Is beer economic development?

I had a lively chat a few years ago when Molson announced they would be putting a plant in Moncton (with a large grant from the province).  The person I was discussing this with was insistent that it wasn’t economic development because the plant was primarily going to service the local market (Maritime) and would end up just taking market share from other local producers (see story about the firm’s growing market share here).

Import substitution is an important economic development concept.  I don’t believe we should put up barriers to protect local producers, but in a free market context if a firm (like Molson) was manufacturing product elsewhere and shipping it into the Maritimes decides to move the production here that is indeed incremental economic activity and therefore economic development.  If they increase their market share here and reduce the market share of other local producers that is not strictly speaking economic development because they are just taking market share from other producers (not new economic activity).

In fact, I would like to see import substitution explored more fully as an economic development driver.  If there is a captive market in the Maritimes for a product or service – we should be encouraging companies to fill that market by setting up here.  An example might be Walmart’s distribution activities in the Maritimes.  Right now all their product is shipped in from warehouses elsewhere.  If that distribution activity was done locally in the Maritimes it would add incremental economic activity (say 150 good paying jobs) here.

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9 Responses to Is beer economic development?

  1. Anonymous says:

    Certain days better for dreaming?

  2. mikel says:

    I think Moosehead said it best when it said it was about ‘fairness’. Molson received $6 million, plus free land from Moncton to set up a facility. Moosehead lost 13 jobs because it used to brew Canadian. All that for a facility that only provides FORTY jobs. 40-13=27 jobs. I’m pretty sure I remember that Mrs.Dunster’s Doughnuts provides around 20 jobs, and with a heck of a lot fewer subsidies than Molson got.

    So all that fuss really only created 27 jobs, so the question is whether it is worth it from a ‘corporate welfare’ point of view. No doubt the liberals teamed with Moosehead for its ‘subsidy beer’ in order to combat the unlevel playing field that this created.

    So will you still be saying this next year if, say, Moosehead, one of the BEST employers in Canada, says that it makes more money in ontario, the US, and overseas, and simply has no reason to be in New Brunswick anymore? THAT is the price that is often paid when deals like this are hatched.

    We really don’t have the whole story here though, I simply can’t believe that sales shot up that highly simply because they opened a brewing facility in Moncton. More marketing could have been done even without the new facility, and would have had the added benefit of increasing jobs at Moosehead, which, from what I’ve heard, is FAR better than Molson.

  3. Smalltown says:

    Yes, we should always support competition….which is someways what this is; in a simplified fashion. It’s better for everyone.
    We Maritimers sometimes forget that we are worthy…and that other people would want us…that we are just as good as those from away. The reason why I think these comments are relevant – is that I think it means we don’t have to protect those businesses that we have here. All business is worthy. Too many folks think we have to protect our jobs…that we can allow monopolies to stay in place as we think its the only way we would have jobs.
    The reality is we are worthy. We are innovative, smart, and flexible when we want to be. We have lots to offer as employees and business owners. We should not have to protect those old-time businesses that have been here forever.
    Competition is good.

  4. Anonymous says:

    Better find something, because subsidizing two cultures may be ending with this great news!

    The Conservatives now command 39 per cent in support among decided voters, compared with 28 per cent for the Liberals, according to the survey, conducted exclusively for Canwest News Service and Global National by Ipsos Reid.

  5. mikel says:

    Moosehead was hardly ‘being protected’ simply because the government WASN”T subsidizing Molson (or Labatts, or Pumphouse, etc). Not to sound like old whatwashisname, but providing a subsidy to Molson is hardly ‘creating competition’. The fact is that Canadian was already available in the province, competing with other brands.

    In fact, in this case you’ve got a new large player in Molson, an EXTREMELY large multi national corporation not afraid to flex its muscles (remember when construction was put on hold until NB and NS could iron out their liquor import rules). What that means is that its very unlikely than any other company in the field will receive any of the help that Molson got, so simply won’t be interested. And to be fair, Moncton SHOULD give pumphouse brewing land for free.

    And again, not to be jingoistic, but in the case of Pumphouse, not only is the brand ‘as good as those from away’ but it is BETTER. It has been PROVEN better in independant tests and has won numerous awards on several of its line. However, it simply doesn’t have the clout to expand, brewing is a VERY fickle business and creditors usually won’t touch expansion with a ten foot pole. That’s why in the states local beers stay local, and expansion only happens when a beer is bought out by a larger corporation.

    New Brunswick has actually had numerous brewers of note. Here in ontario the local u brew has an article from the early nineties with rankings and number one was a New Brunswick beer, which unfortunately now no longer exists. Meanwhile, Molson and other large corporations get market share the same way Coke and Pepsi do with eight year olds-get the customers young and create brand loyalty. Anybody who has tasted any more than twenty micro brews knows what absolute rubbish Molson products are.

    Patriotism has nothing to do with this, and people in NB are no different than people anywhere, ALL people are resourceful, smart, innovative and flexible (not everybody are each all the time though). Again, what separates NB are the provincial policies (and the culture somewhat).

  6. Gary says:

    I think the Molson deal was great.

    The folks who drink Pumphouse are not the same people who drink Molson or Moosehead. They may be similar products that are sold in the same stores but Pumphouse does not compete with Molson or Moosehead. Ask anyone who works at Pumphouse. They can’t even make enough beer nor do they want to mass produce.

    Mooshead and Molson had a partnership where Mooshead would brew Canadian and Molson gave them some marketing money. When the consolidation with Coors occured, they could not do it anymore. Molson would’ve been giving money to it’s own competitor.

    Moosehead may have claimed they lost 13 jobs but they whined and they got many other things in return; (such as the contract for making that communist government beer we now have and other expansion money along with it). The City of Moncton got a much needed water treatment plant with the Molson deal so it wasn’t completely bad.

    I think that it would’ve been a sin not to let (or lure) another company here in NB because we had this employer for over a hundred years. This would bring us back to what we do most of the time; not let new employers in same sectors come in just because we don’t want to ruffle the feathers of the old boys who have been running this province since the second world war. If we put barriers, we’ll never get anywhere. Are we capitalists or are we socialists?

  7. mikel says:

    That depends on who you ask and how terms are defined. By large part we are socialists, just badly run socialists. The ‘capitalist’ aspect is only a very minor facet of our lives, and by large measure what we consider ‘important’ is state run (thats not actually socialism but anyway).

    As for Pumphouse, that’s not completely true, while beer does have its target market Pumphouse is definitely competing with Molson and Moosehead. As I mentioned before, its clear they DO want to manufacture more, and for a short time they were available in ontario liquor stores where they quickly sold out at most locations. The market is very much in their eye, and the owners asked me to research the various beer festivals here in southern ontario several years ago. However, like I said, for mid line companies, the stage where they need to get credit to enter new markets is hard to come by because the brewery market is so political and fickle. And in Ontario, pumphouse doesn’t have a ‘name’ to help them sell, so they sit side by side with Moosehead.

    Technically, Molson WAS giving money to its own competitor, whether it was Coors or not. And the water treatment plant was set up in 1999, LONG before Molson ever came around. While some try to link the two, again its obvious that a PUBLIC water treatment facility can make clean water just as easily as a private one.

    Finally, that WAS my point, that Moosehead no doubt went to the government and complained, so they got this extremely bizarre deal. No doubt the government couldn’t find any other way to subsidize Moosehead without completely *&^%ing up the liquor market. So like Moosehead said, if we WERE capitalists then Molson would have seen the benefit of setting up in NB, would have paid fair market value for its land, would not have gotten government money, and wouldn’t have gotten the license rebate that let them begin retailing immediately (go ask a microbrew like Pumphouse just how many hoops they had to jump through in order to get to retail).

    THAT is what capitalism is all about, so you can’t ‘like the Molson deal’ AND complain that the market isn’t capitalist enough, because both the Molson and Moosehead deals are simply different ways government is subsidizing large producers.

    By the way, if the market were TRULY capitalist then NEITHER brewery would be permitted to function because a basic tenet of capitalism is the ‘level playing field’. That’s also not good for jobs, in Kentucky at the turn of the century there were 10,000 distillers, today there is ONE, with one tenth the number of employees it used to have.

  8. Samonymous says:

    Sure it is, and because of provincial trade barriers in Canada, the industry had its production hopelessly fragmented in numerous uncompetitive plants across the country.

    This was part of the reason for justification of increased beer subsidies over the years, not to mention, the Canadian government was convinced back in the late 80s that it could not compete successfully with Big U.S. breweries like Budweiser (which have since been sold off to larger foreign companies). I guess that’s why they ended up grandfathering the industry in the FTA agreement.

  9. mikel says:

    It depends what is meant by ‘uncompetitive’. Most of the large brewers have never lost money, that was simply a province’s way of protecting a market. It makes sense too, if you want to sell in our market, then you have to contribute to it.

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