resolutions, the LCBO board seeks input from staff and government officials at the line ministry (Ministry of Finance) to which it reports," Linda Hapak said in an email response to questions.
"However, the final decision on such matters rests with the board."
Hapak said the increase was primarily to catch up with three years of inflation.
The board made no public announcement of the price change, which affects about 40 of the 400 beer brands for sale at LCBO outlets and The Beer Stores. A notice appeared a week after the Oct. 15 meeting on a section of the LCBO website directed to product suppliers.
"LCBO does not issue news releases for price increases," said Hapak.
Raising minimum prices for beer can help boost the bottom line at the big breweries. Hapak said the increase could also affect government revenues.
"If customers purchase the same litre volume of the 40 brands directly affected by the minimum price increases, then the province could receive incremental RST (retail sales tax) revenue, if customers don't reduce other purchases that are subject to RST."
A higher floor price for spirits -- which the board implemented on July 21 this year -- has boosted revenues at the LCBO by about $1 million a month, an internal document shows.
A court document made public earlier this year showed the federal commissioner of competition was investigating whether one big brewery in the province had ever tried to influence the Ontario government's decisions on minimum prices.
But no such evidence was ever produced, and the commissioner eventually lost the complicated takeover-related case in federal court.
Most other provinces also set minimum prices for alcohol, whether for sale in retail outlets or in bars and taverns.
Last week, for example, the Nova Scotia government set a minimum price of $2.50 for a serving of wine, beer or spirits in licensed establishments -- a move it said was designed to encourage responsible drinking, especially among the young.
Beer sales in Ontario are estimated to be worth $2.5 billion annually.