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Beer Store rejects claims of high beer prices in Ontario

A C.D. Howe Institute study says 24-packs of some popular beers cost $1 to $3 more at the Beer Store in Ontario than in IGA grocery stores in Quebec.

Deborah Baic/The Globe and Mail

Ontarians are paying more for beer than drinkers in Quebec thanks to the near-monopoly of the province's big-brewer-owned Beer Store, according to a study released by the C.D. Howe Institute that calls for beer and wine to be sold at supermarkets and convenience stores.

The study says 24-packs of popular beers Molson Canadian, Coors Light, Bud Light or Rickard's Red were about $1 to $3 more expensive at Ontario's Beer Store than in IGA grocery stores in Quebec, after accounting for tax differences. Imports, such as Heineken or Stella Artois, according to the study, were even more dramatically expensive in Ontario. However, Budweiser and Molson Dry were cheaper in Ontario, the study found.

The numbers prompted a swift response from the Beer Store, which like the province-owned Liquor Control Board of Ontario has been facing increasing calls for the liberalization of Ontario's tightly controlled alcohol market, particularly from the convenience-store industry.

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Before the C.D. Howe study was released on Wednesday, the Beer Store sent out its own study claiming that beer was in fact cheaper on average in Ontario than in Quebec. And it says the C.D. Howe Institute deliberately picked lower sale prices to make Quebec beer appear cheaper.

Jeff Newton, head of Canada's National Brewers, an organization made up of the Beer Store's owners – Belgium's Anheuser-Busch InBev SA (which owns Labatt), Molson Coors Brewing Co. and Sleeman Breweries Ltd., which is owned by Japan's Sapporo – also accused one of the C.D. Howe study's authors of bias.

The following price comparison chart was compiled in a study for the C.D. Howe Institute and adjusted to eliminate differences in HST/QST, deposit fees and commodity taxes.

Prices for a 24-pack of domestic beer in Ontario and Québec

December 2012 to May 2013 prices, adjusted for taxes and deposit fees

SOURCE: C.D. Howe

In a letter to the institute, Mr. Newton pointed to University of Waterloo economics professor Anindya Sen, a co-author of the C.D. Howe study, for having been paid to do a similar study by the Ontario Convenience Store Association, which has been lobbying the province to allow its members to sell beer and wine.

"I am disappointed that the C.D. Howe Institute has chosen to publish a commentary authored by a clearly biased and grossly conflicted individual [Mr. Anindya Sen] that is clearly nothing more than a re-packaging of earlier work funded by the Ontario Convenience Store Association [OCSA]," Mr. Newton wrote in a letter sent to The Globe and addressed to Finn Poschmann, the C.D. Howe Institute's vice-president of policy analysis.

In an interview, Prof. Sen said his study, which relies on advertised prices for a selection of popular beers, was peer-reviewed and checked by the C.D. Howe Institute. And he points out that the report discloses his previous work for the convenience store association: "I'm not hiding that at all."

The Beer Store's study, conducted by Debra Aron, an adjunct associate professor at Northwestern University in Evanston, Ill., and a managing director at Navigant Economics, concludes that the "volume weighted average pretax price per litre for all beer products sold in Ontario" was 18 per cent lower than in Quebec.

Prof. Sen said he had a quick look at the Beer Store study, which he said made use of wider range of data to which he did not have access. But the problem with the Beer Store study, he said, is that it lumps all different kinds of beer, and formats – six-packs, 12-packs, 24-packs etc. – together and analyzes prices on an average per-litre basis.

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"I just think that when you do that, you are taking averages over apples and oranges," Prof. Sen said. "… I think that adding them all up and taking an average really skews everything."

In a phone interview, Mr. Newton said the Beer Store has "the cheapest beer prices in the nation." He said the C.D. Howe study engages in "creative manipulation of selective numbers" and that the Beer Store study was more comprehensive.

"You can't just look, as this [C.D. Howe] study has done, at select brands and select pack sizes over limited periods of time," he said. "… Prices here, like in Quebec, are very volatile. They are changing all the time."

The Beer Store system, he said, allows any brewer to put its beer in any of its stores and pay the same fees, and then lets brewers set their own prices (subject to provincial rules). The result, he said, is "intense inter-brewer competition," more variety and better prices for consumers: "We take great issue with the characterization of the system as a monopoly."

In December, the Competition Bureau said it was studying the beer industries in Ontario and Quebec, with an eye on the Beer Store. But a spokesman stressed the work was for "advocacy" and not an investigation of the Beer Store for any alleged violation of federal competition laws. The Ontario Convenience Store Association has called the Beer Store a "cartel" for its near-exclusive right to sell beer in Ontario.

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