Significant Errors in the Globe and Mail: Statement by the Beer Store

TORONTO, Jan. 23, 2015 /CNW/ - The following is a statement from Beer Store spokesperson Jeff Newton:

Today's Globe and Mail contains significant and substantial errors in facts about the Beer Store.

The Globe and Mail's assertion that the current system generates $396 million in additional profits for the current Beer Store owners is entirely false. 

Here is how the Globe and Mail made their mistakes:

Error #1:  The low cost and highly efficient nature of the Beer Store only helps the owners.

Fact:  The Beer Store is highly efficient – a fact that has been acknowledged by the Premier's Council on Government Assets.  Beer Store efficiencies deliver lower retail and distribution costs that benefit all brewers as well as beer consumers.  But the Globe and Mail ignores the fact that that those low costs directly benefit consumers -- by way of the lowest average prices in Canada -- and governments through a 44 per cent tax rate on beer. 

The Beer Store fully cooperated with the Globe on this story, and in fact, provided data that had not been provided to media before.

The Globe was advised that the latest available data (for 2013) showed that the Beer Store's retailing and distribution costs are $3.72 lower per case of 24 (341 ml bottles) than in Quebec. To suggest that all of that goes to the brewers, as the Globe does by suggesting a $396 million profit, is a complete factual error.

The Globe story ignores the information we provided to its reporter, as we have to the Premier's Advisory Council on Government Assets: that in 2013 Ontario had a $3.58 higher tax per case, plus a $0.65 lower average retail price per case than Quebec.  That means that on average brewers collected $4.23 less per case on beer sold through the Beer Store than through Quebec corner and grocery stores, an amount that is greater than the Beer Store's lower costs.  These data illustrate that the Beer Store's efficiencies are not flowing to brewers as higher profits – they are flowing to government as high taxes and consumers as lower prices.  The Globe's assertion of high Ontario brewer profits is false.

Error #2:  Higher costs of LCBO not taken into account.

Fact:   Other jurisdictions and systems, including Quebec, BC, Alberta and the LCBO, all have higher retail and distribution costs for brewers than the Beer Store.  At the LCBO, beer retailing costs are more than double those in the Beer Store.

How this effects the Globe and Mail's math:  The Globe and Mail does not take into account the impact of higher retail and distribution costs if Ontario was to adopt another retail model.  If, as the Globe suggests, the sale of all Ontario beer was switched to the LCBO, the newspaper should have taken into account the much higher costs of that retail system in their calculations.

Summary: It's worth noting that these facts are supported by independent reviews.

A comprehensive study done by NAVIGANT consulting in August of 2014 found that even with much higher provincial taxes in Ontario, prices at the Beer Store are still lower than average prices in Quebec grocery stores.   The study examined beer prices in the two provinces over an entire year (2013). After taking into account higher Ontario taxes, pre-tax prices in Ontario were 8.7 percent lower than pre-tax prices in Quebec when comparing beer products that are common to both markets.

With regard to the Sen study the Globe cites, it was discredited by a Nov. 2013 Earnscliffe study report that showed the Sen Study included sales taxes in Ontario prices while excluding sales taxes from its Quebec prices, that the Sen Study included the refundable container deposit in its Ontario prices ($0.10 a container) while excluding the same deposit value from its Quebec prices, and that the Sen Study did not account for significant differences in the levels of beer commodity taxes in the two provinces, taxes that are applied prior to the sales tax.

The Beer Store understands that for many, the announcement two weeks ago that this world-class retail system is now open to all Ontario-based brewers to become owners is a big change that will take time for brewers to fully analyze. All Ontario-based brewers will have complete visibility and transparency of the Beer Store's finances under this policy. 

The Globe also ignores the reality that the LCBO overlooks many locally-brewed beers and instead favours stocking brands produced outside of Canada.

At the Beer Store, 89 per cent of beer sold is made by Canadian workers, while at the LCBO only 59 per cent of beer sold is made by Canadian workers. In addition, the Beer Store has announced a new package of small brewer benefits that will offer significant additional support to Ontario-based brewers.

We continue to believe this represents the best way forward for Ontario consumers, for independent Ontario brewers, for the Ontario environment in terms of recycling and for the Province of Ontario's revenues.

SOURCE The Beer Store

Bill Walker, [email protected], 416-624-3936