Frustration on tap

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This article was published 16/12/2023 (663 days ago), so information in it may no longer be current.

It’s a deal seldom seen on the shelves at Liquor Marts and beer vendors and one that may cause even the thriftiest shoppers to ask “what’s the catch?”

At just $18 for a 15-pack of Coors Light or a case of 12 Stella Artois, deal-hunters can’t be blamed for seizing on the deeply discounted booze offered by Manitoba Liquor and Lotteries.

Since January, the Crown corporation has been slashing prices for select products by as much as 40 per cent, bringing the cost of some brews down to nearly a buck a beer.

It’s a bargain only made possible because the liquor board agreed to match a minimum 20 per cent manufacturer discount and subsidize customer purchases through its “Hot Buy” program.

And while the discount program dropped prices during a time of high inflation, it has also vexed some local brewery owners who say it gives big beer brands an unfair advantage.

“It’s really concerning whether, as local breweries, we should continue to invest when (Manitoba Liquor and Lotteries) is willing to create this kind of risk for us and harm our businesses in this way,” said one local brewer, who requested anonymity over concerns they could face backlash for criticizing MLL.

Until this year, the province’s craft beer sector had reported year-over-year growth and an increasing market share despite an overall decline in beer consumption, according to the brewer.

However, local craft beer sales declined noticeably for the first time in 2023 as large beer brands had sales increase in Manitoba, bucking declining trends seen in other provinces.

“We noticed some significant impact on our sales, and looking into it, it looked like a big cause of it was this Hot Buy match program,” the brewer said.

As of June, the corporation cut its margins on “Hot Buy” products by more than $17 million, according to numbers provided by MLL, with more than half of that going toward beer sales. Liquor sales were also above budget and last year’s sales during the first six months of the year, MLL said.

Manitoba Brewers’ Association director Brad Chute said beer makers should be able to discount their products how they see fit, but the subsidy on select products has massively distorted the market.

“While some local breweries participated, the majority of the funding went to international brands, which is inappropriate for a Manitoba Crown corporation,” Chute said.

Typically, discounts on products sold by Liquor Marts and beer vendors are paid for by the manufacturer, with the corporation charging them back for the full amount of the discount on sales.

MLL’s profits are funnelled into general revenue for the provincial government to pay for health care, education and social services. Liquor operations generated $319 million for provincial coffers last year.

While craft breweries could apply to the program, and some did participate, cutting margins with the same frequency as the large beer brands was not sustainable for some local businesses.

The association has called for MLL to re-evaluate promotional programs to ensure they support local businesses and maintain fair market competition.

“Some of the current weaknesses and vulnerabilities in the industry can be directly attributed to the unintended consequences of this program,” Chute said.

One unintended consequence is that customers — including those who support craft beer regularly — are buying the discounted beer and passing up on local options, the brewer said.

“How can I argue with that when it really is that cheap, right?” the local brewer said. “Let the macro-players discount their product however they want. But what is the taxpayer doing subsidizing somebody’s final consumer product purchase.”

The brands included in the discount program were also chosen at the discretion of MLL, with just 10 products selected every two weeks.

It’s hard to understand why the Crown corporation intervened in the market without considering its effect on local craft beer producers, the brewer said.

“It’s incumbent on the government to create policies and to have programs that are neutral and not picking winners,” the brewer said.

“Here they’ve chosen a winner, and that winner was multi-national companies that do not invest in Manitoba.”

MLL declined requests by the Free Press to interview chief executive officer Gerry Sul and vice-president of liquor operations Robert Holmberg.

In a prepared statement, a spokesperson said the discount matching program will end in January.

“These discounts are one way we delivered exceptional value, with the intent of improving sale prices for customers and all the small local businesses who rely on liquor sales,” the MLL spokesperson said.

The corporation did not directly address concerns the program distorted the market and primarily benefited large beer brands. However, it was adjusted based on responses from customers and suppliers, it said.

“Our team ensured local suppliers were represented during every promotional period of the year,” the spokesperson said.

A source familiar with industry said the deep discounts on alcohol also made people in the corporation uncomfortable, owing to its mandate to market products in a socially-responsible manner.

Such discounts would not have been suggested without direction from the board, the source said.

The idea to match manufacturer discounts was “conceived” while considering ways to mark the 100th anniversary of government-regulated alcohol sales, MLL said.

The discount program was presented to the board, received approval, and was implemented with a “tight timeline,” according to the spokesperson.

On Friday, the Progressive Conservatives — who were in government when MLL launched the program — declined to comment on the policy.

“This marketing program was done was at (MLL’s) discretion. Under the previous government, the board was independent and we respected that,” a spokesman for the Tories said.

Culture Minister Glen Simard, who is responsible for MLL, said the decision to match manufacturer discounts caused more harm than good for local producers.

Simard appointed a new board of directors for MLL on Tuesday.

“We have a lot of smaller local producers that have to compete with these bigger companies, and what we want to do is ensure a level playing field for Manitoba brands,” Simard said in an interview.

“The new board, it’s my hope they’ll work very closely with local companies to showcase these quality brands that we have.”

danielle.dasilva@freepress.mb.ca