The consortium of multinationals that controls Ontario’s beer retailing has published a study that suggests they are not making windfall profits because of prices that are sharply higher than in Quebec.
The research was done in response to a widely publicized study released in August by University of Waterloo economics professor Anindya Sen, who said there was a dramatic difference in beer prices between the two provinces – up to $9.50 a case – and that this was generating huge incremental revenue for Ontario’s Beer Store owners. His study was sponsored by the Ontario Convenience Store Association, which is lobbying to get legislation in the province changed so corner stores can sell beer.
The Beer Store owners have hit back, saying the numbers in Prof. Sen’s study were flawed. Their new analysis, performed by consultants Earnscliffe Strategy Group, suggests that beer prices in the two provinces during the period studied were almost identical when taxes were excluded.
Beer drinkers in Ontario do pay a little more – about $3.34 per case of 24 – but that is because of a higher commodity tax in Ontario, the Earnscliffe study concludes.
It says that Prof. Sen made a serious error by comparing Ontario prices that included sales tax and the container deposit, with Quebec prices that did not include that tax or deposit. Once those taxes are included in both provinces, the gap narrows significantly. And because the commodity tax – which makes up almost all of the price difference – is collected by the government, the retailers actually get no more income, the study concludes.
Prof. Sen had suggested in his report that the Beer Store owners were getting about $700-million a year in incremental revenue because of the price differential, but the Earnscliffe report says that they get no more money in Ontario.
“There is no difference [in prices] once you take out the taxes and put everything on a level playing field,” said Tom Sweeting, an Earnscliffe principal who was one of the report’s authors. “The correct data for the period that [Prof. Sen] studied shows that there is not $700-million going into the beer company’s pockets.”
The Beer Store is owned by Labatt Brewing Co. Ltd., Molson Coors Canada, and Sleeman Breweries Ltd. (which is owned by Sapporo of Japan).
Prof. Sen’s study involved checking prices of five beer brands over a 22-week period between December, 2012, and May, 2013. In Ontario, he looked at prices posted on the Beer Store’s website, and at weekly price data from the web sites of IGA and Metro stores in Quebec. The average price in Quebec was $25.95, and $35.56 in Ontario.
An earlier survey by Ipsos Reid, conducted for the three big brewing companies and released in June, suggested that beer prices are cheaper in Ontario than in British Columbia and Alberta, and competitive with private stores in Quebec. That study looked at 14 different brands in a variety of package sizes, and 90 different retail locations.
The big brewers argue that allowing corner stores in Ontario to sell beer would boost the price in the province.
In many provinces, all retail beer sales are handled by government regulated stores. In Western Canada, some licensed hotels also sell packaged beer.