Honesty in Advertising
I was reading the new issue of MacLean’s magazine today (dentists’ waiting offices are useful for something – it was his copy), and there was an editorial titled “Why Is Your Government Standing in the Way of Cheaper Beer?”. It was a quick and interesting analysis, arguing government policy is combining with industry self-interest to artificially inflate beer prices in Canada through minimum retail prices and high taxation. As the hygienist buffed and polished my pearly whites I found myself thinking about the article (what else are you supposed to do in a dentist’s chair since comprehensible conversation is impossible?). It is particularly relevant around these parts, given Alberta just altered its taxation policy for high alcohol beer.
I find myself of two minds on this one. The editorial is right that minimum prices will not stop alcohol abuse. The social and psychological factors that lead to alcoholism, binge drinking and irresponsible drunken behaviour are far more complex than that. I can think of a number of policies that would have more effect – poverty reduction just to name one – than increasing the price of beer. Plus I have always found the moralistic tone of the justifications to be heavy-handed and likely to be cloaking unspoken prejudices that go beyond a six pack of beer.
And the industry suggestion that Brew-on-Premises should forced to charge the retail minimum is just outrageous. Will they want to tax my homebrew system next? That particular recommendation does lay bare much of the industry’s hidden agenda, bolstering the editorial’s case. In fairness,I imagine that is why they included it and that such a policy is not being seriously considered by anyone with access to higher brain functions.
The “social responsibility” defence for minimum prices and high taxes doesn’t hold water (beer?), despite the desirability of reducing alcohol abuse and binge drinking. The editorial is correct in identifying industry profits as the real reason for minimum prices. (By the way, Alberta has no minimum price for liquor stores – only bars).
But this is where I start getting fence slivers in my tush. Who gains from unregulated beer prices? Makers and consumers of discount beer. If someone wants buck-a-beer (or less), then they will be looking for fermented corn sugar play-acting as beer, as that is the only stuff you can make that cheaply. Yes, I know that the product in the bottle, even at small craft breweries, costs less than the bottle itself. Even good beer can be made fairly cheap. But someone isn’t going to put out hundreds of thousands in capital, hire a world-class brewer and design great beer with real flavour just to sell it for $5 a six pack. That is a stupid business model. And the big boys have large infrastructures to support, meaning they can only go so cheap as well.
But the MacLean’s refrain is a common one. Lots of people want cheaper beer. That is a natural human tendency. We all want prices to be lower and wages to be higher. But I think for some, the cause of lower prices has become just as excessive as those who want to curtail access. We need to keep this in perspective. Cheap beer is not protected in the Charter of Rights and Freedoms (I checked).
I believe the obsession with cheap beer prices devalues the beverage as a concept. If it is just something you chug from a can, and if a six pack costs less than a latte, who is going to take it seriously? The Canadian wine industry didn’t pull itself from the brink of post-free trade oblivion by pushing out more cheap plonk. It saved itself by upgrading its reputation – by focusing on quality rather than quantity and creating a brand that Canadian wine can be good wine. I contend that if we continue to fight over beer prices and taxation levels, we do so at our peril. We should be pushing for a quality advantage. When something is seen as “quality”, people don’t mind paying more. And that is what I think gets lost in these debates between the neo-prohibitionists and the free market idealists.
I don’t want people wringing their hands worriedly over the fate of my soul/body/mind because I picked up a six-pack on the way home from work. But neither do I want the vulgarities of the-bottom-line-is-everything capitalism dictating my choices.
Of course, this is easy for me to say, as someone who pays more for a single bottle than the cost of a two-fer of buck-a-beer. But maybe, just maybe, our end game needs to be not getting lower beer prices, but building consumer expectations of higher quality beer.
January 19, 2011 at 10:32 PM
Cheap beer isn’t a human right, but the right to purchase what you want without the government messing with the transaction via 13 (at least) departments and a few thousand bureaucrats has got to be pretty high on the list. If you leave booze regulation in the hands of the government you get things like monopolies (AGLCB) that stifle markets and make it very difficult and expensive to get small batch brews (from places like southwest Oregon or Chile), meaning breweries will be less successful than without interference. You get stupid bureaucrats from the AGLCB banning high alcohol brews for fear of teenage binging, with no evidence of harm ever presented. You get regulations that favour big breweries over small – the OLCB’s beer store monopoly is a disgrace for the subsidies and market coverage it provides the big brewers.
Why should it be any governments’ job to protect people from drinking swill? If you buy that government regulation is going to improve the palate of the average individual, then you really should be advocating for all sorts of interference where things could “better”.
Your line, “But neither do I want the vulgarities of the-bottom-line-is-everything capitalism dictating my choices,” is strange. The government adds nothing to the process in liquor regulation – as you noted our regulations are aimed squarely at “social responsibility”, circa 1913 – and impairs industry and consumer opportunities at all levels. If government regulation, especially taxes, were the route to better beer, then continental northern Europe would be a wasteland of lousy, big-brewery-only brews. Do you think that regulation and taxation made it easier for WildRose, Alley Kat, Amber’s, et al to start up, or did the taxation and regulations make it more difficult? Higher pricing (through taxes) on beer reduce the opportunities for a brewing/beer consultant since a higher price will mean less sold, hence fewer breweries and fewer brews.
The market may be vulgar, but it does a much better job of connecting consumers with their wants and needs than any planned economy.
(all that said, thanks for the blog! It’s been part of my feed stack for a while. (By way of introduction I’m an economist, who for a while in the early 00’s was the beer columnist for CBC Calgary’s Eye Opener. I brew much less than I should and consult occasionally on beer menu design, and run the very occasional walking beer tour through Portland.))
January 21, 2011 at 8:16 AM
Hi Todd,
Thanks for the kind words about the blog and I am glad you feel it is worth a few moments of your day from time to time.
I also appreciate a good, healthy debate about these kind of things. I understand your points. I would like to add, if I may, a couple more of my own.
First, not all government regulation is bad. The differential tax structure for small brewers (all provinces have this) helps keep them cost competitive. B.C. guarantees regional distribution for local brewers (albeit with a limited number of SKUs). The rules prohibiting “inducements” (read: bribes), while wholly unenforced, is designed to keep the big boys from using their money to unfairly suppress competition. It happens anyway because no one enforces the bloody rules.
Second, I am unconvinced that throwing the market open wider will benefit craft beer. The beer industry, as currently structured, is an oligopoly, with a couple of massive whales surrounded by hundreds of guppies. In such conditions “ideal” market conditions will not occur naturally. Predatory practices would increase, creating a less habitable environment for small players.
Third, we need to remember that the AGLC is not the monopoly in Alberta – it is the regulator. The monopoly is Connect Logistics, a private corporation. The AGLC created the monopoly, but what that means is a discussion for another day.
Writing about the problems of Canada’s beer industry and possible solutions would require a book or two (if anyone is willing to finance such a project, you know how to contact me 😉 …). It is very complex. I also realize my analysis is often not shared by the craft brewers themselves. Fair enough.
Boiling it down, I think I hold less faith in the market than you do. A fair point of disagreement that likely stretches beyond beer. And likely deserves a good airing over a pint or three.
Thanks for commenting.
Jason
January 20, 2011 at 7:59 AM
Excellent analysis! Similar to a minimum wage argument in some respects. The minimum wage is only a direct influence on your purchasing power if you work minimum wage jobs. In the same way, how cheap someone is allowed to sell beer only directly effects your purchasing power if you are trying to buy the cheapest beer available.
I really don’t think that Duvel, Mikkeller, Cantillon, Rochefort, etc have based a significant portion of their pricing decisions on price comparisons in each of their markets. These prices would remain the same regardless.
There is very much two entirely separate beer buyers and I see it at Sherbrooke all the time. I have searched for the highest rated beer in a particular style or made a laundry list of craft beers I need to try and entered the Sherbrooke beer cooler. While there, I often hear numerous people enter and say something along the lines of “What the hell, why is there so much? Where is the cheapest beer.”
As I wipe a single tear from my face I can only be thankful that I was lead to appreciate the complexities of our beloved beverage enough to be willing to pay sufficiently to support quality producers.
January 31, 2011 at 6:49 PM
Hey! Very sorry for the long time in reply – quick responses to your points.
– Big beer is an oligopoly, one that is nicely protected by the government in a variety of ways.
– the AGLCB is the monopoly – contracting out the dirty work to CL doesn’t absolve them from the bad affects, poor service and pain it takes to order small batches.
– The inability to order beer and wine directly through from vendor makes it difficult for small outfits to flourish.
I do think that our disagreement likely runs deeper than just getting a beer – if you’re out and about in Calgary, put in a post on your blog. I’d be happy to buy you a pint – and even not talk about economics!
Thanks again!