Ontario Beer Sales Changes

Are the proposed changes very good? A bit. Are they really rather bad? Sadly, yes. How is this even possible? Let me explain.

We have just seen the biggest proposed change in beer sales in Ontario, since the repeal of prohibition and introduction of Brewer’s Warehousing (subsequently Brewer’s Retail, now just The Beer Store).

It will be easiest if we start with why these changes are positive. Because some of this is quite good. First and foremost, if you regularly buy beer from The Beer Store, your life is surely about to get easier.

Convenience

You will be able to buy your mainline brand (albeit only in 6 packs), at the grocery store. Assuming you’re in one of the 450 stores, in an urban centre, during the legal operating times, you will be able to enter the separate area of the store where beer is sold, and buy beer. I would assume you could also pay for the other items in your cart. To be clear, the first 150 licenses will be ready in two years. The following 300 will roll out after that. This is good, as it’s a bit more convenient for many people, than our current set-up.

Thumbs-up, bro!

Thumbs-up, bro!

Shared Shipping

Another good point is that the government is proposing allowing brewers to share shipping, which has been illegal up until now. I know, that sounds insane, and it is. But suffice to say, now very small rural brewers can join together and hire a truck to deliver all their products into urban centres and LCBO/TBS distribution warehouses together. This will doubtlessly be very good for small brewers.

No Volume Requirement on 2nd Retail Stores

One more green check, and it’s about brewery retail stores, and if you thought that last proposed change was a bit crazy, you ain’t seen nothing yet. Up until now, a brewery could apply for a license to sell their products at a retail store located at the brewery. However, if a brewery had two brewing locations (and there are a few, even among the small brewers), they could apply to have retail stores at both locations, as long as each locations made a fixed minimum volume of beer. If one didn’t make enough, only the bigger one could have a shop. Each location also had to sell at least 50% beer produced on site. For a brewery like Amsterdam, who has the BrewHouse and their production facility in Leaside, or Mill Street with their brewpub in the distillery district and their production brewery in Scarborough, this was fine. Both of their brewpub sites have high enough production to qualify for a retail store. However, Bellwoods, who’s brewpub is notably smaller, does not. So when they decided to lease a space not too far away, and yet in an area with quite a bit less foot-traffic, they found that they wouldn’t be allowed to have a retail store at the brewpub anymore. Beyond The Pale had to consider similar realities when they wanted to open a larger second brewery, and I think, had resigned themselves to having to close their first brewery in favour of the larger space.

If you’re wondering, both the minimum volume production rule, and the 50% produced on-site rule, were to prevent a large brewery from opening a store with a home-brew-sized set-up in it, apply for a license as a “brewery” and then basically just run a private retail store that never actually makes beer. Either rule makes good sense, though it’s fair to say the 50% rule is a lot more fair to small brewers. The minimum volume rule was written in a time when very very small breweries just weren’t a reality, and so it never really bothered anybody. Now that small breweries are the norm, it has become rather a problem.

So now, they propose to remove the minimum volume rule. If you have two breweries, you can apply to have retail stores at both, regardless of volume production. The 50% rule will still ensure the breweries that the stores are attached to actually produce beer. For at least two small breweries, this is good news, and it also means more smaller operations might consider scaling up their production through second locations. Good, yes?

And that’s it. If you’re feeling pretty good about things, go ahead and stop reading now.

You might be scratching your head saying, “surely, Chris, you’ve missed a few things? Committing 20% of shelf-space to craft is amazing, right? Adding tax levies on beer is good too, right? Like you’re a ‘tax me and provide good services’ leftie nutjob….”

Okay, I’m going to put an adorable picture here so that everybody who wants to tap out happy can, and then we’ll do this

Adorable elephant

Gets you in the feels.

20% Craft Shelf Space

I am not going to point out that it’s likely most of this will be products that are not craft but look like it (Rickard’s, Shock-top, Keith’s etc) or products that are craft but are owned by mega-big conglomerates (Creemore, Granville Island, Goose Island, etc). I don’t want to get into a “what’s craft” pissing war. It doesn’t matter. What does is this: The Beer Store is still going to charge fees to brewers to list products. Grocery stores will also charge their usual fees (and if you have also actually read the full report and are saying “ah ha, but it says they must “prohibit inducements or monies from suppliers. ” believe me, if that includes listing fees, then The Beer Store is truly screwed. And if one thing is apparent, it is that the government has made huge steps to appease The Beer Store, even in the “shake-up”. More on that in a minute).  So what happens if no small brewers are willing to pay the grocery stores’ fees? Or what if only about as many do which already do so at The Beer Store? Which is like 9%. Where does the other 11% come from? How can we make it law that a certain amount of shelf space is for one (ill-defined) segment of the market, when that segment might not actually step up and take it? When you hear people use the term “smokescreen” in relation to the proposed changes, it’s this sort of thing they’re talking about. This might do something, kind of. If you think 20% of the shelves will be full of beautiful one-offs from Left Field and Stone City and Nickel Brook, you’re dreaming.

Beer Tax

Yes, tax me. Tax me more. I like public services that are funded by tax dollars. I prefer when they are well-managed, and also when the tax burden is fair (and those are both regularly a problem), but that’s for a post on a different blog. For now generating income through minimal tax increases (about 50% of which can’t even be passed on to the consumer for the first two years) seems, on the face of it, to be a good thing. Except the originally suggested licensing fee for TBS locations had something this tax doesn’t: future potential awesomeness.

Yes, that was effectively just a tax with a different name. It would still trickle down and slightly raise the cost of beer. But here’s the thing: if it were a licensing fee, then maybe, in 10 years or whenever the term of this deal is up and can be changed (another thing I’ll deal with in a minute), maybe then Indie Alehouse could also apply for a license, pay the same sales-volume-based fee, and open their own privately-owned off-site retail shop. Or Muddy York. Or Steam Whistle. Or any damn brewer in the province. Because right now, aside from the worse-than-token-gesture ownership offer from The Beer Store, no brewer can operate their own off-site retail store, except the three biggest, none of whom are actually Canadian businesses. And that terrible ownership deal from The Beer Store is basically about as real as when you “adopt” an animal at the zoo. You don’t. You can’t take it home. You have no say on its enclosure or diet. The benefit is that, for most people, they actually care about helping an animal out. Nobody wants to help The Beer Store, aside from their owners, the unions they deal with, and the politicians they’ve bought they support. So tax over licensing fee? Yeah, bad, because it could have been so much better.

Size Matters

Okay, I hope I don’t have to explain why limiting the sales at grocery stores to 6s and singles sucks. It does. It is literally only there, to keep giving The Beer Store a leg-up, which they absolutely don’t need. The proposal also suggests a pilot program of selling 12s at 10 LCBO locations. The “test” is to see if it impacts The Beer Store’s sales. As in, they will only do it, if it doesn’t impact sales at The Beer Store. What the actual fuck? Right, “the monopoly is over”, except we, as a province, will still do everything in our power to not affect the bottom line of The Beer Store. So we will allow wider alcohol sales, only if it doesn’t hurt the company we say we’re done protecting.

Price Matters Too

Ever see a flyer, and think “Oh, I’ll go to Sobeys this week, to buy my box of Yummy-Os cereal because it’s on sale”?  This happens because Sobeys negotiates a deal with the makers of Yummy-Os and gets a good price for the product, and allows them to lower the price a bit. Maybe they eat a bit of the profit too, to really drop the price. Because if you want to save a bit on your Yummy-Os, maybe you’ll also do the rest of your shopping in the store too. Which means you choose Sobeys over Loblaws that shopping trip. This is how competition works. What happens if Yummy-Os price is set by the producer and has to be uniform at *every* store? Well, there is no competition. Sounds kind of dumb, I know, and I feel silly even explaining such an obvious concept, except that is exactly how beer will be sold. The producer will set the price, and the stores will buy it wholesale via the LCBO. No competition, lest a chain decide they might actually have a run at providing bother better service AND prices than The Beer Store……

But Any Change Is Good Change

I can hear (and have heard) many many people telling me to stop being such a negative Nelly. This is huge! Grocery stores sales! In our lifetime! We did this! Pat ourselves on the back!

Except, no, we didn’t do this. This has been “happening” for over 30 years. At which point it was identified that the system was already horrendously out of date. Celebrate the fact that it took us a generation to get the province to make the most minute changes to the system? No thanks.

I’ve heard the cries of “but now the ball is rolling, more change is coming!”

No, no it is not. Want to know why? Because the first 150 licenses won’t even be issued until May 2017. Yes, two years away. At that point, there will be a 10 year term to see how this all goes. At the end of the 10 years, they will reassess. At that point they can opt to continue in 5 year terms. I seriously wish I was making this stuff up.

Sure, we could possibly see some change if we elected a different party (hint, not the one that generally supports unions, which have enough skin in the game not to ignore). And we’re still a few years away from that election, so who is to say? But the idea that just sustained noise saying “hey, why not let us pay for the beer at the regular checkout?”, etc, is likely going to be filed under the “consider at the time of review”. Yes, about a dozen years from now.

And Here is the Crux

Conceptually, nothing has changed. Not a damn thing. Yes, we will eventually have 450 more places to buy beer. Yes, two rules that were so incomprehensible as to be comical will be repealed. But Ontario still bows at the altars of The Beer Store (and by proxy, their owners) and MADD, which I haven’t even mentioned yet. But remember when we were all kind of excited because beer would sold in an aisle like any other product, you would just need to be legal-age to purchase it? Yeah, no. Beer is scary, ruins lives, and must be treated like the highly dangerous product it is. If you don’t believe us look at these pictures of bloody shattered windshields and crying children.

In case you missed it, I’m not a fan of this type of thinking. If we are going to have an actual conversation about the very real problems that surround alcohol abuse (and make no mistake, drunk driving is a part of alcohol abuse) we cannot rely on cheap fear-mongering. We can’t cast the conversation as people who like beer vs people who don’t like maiming people and orphaning babies. We are adults. We are considering very complex problems. Let’s have these conversations in mature and sensible ways. Let’s not cave to the “won’t somebody think of the children” hysteria, and admit that our current system clearly doesn’t prevent either drunk driving or underage drinking, and engage the idea that these problems maybe won’t be solved by tightly controlling the sale of alcohol, but rather might be reduced through social programs.

But for now, nothing has changed in the attitude of the province. By allowing a small number of grocery stores (I know 450 sounds like a lot, but it doesn’t even increase the number of stores where you can buy beer by 50%) they have ended the “monopoly” The Beer Store had, by extending it to a handful of other enormous businesses who also, it happens, make rather generous political donations. Who are used to politicking. Who pay lobbyists. Who absolutely don’t need any help in the profit department.

They have continued protecting a gigantic operation that not only doesn’t need protection, but genuinely needs real open competition.

They have done almost nothing for the very small brewers of the province, who will employ 1000s of hard working Ontarians by the time the first grocery stores see case of beer on shelves.

I said this on Facebook regarding the two nice policy changes for the little guys, in light of everything else, but I’ll repeat it here.

“…I feel like those are crumbs brushed from the table where the province and The Beer Store have just invited the 5 biggest food retailers to come dine.”

Welcome to the future, it’s called the status quo.

Full Audio of this Editorial

3 Comments

  1. Jeffrey Poulin
    Posted April 21, 2015 at 5:26 pm | Permalink

    First written April 19, 2015

    Thirty years ago, in 1985, a few of us helped organize beer consumers in Ontario who clamoured for change. We, CAMRA Canada, advocated for them, and in the end produced what we thought were momentous alterations to the landscape. We lobbied the McGuinity government for beer change and in the end drafted to legislation. We had also asked for change to The Beer Store as part of our lobbying, but were refused point blank. A monopoly collective of three foreign brewers still ran the show in Ontario following, continuing to feed the government with money through its many back doors, the government installing its agents in TBS ranks as part of a very cozy arrangement. The deck was still stacked, all highly regulated and controlled.

    Once again, change has swept the province. 450 grocery stores will now carry beer, and The Beer Store will be required to freshen up and display all forms of craft to the front line. So, why are we not rejoicing in the trenches?

    Is it because the monopoly has survived, strengthened? Their swill will get 80% of the new grocery space plus plus. Promised reform that would have seen them chastened has not happened; the reverse has. They are emboldened now, their trolls laughing at us online this morning.

    Is it because the groundswell of small brewers in this province now have a clear path to success laid before them? I am not defining success as a golden goose, leading to easy riches, although in the alcohol business that is possible. I am defining small brewer success here as the ability for neighborhood brewers to be able to compete in a tough market, and survive. This is not yet guaranteed, or even enabled.

    What has been perpetuated is more of the same. 80% plus plus more of TBS swill will be seen and available, and there will be less of an opportunity for consumers to choose, not more.

    It is argued that change in Ontario is slow. But what is missing is an historical perspective on the situation from those who have lived it: change in Ontario is at the amusement of those who effect it, who control it. Thirty years ago we thought we had it, when in fact what was being handed down was a rigorous lesson in ‘Who’s Your Daddy’.

    We just got the same thing slapped in our faces this time around. As a consumer and Ontarian I feel cheated by Kathleen Wynne​. The pretense is that beer is like nitroglycerine… very dangerous. That is the ruse, and always has been. The reality is that beer is liquid gold, and he who controls it is king.

    It is this central need to control which consumers need to revolt against. Until Ontarians demand that the nanny state back off, we will be drinking overpriced chilled swill in bright cans until we die, a symbol of our serfdom.

  2. David Rickards
    Posted April 21, 2015 at 6:40 pm | Permalink

    There are some changes that will assist small (ie non-franchised) restaurants. I think those can be included in the good news portion of this “sweeping reform”.

    But yes, the majority of it is just TBS getting a little smokescreen to hide the fact that beer is still overly regulated in Ontario. Oh yeah…and the announcement was timed to hide the sale of Hydro One. The Government of Ontario is living up to its motto of panem et circenses (at this time it is Beer and PanAm Games).

  3. Angus
    Posted April 21, 2015 at 10:17 pm | Permalink

    There is another reason that this plan might turn out not to be the first step in a long-overdue process of liberalization, but rather the last. And that’s the political economy of the retail license auction. In one fell swoop, this move creates a constituency of license holders who will oppose any further opening-up of the system, much like the Beer Store has.

    If you paid (say) $200k for the privilege of selling beer in 2017, will you be eager to see those privileges extended to competitors in the future? Not a chance. And among existing license holders will be stores run by the powerful supermarket chains. This plan is practically guaranteed to take the corruption that already exists between TBS and Ontario politics and spread it further afield.

    Whenever the Liberals are given the option of doing the right thing and shutting down some gravy train, they always opt to invite a few more cronies on board instead.

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