08/23/14

Ontario’s liquor sales conundrum


The C.D. Howe Institute released its report on beer and wine sales in Ontario, today, advocating for a more liberal approach and allowing beer and wine to be sold in other outlets, such as supermarkets and convenience stores. You can read the report here.

I have a grudging respect for the C.D. Howe Institute, but not always an agreement with their conclusions, because I feel they are seldom as free of right-leaning ideologies as I would hope. But the report is a good read, nonetheless. It has a local significance in that we have seen three craft breweries open in Collingwood this term and their well-being is important to our local economy.

Coincidentally, the Beer Store was an exhibitor at the recent AMO convention*, and made presentations (as well as handing out reports) that proved a counterpoint to the C.D. Howe study. It’s a battle of conflicting figures and facts being tossed about.

Of course, The Beer Store (TBS) has a vested interest in keeping its near-monopoly on beer sales. Contrary to what some folks think, the Beer Store – we knew it as Brewer’s Retail when I was growing up – is not a government outlet like the LCBO. It’s privately owned; although it’s technically designated “not for profit” some reports say it managed to garner $700 million in “incremental profits” every year for the past few years.

This figure is challenged by Jeff Newton, President, Canada’s National Brewers, who writes:

The Beer Store does not make $700 million a year in profit; it actually makes no profit, a fact that can be confirmed by reviewing the corporation’s publicly available financial statements.

The so-called 2013 study that produced this erroneous claim was funded by the convenience store lobby association and has since been proven false by two former assistant deputy ministers of finance in the Ontario government.

What the convenience store lobbyists claimed to be a $700-million profit was actually shown to be higher Ontario beer taxes. The report debunking this claim can be found at ontariobeerfacts.ca/files/studies/earnscliffe_comparison.pdf.

Well, if The Beer Store itself isn’t making those profits, the brewers who own it are, according to the CD Howe report:

The Beer Store enjoys significant economies of scale. These factors combined allow brewers to earn what we estimate to be $450 to $630 million in additional profits compared to what would have occurred in a competitive retail market similar to that in Quebec.

Nothing against profits, mind you: they keep the brewers in business. But maybe we could shave off a couple of points to allow some of the smaller, Ontario brewers to get a bit more of the action. Encourage local, home-grown craft breweries.

Over the past few years, TBS has been the subject of considerable political controversy over its practices and policies that, some companies say, are prejudicial against small, craft breweries. The ownership of The Beer Store is also controversial because it is now an international conglomerate, not even Canadian:

…when you buy beer at The Beer Store, you’re actually supporting massive corporations based at least in part in the States, in Brazil, in Belgium, or in Japan — regardless of the brand of beer you actually buy.

The Beer Store, as you probably already know, is actually owned by Labatts, Molson-Coors, and Sleeman, and however Canadian these household brands may sound, they’re not. Molson isn’t really just Molson anymore. It’s Molson-Coors, a company with equal ownership in Canada and the United States. Labatt Brewing Company is owned by Anheuser-Busch InBev, a Belgian-Brazilian multinational company headquartered in Leuven, and, since 2006, Sleeman has been owned by Japanese brewer Sapporo.

As the owners of The Beer Store, these three brewers are not only taking in an astounding 79.2% of the market share of all beer sold in Ontario, but they also gets to make up standards and fees to which any other brewer must adhere if he or she wants the store to stock his or her products.

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