Looks like the foreign owners of The Beer Store don’t have much to worry about despite recent grumblings that it is time for their 90 year-old beer sales monopoly to be wound up.
The Ontario government may very well end up doing a little tinkering around the edges but inside sources suggest no major changes in the private monopoly are planned. The Beer Store’s iron grip on Ontario beer sales seems safe for now.
First, a few background facts.
Unlike the LCBO, The Beer Store is a privately owned monopoly – controlled by giant, foreign-owned brewers. Forty-nine percent of the company is owned by the Labatt arm of Anheuser-Busch InBev of Belgium; forty-nine percent is owned by Molson Coors Brewing Company which has headquarters in both the United States and Canada, and the remaining two percent is owned by Sleeman Breweries, an arm of Sapporo of Japan.
The LCBO, by contrast, is 100% owned by the Ontario Government and all LCBO profits end up in the provincial government treasury.
The monopoly for Ontario beers sales was granted the private brewers in1927. Post-Prohibition, wine and spirits went to the LCBO while beer was given to a distribution co-operative formed by every brewery in Ontario. Over time, Brewers’ Retail – as it was called then – snapped up all retail operations, and industry consolidation reduced its ownership to a handful of dominant breweries. Molson’s and Labatt’s, of course, were the biggest.
Today, The Beer Store is a massively profitable goliath run from abroad. And many believe it is an indefensible goliath.
The basic question is this: why should three foreign-owned multinational breweries that haven’t changed their basic store format much in Ontario since the ’50’s, have a near monopoly on beer sales in Ontario?
The answer is pretty simple: they shouldn’t.
And a secret, no-compete deal between The Beer Store and the LCBO explains exactly why they shouldn’t.
This still-secret operating agreement lays bare the foundations of a massive cash grab that the big foreign-owned brewers who run The Beer Store don’t want you to know about.
And what the Ontario government and LCBO are too embarrassed to show you.
Dated June 1, 2000, the document confirms the wrong-headedness of the Crown-owned LCBO acting on the orders of the Mike Harris government of the day (and the Ontario Liberal government of today, which is no less guilty).
The 10-page document details a legal arrangement that constrains growth in the LCBO’s beer sales to protect the effective retail monopoly of the massively profitable, foreign-owned Beer Store.
The agreement’s bureaucratic wording spells out precisely how beer drinkers shall be gouged. The core of the scheme comes in the section that sharply delineates “Beer Selling Roles” for the two rival alcohol retailers — one government-owned and the other privately run — to sharply limit any competition between them.
“Consistent with historical practice, the public LCBO will not sell beer . . . in packages containing more than 6 containers,” the document declares.
Why would the LCBO agree to tie its hands in such a way? Why give up the right to sell more affordable 12-packs or two-fours (cases of 24) that make up the largest volume of beer buying in Ontario?
And why would the publicly owned LCBO further agree that it “will not promote beer at price points greater than 6 containers?” The effect, of course, is to deny drinkers the cost savings of a 12-pack or two-four available at the privately-run Beer Store, forcing them to pay the higher tab for each individual six-pack.
Another clause in the secret agreement spells out the specifics of noncompetition: The LCBO will not sell to restaurants and bars any of the major brands not carried in its regular stores, thus giving the big brewers unchallenged power to gouge bars and restaurants with their market muscle (which they do by setting prices, and profit margins, unconscionably higher than in most other provinces or in regular Beer Store outlets).
Sales territories are also sharply circumscribed in the secret document: If The Beer Store decides to move into growing communities, the LCBO will retreat to make way: “Existing LCBO store is to revert to a … 6-pack store and will carry package sizes no greater than 6 containers.”
Oh, and if The Beer Store disagrees with the LCBO on key points, they will operate by “consensus on all issues,” and a joint committee’s decisions “shall be consensus (sic).”
The brewers say jump, and the Ontario Government asks how high.
The private, foreign-owned Beer Store’s 90-year monopoly on Ontario beer sales must end.
What should take its place is the subject of a future post.