The Liquor Corporation in New Brunswick has created a wee bit of a stir lately (pun intended). It seems it is losing a lot of beer sales in border communities. Not to the U.S., as you might think, but to Québec.
Every province and territory in Canada has their own approach to beer pricing. As such, beer prices vary depending on where you are. And to complicate matters, some provinces have what is called a “social reference price”.
This is the minimum price that a product may sell at – the theory being that if alcohol is too inexpensive, we will all turn into alcoholics. There is no social reference price in the Yukon, by the way.
In New Brunswick, however, there is. The social reference price for beer is $18.67 for 12 cans, at present. A brewery must apply to sell beer at this price and may do so for a limited time (presumably for promotional purposes). Of course, the day-to-day price of beer is higher.
Apparently, in Québec, depending where you shop, you can buy beer for slightly more than $1 a can. So, in border towns like Campbellton, people have been making beer runs.
I guess the good folks at the New Brunswick Liquor Corporation (NBLC) were concerned about lost tax revenue due to this cross-border shopping. Their estimate is that they lose about $12 million in sales each year. Last year they reported about $380 million in sales, so this leakage is about three per cent.
What did NBLC decide to do about this leakage? Well, they contracted with Moosehead to brew a New Brunswick beer called Selection Lager (and Selection Light) that will be sold at the social reference price.
No details have been made available about how much the brewer will be paid and how much markup the NBLC will take.
Now, in New Brunswick (as in all provinces and territories), the Liquor Corporation is the only permitted buyer of beer from brewers. Then, they can re-sell to customers such as the public and the bars and restaurants.
It strikes us that it is a bit unfair for this mandated government distributor to make this kind of a deal.
If the Liquor Corporation is using a lower markup on this beer (nobody knows because it is all “confidential”), then they are using taxpayer money to fund the project. Doesn’t this give the government an obligation to report the costs and savings to the taxpayer? Not in New Brunswick.
And how about the New Brunswick brewers who are not brewing this beer?
Is it fair to have another provincial brewer enjoying the revenues from this low-priced product – a product supported by in-store marketing efforts of the provincial government?
At the end of the day, it is hard to know how much leakage will be stemmed through this approach. It does, however, set a bit of a dangerous precedent.
Liquor Corporations are already in a tricky spot. They make a great deal of revenue from the sale and distribution of alcohol, but they are also responsible for the regulation of this same substance.
When they use their position as the sole supplier, to enter the field of product development, they have simply gone too far.
This column is courtesy of the Yukon Brewing Company, an organization that offers the following deal to YTG: you don’t brew beer, and we won’t build any roads.