Reported in the Edmonton Sun today: Alberta has the highest beer prices in the country; Manitoba has the lowest. This surprises me not in the least, but it gives me a good opportunity to muse about beer pricing. First, what the article says (the author’s methodology was not well spelled out) is that a 12-pack of Molson Canadian sells for two to four dollars more than Manitoba – that is about a 10% price difference. The article offers a myriad of reasons for why that might be – mostly blaming taxes and such.

This is not the first time someone has pointed out that Alberta has a price disadvantage on booze. The CBC did a report last year finding similar results. I have also been keeping a personal eye on prices and my experience is that Alberta is more expensive. This has been the case for a while, I believe. For most of the last decade or so Alberta has had higher than average prices, trending toward the highest.

The hard question to answer is why? Here is my take. First, it isn’t because of taxes – at least not in they way the Sun article means. Alcohol taxes are complex beasts, but I recently conducted some research on tax rates for beer. Alberta is quite competitive and lower than most provinces, including Ontario and B.C. The tax regime cannot explain the price difference. However, I do know that back in 1995 when the liquor retail system was privatized, the government also altered the tax regime to effectively increase the take on low-alcohol drinks – beer, cider, wine – and decrease the mark up on spirits (at the time some said it was because the Minister responsible, who had something of a sodden reputation, had a preference for the hard stuff – I make no comment on whether that assessment was accurate or not). The effect was to mean that beer became more expensive relative to spirits.

So what is the reason? Partly it is how we handle distribution. During privatization, distribution was handed over to a private monopoly – Connect Logistics. It appears that handling and storage charges have jumped significantly since.

I also argue that privatization of retail is a culprit. No one can deny that the private system has created a situation where more beer is listed than any other province. Just good luck finding it if you don’t live near Sherbrooke Liquor in Edmonton or Willow Park in Calgary (or a handful of other stores, like Trackside in Medicine Hat). Most of the thousands of liquor stores in the province carry the industry standards. Fair enough – that is where the demand is. But my point is this: the proliferation of small, strip-mall stores has greatly increased the industry’s overhead. More stores paying rent. More paying distribution fees. More stores scraping to keep a small profit margin on their product. That will, in my opinion, lead to a slow creep in prices. Yes, they are paying their staff half of what they used to get paid, but that cost savings doesn’t make up for the overall economic inefficiencies of the system.

Compare that to Manitoba, who maintains a wholly public system and can take advantage (as best as their small population is able) of economics of scale and coordinated ordering. These are standard economic strategies we cannot employ in Alberta.

I know the retailer’s association argues all the competition in Alberta keeps prices low, as people can comparison shop. But, really, who drives around looking for the store selling Bud Light for 50 cents cheaper? Beer is a convenience product for most consumers – something to quickly pick up on the way home Friday after work.

I am not alone in this. A few years ago, the Parkland Institute, a think tank based out of the University of Alberta, did a comprehensive report on liquor privatization in Alberta which suggested the gains promised by the government largely failed to materialize.

I realize debating privatization is not really the purpose of this website. And I know there are varying opinions on the value of liquor retail privatization. I also know that Liquor Control Boards in other provinces (Hello Ontario!!) can be horrendously bureaucratic, restrictive and punitive on small players. The situation is complex. My ideal system would employ neither the Alberta experiment nor Ontario’s moral guardian approach.

However, Albertans have to realize that our expanded beer inventory and propensity for a liquor store in every strip mall comes with a price tag. And a label: Most Expensive Beer in Canada. As for Manitoba, I will tip my hat to them for their modest pricing and leave it to others to pontificate why they are so inexpensive.