Exam 6: Section 2: Does It Matter: Society, Ethics and Business

Case: Beer and the Canadian Economy For many Canadians, beer is a poplar alcoholic drink that has become associated with fun social pastimes such as hanging out with friends or watching a hockey game. But did you know for every dollar spent on beer in Canada $1.12 goes back into the Canadian economy? According to a 2013 Conference Board of Canada report, "From Farm to Glass - The Value of Beer in Canada," beer is considered to be the most consumed alcoholic beverage in Canada, making up 8.1 per cent of household spending in food and beverages. What does this mean? According to the report, Canadians bought an average equivalent of 235 bottles of beer per person whether at beer stores, liquor agencies, airports, trains, sports bars or restaurants. For retailers this means good business; for the government, this means great tax revenue. While the beer industry in Canada consists of any business that sells beer, the beer economy is much broader on a whole. The beer economy consists of retail sales, wholesale distribution, transportation, and, of course, the agricultural products themselves that beer depends on. In 2013, it was estimated that the beer economy made up 1 out of every 100 jobs in Canada, which meant 163,000 jobs were related to producing, transporting or selling beer. Today, many breweries are located in Ontario, Quebec, Nova Scotia, New Brunswick and British Columbia while other parts of Canada produce grains, electricity, transportation and packaging materials. The Atlantic provinces, for instance, have more than 10,000 jobs in the beer economy. Paperboard manufacturing and transportation are two examples of how they contribute to the economy. Central Canada, on the other hand, is the home of the brewing hub of the country. The three largest Canadian brewers are located here: Labatts, Molson and Sleeman. Similarly, financial firms, such as insurance companies provide support to the industry. In Central Canada, 87,000 jobs are related to beer in Ontario and Quebec. The three Prairie provinces provide support functions as well. Water, energy and grains for production are three examples. Distribution and warehousing activities also contribute to the industry. In the Prairies, this means about 20,000 jobs. The report estimates average annual beer sales to be $12.3 billion annually. The beer economy, however, contributes to $5.8 billion in annual tax revenues for the various levels of government. Through the beer economy, the Canadian government collects personal income tax from individual wages in the beer industry, as well as corporate and sales taxes on beer-related sales. In Canada, the largest consumers of beer are in the Yukon. Newfoundland ranks second according to the report. While it is a profitable industry, some consumer and government officials wonder if it could be more competitive in Ontario. The province of Ontario is unlike many of the other Canadian provinces which strictly regulates the sale of beer through the Liquor Control Board of Ontario. Currently, beer is mainly sold through The Beer Store, which is foreign-owned by the U.S.-based Molson-Coors Brewing Company, Sapporo of Japan and Anheuser-Busch InBev of Belgium. While beer is available in some liquor stores, many call this a 'near-monopoly' which has resulted in higher prices compared to other provinces where beer is also available in grocery and convenience stores. In a research study, University of Waterloo economic professor Anindya Sen found that the cost of 24-pack of beer was $35.56 in Ontario ($9.50 more or 27% higher) when compared with two main Quebec grocery stores. Here, a 24-pack was only $25.95. According to Sen, "[The study] raises the important question of whether through modernizing retailing the Ontario government could be benefiting more - and capturing more revenue - particularly in a period of large government deficits." CEO Dave Bryans of the Ontario Convenience Stores Association said "adding private retailers, like convenience stores, who can work with the LCBO wholesale system would benefit the provincial government, and Ontarians would benefit from improved choice and convenience." The Ontario Convenience Store Association has been lobbying the government for the right to sell beer in convenience stores. However, not everyone agrees. Some interest groups, like MADD, Mothers' Against Drunk Driving, argue that increased access and availability of alcohol with private retailers may result in more alcohol-related fatalities, since convenient store owners may be more concerned about making a profit, than checking vigilantly for proper ID. Read the case on Beer and the Canadian Economy and answer the following questions: Determine the barriers to entry for the beer industry (using Michael Porter's Five Forces model). State your assumptions where necessary.

Case: Beer and the Canadian Economy For many Canadians, beer is a poplar alcoholic drink that has become associated with fun social pastimes such as hanging out with friends or watching a hockey game. But did you know for every dollar spent on beer in Canada $1.12 goes back into the Canadian economy? According to a 2013 Conference Board of Canada report, "From Farm to Glass - The Value of Beer in Canada," beer is considered to be the most consumed alcoholic beverage in Canada, making up 8.1 per cent of household spending in food and beverages. What does this mean? According to the report, Canadians bought an average equivalent of 235 bottles of beer per person whether at beer stores, liquor agencies, airports, trains, sports bars or restaurants. For retailers this means good business; for the government, this means great tax revenue. While the beer industry in Canada consists of any business that sells beer, the beer economy is much broader on a whole. The beer economy consists of retail sales, wholesale distribution, transportation, and, of course, the agricultural products themselves that beer depends on. In 2013, it was estimated that the beer economy made up 1 out of every 100 jobs in Canada, which meant 163,000 jobs were related to producing, transporting or selling beer. Today, many breweries are located in Ontario, Quebec, Nova Scotia, New Brunswick and British Columbia while other parts of Canada produce grains, electricity, transportation and packaging materials. The Atlantic provinces, for instance, have more than 10,000 jobs in the beer economy. Paperboard manufacturing and transportation are two examples of how they contribute to the economy. Central Canada, on the other hand, is the home of the brewing hub of the country. The three largest Canadian brewers are located here: Labatts, Molson and Sleeman. Similarly, financial firms, such as insurance companies provide support to the industry. In Central Canada, 87,000 jobs are related to beer in Ontario and Quebec. The three Prairie provinces provide support functions as well. Water, energy and grains for production are three examples. Distribution and warehousing activities also contribute to the industry. In the Prairies, this means about 20,000 jobs. The report estimates average annual beer sales to be $12.3 billion annually. The beer economy, however, contributes to $5.8 billion in annual tax revenues for the various levels of government. Through the beer economy, the Canadian government collects personal income tax from individual wages in the beer industry, as well as corporate and sales taxes on beer-related sales. In Canada, the largest consumers of beer are in the Yukon. Newfoundland ranks second according to the report. While it is a profitable industry, some consumer and government officials wonder if it could be more competitive in Ontario. The province of Ontario is unlike many of the other Canadian provinces which strictly regulates the sale of beer through the Liquor Control Board of Ontario. Currently, beer is mainly sold through The Beer Store, which is foreign-owned by the U.S.-based Molson-Coors Brewing Company, Sapporo of Japan and Anheuser-Busch InBev of Belgium. While beer is available in some liquor stores, many call this a 'near-monopoly' which has resulted in higher prices compared to other provinces where beer is also available in grocery and convenience stores. In a research study, University of Waterloo economic professor Anindya Sen found that the cost of 24-pack of beer was $35.56 in Ontario ($9.50 more or 27% higher) when compared with two main Quebec grocery stores. Here, a 24-pack was only $25.95. According to Sen, "[The study] raises the important question of whether through modernizing retailing the Ontario government could be benefiting more - and capturing more revenue - particularly in a period of large government deficits." CEO Dave Bryans of the Ontario Convenience Stores Association said "adding private retailers, like convenience stores, who can work with the LCBO wholesale system would benefit the provincial government, and Ontarians would benefit from improved choice and convenience." The Ontario Convenience Store Association has been lobbying the government for the right to sell beer in convenience stores. However, not everyone agrees. Some interest groups, like MADD, Mothers' Against Drunk Driving, argue that increased access and availability of alcohol with private retailers may result in more alcohol-related fatalities, since convenient store owners may be more concerned about making a profit, than checking vigilantly for proper ID. Read the case on Beer and the Canadian Economy and answer the following questions: Explain which stakeholders are impacted by the consumption of beer?

Case: Beer and the Canadian Economy For many Canadians, beer is a poplar alcoholic drink that has become associated with fun social pastimes such as hanging out with friends or watching a hockey game. But did you know for every dollar spent on beer in Canada $1.12 goes back into the Canadian economy? According to a 2013 Conference Board of Canada report, "From Farm to Glass - The Value of Beer in Canada," beer is considered to be the most consumed alcoholic beverage in Canada, making up 8.1 per cent of household spending in food and beverages. What does this mean? According to the report, Canadians bought an average equivalent of 235 bottles of beer per person whether at beer stores, liquor agencies, airports, trains, sports bars or restaurants. For retailers this means good business; for the government, this means great tax revenue. While the beer industry in Canada consists of any business that sells beer, the beer economy is much broader on a whole. The beer economy consists of retail sales, wholesale distribution, transportation, and, of course, the agricultural products themselves that beer depends on. In 2013, it was estimated that the beer economy made up 1 out of every 100 jobs in Canada, which meant 163,000 jobs were related to producing, transporting or selling beer. Today, many breweries are located in Ontario, Quebec, Nova Scotia, New Brunswick and British Columbia while other parts of Canada produce grains, electricity, transportation and packaging materials. The Atlantic provinces, for instance, have more than 10,000 jobs in the beer economy. Paperboard manufacturing and transportation are two examples of how they contribute to the economy. Central Canada, on the other hand, is the home of the brewing hub of the country. The three largest Canadian brewers are located here: Labatts, Molson and Sleeman. Similarly, financial firms, such as insurance companies provide support to the industry. In Central Canada, 87,000 jobs are related to beer in Ontario and Quebec. The three Prairie provinces provide support functions as well. Water, energy and grains for production are three examples. Distribution and warehousing activities also contribute to the industry. In the Prairies, this means about 20,000 jobs. The report estimates average annual beer sales to be $12.3 billion annually. The beer economy, however, contributes to $5.8 billion in annual tax revenues for the various levels of government. Through the beer economy, the Canadian government collects personal income tax from individual wages in the beer industry, as well as corporate and sales taxes on beer-related sales. In Canada, the largest consumers of beer are in the Yukon. Newfoundland ranks second according to the report. While it is a profitable industry, some consumer and government officials wonder if it could be more competitive in Ontario. The province of Ontario is unlike many of the other Canadian provinces which strictly regulates the sale of beer through the Liquor Control Board of Ontario. Currently, beer is mainly sold through The Beer Store, which is foreign-owned by the U.S.-based Molson-Coors Brewing Company, Sapporo of Japan and Anheuser-Busch InBev of Belgium. While beer is available in some liquor stores, many call this a 'near-monopoly' which has resulted in higher prices compared to other provinces where beer is also available in grocery and convenience stores. In a research study, University of Waterloo economic professor Anindya Sen found that the cost of 24-pack of beer was $35.56 in Ontario ($9.50 more or 27% higher) when compared with two main Quebec grocery stores. Here, a 24-pack was only $25.95. According to Sen, "[The study] raises the important question of whether through modernizing retailing the Ontario government could be benefiting more - and capturing more revenue - particularly in a period of large government deficits." CEO Dave Bryans of the Ontario Convenience Stores Association said "adding private retailers, like convenience stores, who can work with the LCBO wholesale system would benefit the provincial government, and Ontarians would benefit from improved choice and convenience." The Ontario Convenience Store Association has been lobbying the government for the right to sell beer in convenience stores. However, not everyone agrees. Some interest groups, like MADD, Mothers' Against Drunk Driving, argue that increased access and availability of alcohol with private retailers may result in more alcohol-related fatalities, since convenient store owners may be more concerned about making a profit, than checking vigilantly for proper ID. Read the case on Beer and the Canadian Economy and answer the following questions: How is beer important to the Canadian economy?