The NB Liquor Corporation has announced that they will be reducing the price of 24-packs of several domestic beers later this month. The prices of Alpine, Budweiser, Bud Light, Coors Light, Molson Canadian, Moose Light, and Sleeman Clear will all drop by $7 to $35.99. While a trial period of discounts on multiple 24-packs was implemented last year, this new change will be permanent. The drop in price is being financed solely by the ANBL, with revenue losses of $7,000,000 expected annually.
We spoke with ANBL’s Mark Barbour for how they expect these changes to affect the local beer producers. Barbour shared data that during last year’s trial run, sales in craft beer was up more than 20% over the same period in 2015, the solid growth apparently undeterred by deep discounts in domestic beer. “There are two distinct beer drinking profiles in the province, those who choose domestic beer, and those who choose craft,” he went on to say. He suggested the possible spillover effect of a cheaper domestic beer might even allow the value drinker a few extra dollars to try the local beer offerings. When asked if discounts would be applied to locally-produced craft beer, he responded that they would not, but added, “The ANBL is very invested in the development of the Craft Beer Industry in New Brunswick, providing circa $2M annually in subsidies annually in the form of a reduced Markup Structure.” Both last year, and with this announcement, the ANBL denies that it is reducing the price to compete with lower-priced beer in Quebec and Maine, but as the sole retailer of domestic beer in the province, it is difficult to deny the reality of the situation.
We also reached out to Stephen Dixon, owner of Grimross Brewing, and President of the NB Craft Alcohol Producers. He expressed concerns that these price reductions were done without any consultation with the small local producers, who learned of the price change through the media like the general public. “Part of ANBL’s mandate is to participate in the development of the liquor industry in the province,” Dixon says, “The province in general would reap more benefit if ANBL and the New Brunswick Government worked towards creating a better environment for the development of NB-based producers.” The delineation between value and craft beer drinkers is not so cut and dry, Dixon believes. “Those that currently drink either (craft or macro industrial beer) will be enticed to the macro beer with these big discounts”, he explains.
The implementation of the permanent price change is puzzling: as last year’s trial wound down, the ANBL stated (from a CBCNews article in October 2016), “Although profitable, the beer promotion had a negative impact on overall profit margins”. And that was with the price reduction shared with the participating breweries, not solely a burden on the ANBL. With this move costing ANBL something like $7M annually, we feel it important to note who the likely beneficiaries are. Certainly not the average New Brunswicker, who will potentially see a reduction in the Government’s coffers. Licensed establishments who serve the same macro beers might not be happy to see the discrepancy between what a patron pays per beer at home vs. what is paid at a bar grow even wider. The “value drinker” will surely see a benefit, we suppose, but we believe it will more likely be viewed as, “It’s like getting every 7th case free,” rather than, “I’ll take that $7 and buy something I wouldn’t normally buy.” The ANBL’s stated mission is, “To responsibly manage a profitable liquor business for New Brunswick,” which certainly seems countermanded by a seven million dollar writedown, unless you buy the argument that they are fending off competition, which is an interesting notion for a company that effectively operates as a monopoly in their market. Perhaps this is anticipation of the provincial trade barriers being lowered, but we also note that the Canadian Free Trade Agreement only specifies a working group to provide guidance around interprovincial alcohol trade and they’ve got a year to develop it. So their recommendation isn’t due until June 30th, 2018, let alone any resultant action. The real winners here then, are the producers of the beer being discounted. While one, Moosehead Light, is a NB product, the others are all owned by multinational conglomerates who will likely see sales increase at no extra cost to them. So more money is potentially leaving the province than before. Meanwhile, craft producers will now be competing with even cheaper mass produced products readily available in every market around the province. We suspect it would cost much less than $7 million to eliminate all excise duties on craft producers in the province, a move that would likely see more money staying within the borders of the province. It’s interesting that ANBL chose instead to stimulate sales for out-of-province producers instead.
What about the fans of locally-produced, small, independent beer? We don’t anticipate those drinkers to switch to the bigger brands because of a cost savings; if a difference in price was the primary issue, we wouldn’t have been drinking craft beer for all this time anyway. We drink craft beer because we like the taste, and having it produced in the Atlantic provinces is just another positive aspect. However, everyone has to start their love of craft beer somewhere, and for those who are currently drinking macro, this cost reduction is just one more reason for them to stay away from craft beer, stifling the amount of growth that could potentially be seen in the craft beer market. This means that local breweries (and other businesses associated with them, such as hop growers, beer tour companies, etc) may not flourish as well as they should. If the ANBL can’t see that, it doesn’t seem to us that they’re standing behind local breweries as they claim to be doing.
And for those readers in PEI and NS, PEI Liquor has said they have no plans to reduce the price of domestic beer to compete with the ANBL*; there has been no specific response from the NSLC as of yet, only that they are “assessing their options”.
*Update (June 6): PEILC has reduced the price of Alpine, Bud, Bud Light, Coors Light, Canadian, and Moose Light to $39.99, “for a limited time, while supplies last”.
That’s a long way to go to prevent people smuggling stuff in from Quebec. If that interprovincial border change happens the adjustment is going to mean very little. It seems to me like they are prepping for it.