Ben's Beer Blog

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Ontario brewers should think twice before they buck themselves

6 Comments

I’ve been hesitant to weigh in on the buck-a-beer fiasco for a few reasons, not the least of which is that fellow beer writer Jordan St. John already did it, literally the day Doug Ford’s campaign announced dollar beer was a possibility back in May. 

But now that it appears the PC government is going to make good on the promise and now that it appears an Ontario craft brewery is actually opting to pursue dollar beer, I’ve literally been asked to weigh in and will be appearing on CTV News Toronto at 6pm today so I’ve had some time to consider the possibility and thought I’d put my thoughts down here too since that is what a god damned blog is for, right? 

So here’s the problem with dollar beer: Economies of scale mean breweries simply can’t make a very good beer that will cost $1 and still make that brewery a profit. If you attempted to, you’d probably end up using extracts instead of real, quality ingredients, you’ll use adjuncts to get more bang for your buck and, essentially, a dollar beer is going to taste like it’s worth a dollar. 

So when Barley Days Brewery in Prince Edward County announced that they would be making a beer that would sell for one dollar, the reaction in the twitterverse was swift and predictable. 

Tyler Turek, who does sales for a brewery here in London, suggested that his employer might be interested in dollar beer, presuming it was sized accordingly. 

Chris Conway, who along with his partner Christina Coady was a founding brewer at Toronto’s Folly Brewing before they moved East, started a twitter thread today musing just how many corners a small brewery might have to cut in order to possibly make something they could still profitably sell for $1.00. 

Truth be told, I didn’t actually know Barley Days was even still producing beer so the news that they’ve jumped on—indeed have offered to drive—the buck-a-beer bandwagon, is a little shocking perhaps, but mostly I think it’s just a little sad. 

Because here’s the thing: There are always going to be people who will drink something just because it costs a dollar, but if the model for your small (and presumably struggling) business revolves around pursuing these discount consumers, it’s probably not a very good long term strategy and it shows you haven’t been paying attention to the market. 

Because on the flip side of that equation, the craft beer industry is proving, day in and day out, that people are also willing to pay a little more for a quality-made product. Price is still a factor certainly, but when it comes down to supporting a small business that we know makes a good beer, most folks are willing to cough up a little more dough than what it costs to get a sixer of Bud, for example. So when these small companies start to cut back on quality, which they almost certainly will have to, in order to chase Big Beer’s base, they’re simply not going to win the consumer they are thinking they’ll attract. No one wants to support local so much that they’ll buy shitty beer to do it. The shitty beer consumer is pretty set in his or her ways and has, for years, had plenty of options. He or she likely isn’t so concerned who’s pouring the shitty liquid into the container.  

And if for some reason small brewers like Barley Days miraculously do start to draw customers away from the discount brand purchasers, you can guarantee they will wake the beast: Start to fuck with Big Beer’s profits and they will fuck you right back. 

Beer is a volume business. And discount beer even more so. ABI is the largest beer company in the world and while Molson-Coors has enjoyed some wonky stock valuations of late, they too make more beer before breakfast than most craft breweries do in a month. If you want to play the “flood the market with cheap shit” game, you will lose to ABI and Molson-Coors. Quickly. If for some reason all of Ontario’s smallest brewers started making beer for a dollar and it was selling, Labatt or Molson could likely afford to sell one of their discount beers for something like 75 cents in Ontario, just long enough to bury these little guys in this game. Hell, they could probably rotate their discount brands as the “75 cent per beer star of the month” until Barley Days and any other dollar wannabe wen bankrupt and Big Beer wouldn’t even have to cut anyone’s bonuses to do it.  (Edit 01/06/2018 10:52pm: We don’t actually know the details of the buck-a-beer arrangement, which will be made public at an announcement at Barley Days Brewery on Tuesday, so 75 cent beer might be technically impossible. The price floor for beer might simply be lowered, not removed entirely, which would mean that the lowest possible price would be $1 for every brewer, not 75 cents. Nonetheless, I’d argue that the big brewers, who could use some of the most powerful marketing muscle in the world to promote their buck-a-beer, could exercise a considerable advantage). 

As for the incentives that are being promised to craft brewers so that Doug Ford can follow through on his election promises, in my opinion, there’s no logical way they could be worth the losses craft brewers will take. These incentives are rumoured to be preferential treatment at the LCBO, i.e. end-caps and desirable shelf placement. I can’t imagine how many LCBOs Barley Days would have to be in to offset selling even semi-decent beer for a dollar, but unless they are Ontario’s best kept secret when it comes to their distribution model and are about to be in a hundred or so stores, I can tell you that there ain’t enough end caps in Prince Edward County to make Barley Days’ One Dollar Extract Adjunct Lite worth the effort. 

Quite frankly, how valuable even is that “prominent” space actually going to be once it becomes the spot for all the other brewers racing to the bottom? Is the end cap, which will now be the home of dollar shit, the place you want your brand presented to consumers? Those who value quality are unlikely to be fooled by splashy retail displays and, while desperate brewers are sure to grab some new “Joe Sixpack” consumers by shifting to a discount model, I don’t think these consumers will remain loyal. When Busch or Carling are suddenly hypothetically priced to undercut beers like Barley Days by 20 cents a can, do you think the people who buy dollar beer are going to opt for eye-catching end cap beers because they are the local Ontario option? Or do you think they’ll simply buy the cheaper shit that also gets them drunk that is right next to that beer in another end cap (and probably comes with a t-shirt)?

Dollar beer, apparently, will be here by labour day, and at least one small brewer is on board.  

Is it going to up end the beer industry in Ontario? Maybe. But not in the way Doug Ford thought it might, if indeed he gave it much thought other than liking the sound of giving Ontarians the option of dollar beer (which obviously SOUNDS good). It’s not going to make all of Ontario’s beer suddenly accessible and affordable but, instead, I think this development is more likely to draw some clear lines in Ontario’s proverbial craft brewing sand: There will be the brands that decide to pursue this market, and will likely compromise quality and, in my opinion, will compromise their brands, and there will be brewers who don’t engage in this race to the bottom and will continue to produce quality beer that is sold with integrity. 

I know which group of Ontario craft brewers will continue to get my buck.

Author: Ben

http://www.bensbeerblog.com

6 thoughts on “Ontario brewers should think twice before they buck themselves

  1. I don’t know of any craft breweries in Ontario that sell their beer at the current floor price, so I’m not sure why any would take the “opportunity” to lower their price even more.
    Anyone who chooses to sell their beer for a dollar is only doing so as a tacky marketing ploy and will lose the respect of many. Not to mention, it will politically align them with Doug Ford, a polarizing political figure.
    Lose-Lose situation in my opinion.

  2. Hey Ben, Great post.

    I thought I’d mention that no brewers will be allowed to sell beer less than a dollar since Ford is dropping the current $1.25 minimum down to $1.

    My thought is that brewers like Barley Days will suffer in the long run because of the negative publicity they will garner. There is already a boycott afoot on social media against the brand.

  3. If you climb into the bathtub with them, you will be drowned. Craft brewers owe much to ‘their’ mediocrity. It is the wellspring of our existence. To mimic that mediocrity in any way as a craft producer is utter folly, methinks

  4. I agree with Jennifer Hill above, first off, Barley Days sees this as a way of getting back on people’s radar, producing a cut-rate lager to get an end cap in LCBO locations might produce a short-term bump in sales. I don’t think it will translate into a sales increase with their other beer styles.

    The marketing communications and branding consultant in me want to tear a strip off the owners for aligning their brand with the Doug Ford government. We have all witnessed how consumer boycotts affected media platforms down south and even companies like Vista Outdoor and Dick’s Sporting Goods to walk away from the gun business. I don’t see Ford Nation voters being big on craft beer, they do like their industrial Lagers and Pilsners. They might buy Barley Days $1 Lager out of novelty but I don’t foresee a wholesale switch from Molson Canadian/Labatts Blue/Bud/Coors/Heineken/Stella/whatever. As far as I’m concerned the owners of Barley Days made a business decision, maybe some politics were involved and will have to face whatever outcome happens.

    Now what this whole stunt shows is how the LCBO is tilted against craft beer. I have a big problem when the government of the day uses it as a tool to favour some businesses over others. I have a problem with the AB InBev, Molson Coors and Sapporo taking my rough guesstimate 50% of the shelf space at my local LCBO when they own their own sales channel, The Beer Store. None of the political parties are friends of the craft beer industry in this province other than being used as a prop during election time.

    If craft beer as an industry wants to move forward in Ontario, they have to 1) create a robust industry association and 2) start lobbying Queens Park.

  5. Pingback: The Roundup for August 6-12, 2018 Edition – Excited Pixels

  6. Pingback: Cool Brewery wants to sell you dollar beer. And possibly weed. | Ben's Beer Blog

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