The Future Of The Beer Store: Foreign Owned Beer Store Monopoly Must End

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Ed Clark, CEO of T.D. Bank, and head of a provincial task force appointed by Ontario Premier Wynne, says it is time to change The Beer Store's mandate

Ed Clark, CEO of T.D. Bank, and head of a provincial task force appointed by Ontario Premier Wynne, says it is time to loosen up the The Beer Store’s near monopoly on Ontario beer sales.

One of the biggest issues out there right now is the question of where Ontarians should be allowed to buy their beer, wine and hard liquor.

On one side of the debate are organizations like the C.D. Howe Institute that recently released a study that said the LCBO and The Beer Store monopolies should be ended and Ontarians should be offered a much wider range of choices about where they buy their booze. Backing this perspective are the convenience store owners, the supermarkets and other retailers who obviously would like to sell beer, wine and hard liquor.

On the other side of the debate are the three foreign-owned, multinational breweries who own The Beer Store, unions representing workers at the LCBO and The Beer Store, and a whole range of consumer and parent groups who are concerned about wider access to liquor – especially to underage teenagers.

Where the C.D. Howe study goes wrong is treating the LCBO and The Beer Store monopolies with the same brush.

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.

Time has passed The Beer Store by but we’re still stuck with a model conceived in 1927. Post-Prohibition, wine and spirits went to the LCBO while lower-alcohol beer was entrusted to a distribution co-operative formed by every brewery in Ontario. Over time, Brewers’ Retail snapped up all retail operations, and industry consolidation reduced its ownership to a handful of dominant breweries.

Today, The Beer Store is an anachronism run from abroad. And it’s an indefensible anachronism.

Pay no heed to propaganda from the big beer lobby about how well it handles recycling. That’s just recycled greenwashing, and can’t countenance the cartel’s attempt to spare the sale of suds from competition — in perpetuity.

The basic question is this: why should three foreign-owned multinational breweries that haven’t changed their basic store format much since the ’50’s, have a near monopoly on beer sales in Ontario?

The answer is pretty simple: they shouldn’t.

Enter Ed Clark, CEO of T.D. Bank, and head of a provincial task force appointed by Ontario Premier Wynne looking into “optimizing” the government owned assets of LCBO, Ontario Power Generation and Hydro One.

Yesterday (Friday), in a speech Metro Toronto Convention Centre, Mr. Clark surprised observers by taking on the privately-owned Beer Store even though it wasn’t specifically part of his mandate.

Clark’s main point was that the foreign owned breweries that own the Beer Store should pay more to the provincial treasury for the right to have a near monopoly on beer sales in Ontario.

Mr. Clark said the government has several options for making the big brewers pony up more cash. They could be made to hand over a franchise fee for every location or for a certain volume of sales. The government could also levy a larger beer tax, but create rules that prohibit the Beer Store from passing the cost of the tax on to customers.

He also took aim at the Beer Store for favouring big name brands by giving them more prominent display than smaller craft brews.

“Finding a craft beer at the Beer Store can be like a game of Where’s Waldo?” he said.

Canada’s National Brewers, the lobby group representing Beer Store owners, threatened to jack up beer prices if the government makes them pay the province more.

“Adding new taxes and government fees on to beer, or the retail and distribution system that delivers that beer to beer consumers, will only drive beer prices higher,” said Brewers’ president Jeff Newton

Mr. Clark dismissed Newton’s concern. He argued the government could make the Beer Store agree not to hike prices as a condition of keeping its monopoly.

While not a bad start, the truth of the matter is that Clark’s recommendations don’t go far enough in breaking up the private, Beer Sore monopoly.

Many Ontario craft brewers say Ontario’s present beer sales system simply doesn’t work for them.

“The Beer Store is not a natural partner for craft beer,” said Mike Gurr, operations manager for Toronto’s Kensington Brewing Company.

“It’s fair in a sense that you’re able to [get in] but they set the bar extremely high in terms of cost and the barrier of entry is very high for smaller breweries.”

Another brewer said selling craft brews in The Beer Store is “a bit like Ford having to sell their cars in a Toyota dealership.”

Panel head Clark also had some suggestions for updating the LCBO. The panel said the LCBO, for its part, does not do enough to get volume discounts from its suppliers. If it drove harder bargains, it would save money that could then be passed on to the government.

Clark also recommended that the Liquor Control Board of Ontario (LCBO) be allowed it to sell 12-packs of beer and give customers the option of buying more booze – including cases of wine – over the Internet

LCBO spokeswoman Heather MacGregor welcomed the panel’s suggestions: “The recommendations were obviously developed with a view to maximizing profitability and certainly enhancing the customer experience, and we definitely support these objectives.”

But the priority should be on busting up the foreign, privately-owned Beer Store’s monopoly.

The Beer Store is an anachronism that is scooping up hundreds of millions of dollars a year in hidden revenues: Not only can this quasi-monopoly charge higher prices than in Quebec (pre-tax), it also saves big money by cutting corners at the front counter, thanks to a lack of retail competitors.

Clark’s recommendations are a start but stronger medicine is needed.

It’s time to break up the Beer Store near-monopoly on Ontario Beer sales for good.

 

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