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Saturday, January 25, 2020
Connecting Our Communities

“The Soviets called. They want their retail store back”

Local brewers support loosening restrictions on sale of suds as province takes aim at Beer Store monopoly despite criticisms about the potential costs to break deal

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In the market for a two-four? Chances are your first and only stop would be at any of the 450 privately-run Beer Store locations across the province. The most ubiquitous source of our purchased suds is also, by government writ, the only place where Ontarians can reliably pick up their beer in quantities above a six pack. But that might soon be changing.

The Ford government has tabled legislature to terminate its contracts with the Beer Store, in a move being welcomed by local craft brewers in Waterloo Region. While wary of the potential financial penalties to the province of backing out of its contract early, craft brewers keen to see the end of a monopoly that they say serves little benefit for taxpayers and local businesses alike.

“I definitely think that there needs to be some changes to the way the alcohol system works in Ontario,” said Graham Spence, co-owner of the St. Jacobs-based Block Three Brewing Company. “We have an unfair disadvantage here where our competitors, which are the big breweries, have owned the retail system. They have a monopoly on the retail system.”

Unlike the LCBO, which is a Crown corporation, the Beer Store is a privately owned enterprise. Ownership is overwhelming split between just three multinational brewing companies: Molson Coors (which stakes a 51 per cent ownership in the Beer Store), Labatt (parent company Anheuser Busch at 45 per cent) and Sleeman (Sapporo, four per cent), with about 30 more brewers in the mix as “non-material stakeholders.”

Despite being primarily owned by just three foreign brewing companies, the Beer Store is obligated to offer fair space on its shelves to beers beyond just Molson, Labatt and Sleeman. And yet, local brewers complain of being shuttered out of Beer Store locations, which they say offers an almost negligible volume of sales when compared to every other avenues, such as in grocery stores and the LCBO.

Block Three Brewing, for example, sells its products at seven Beer Store locations. “But to be honest, we don’t really sell much volume – we sell next to nothing through the Beer Store. If you went to most of those Beer Stores, you probably wouldn’t even know that our beer was there.”

Breaking down sales by location, Spence estimates that about 70 per cent of their beers are sold through their own location on King Street in St. Jacobs. Of the remaining 30 per cent, about half are sold to bars and restaurants, and the other half are sold at the LCBO. And just a tiny fraction of sales, less than one per cent, are made through the Beer Store.

Steve Innocente, owner of the Innocente Brewing Company on Northfield Drive, just south of the Woolwich Township boundary, has seen similar poor returns at the Beer Store. Pulling up his sales number for April 2018 to 2019, Innocente gives an rough breakdown of the craft brewery’s sales by venue.

“So 50 per cent of my sales are out the front – retail sales – which is what I want because that’s my highest profit,” says Innocente. A further 29 per cent go to bars and pubs. The LCBO contributed another 14 per cent to his sales, while at grocery stores, such as Pym’s Village Market in Wellesley village, Innocente made about 1.02 per cent of his sales.

But at the Beer Store? Just 0.7 per cent – less than even the grocery stores which were only recently allowed to carry small quantities of beer to sell to the public.

Both craft brewers saw almost none of their products being sold at local Beer Stores, despite the fact that the Beer Store is where most people buy their beer. Seven out of ten beer sales are made at the Beer Store and On-site brewery retail stores, according to a government report, The Case for Change.

“What’s their incentive to sell our beer? They’re owned by multi-national breweries that are losing volume to craft breweries. So why would they even provide our beer?” asks Spence, adding that he does not believe the Beer Store fairly promotes its craft beers in its stores in comparison with the larger, more well-known brands.

The provincial government charges that the Beer Store model, which has its roots going back 92 years in the province, is a relic of the post-prohibition attitudes. Though prohibition was over in 1927, the government placed tight restrictions on the sale and purchasing of alcohol as a way of discouraging the public from consumption.

The system was intentionally designed to be obtrusive, but “by the late 1960s Ontarians were fed up with a retail system that treated them like criminals,” says the report, and governments began to loosen up restrictions. Now the government is arguing to scrap the system all together.

For Innocente, the move couldn’t come soon enough. “I’m all for it. Even if it costs us money, we have earned that right as taxpayers in the province of Ontario to be treated like adults with respect to being able to buy alcohol anywhere and everywhere. Just like the rest of the first-world.”

“It needed to go 90 years ago, and hopefully we can make it happen now,” he adds.

The Beer Store argues that it benefits Ontarians by keeping the price of beer down through lower operating costs. The company is run as a not-for-profit on a break-even system; brewers pay for space for their products on Beer Store shelves, and profits are reinvested back into the company. However, not included in the break-even designation is the profit Molson, Labatt and Sleeman make in selling their own products at the stores they own.

The Beer Store did not respond to questions ahead of press time.

“Every time I have someone that’s coming from Britain,” says Innocente, “I always take them to one of the old fashioned beer stores, and they literally piss themselves laughing. They can’t believe that people in the West still order alcohol like that. And they always say, well, ‘The Soviets called, they want their retail store back.’”

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