Ontario grocers get green light to bid on licences to sell six-packs of beer

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Ontario's Liberal government has cut a deal to protect most of The Beer Store's lucrative private monopoly while allowing up to 450 large grocery stores to sell six-packs.

Under a 10-year pact between the province and the foreign brewing companies that own The Beer Store, the retailer will retain the exclusive right to sell 24-packs and most 12-packs in the province.

Grocery stores with more than 10,000 square feet of retail space will be allowed to bid for a licence to sell six-packs. The first tranche of 60 licences will be auctioned off before the end of the year. Meanwhile, 10 government-owned Liquor Control Board of Ontario stores will sell 12-packs; the rest will continue to only sell packs of six or fewer.

The Beer Store, for its part, will be obliged to dedicate 20 per cent of its shelf space to craft beer and spend $100-million sprucing up its stores, in exchange for keeping its grip on most of the beer market. A so-called beer ombudsman will help ensure The Beer Store follows these requirements, and also resolve complaints from small brewers and members of the public.

The Beer Store is owned by Molson, Labatt and Sleeman, which are in turn owned by Molson Coors, AB InBev and Sapporo. It currently retails about 80 per cent of the beer in province, with annual revenue of $2.5-billion. The Globe calculated earlier this year that The Beer Store's owners enjoy about $400-million in extra savings and revenue in Ontario as a result of the monopoly.

Once all the grocery store licences are auctioned off, the government estimates supermarkets will sell 10 per cent to 15 per cent of beer retailed in the province.

The government first announced these changes last spring; on Wednesday, Queen's Park codified the changes in a formal legal agreement with The Beer Store and opened bidding on the first grocery-store licences.

"It is an exciting day for people who love beer in Ontario," Premier Kathleen Wynne said at the Mill Street Brewery in Toronto, where she unveiled the deal alongside her adviser on government assets, the former banker Ed Clark. "By December, the first 60 grocery stores will receive their authorizations to sell beer in Ontario. Beer in grocery stores could be seen as a holiday present."

Ms. Wynne said the government decided to let The Beer Store keep most of its monopoly because the system keeps average beer prices down. She said The Beer Store's cartel arrangement allows it to achieve economies of scale and pass the savings on to customers.

"Ontario consumers enjoy some of the lowest beer prices in Canada, and this needs to remain the case. And that is actually the response to the question of: 'Well, why didn't you just blow the whole thing up and start again?' Because we actually have a distribution network that keeps prices low," she said.

The Beer Store's owners have donated $1.1-million over the past decade to Ontario politicians, most of them Liberals. The owners have also hired numerous high-ranking Liberals, including two former chiefs of staff to ex-premier Dalton McGuinty.

Under the new arrangement, all Ontario brewers will be allowed to join The Beer Store's ownership group, but the current owners will retain control of the company.

The Beer Store cheered the new deal. "Through periods of evolution and change in the beer industry, we always operated under a policy framework set out by the Government of Ontario and we will continue to work with the government now under the terms of the signed framework agreement," Beer Store president Ted Moroz said in a statement.

Some craft brewers, including Mill Street co-founder Steve Abrams, said the deal would also help their businesses. "These far-reaching changes … are really significant for us as an industry and as a province," he said. "None of this would have been possible had our Premier not set the wheels in motion."

But not all craft brewers were happy. Toronto's Indie Ale House, whose owner Jason Fisher has called for a freer system that would allow craft brewers and entrepreneurs to open their own retail stores, tweeted criticisms of the pact. "[Ontario] is for sale to the highest bidder," he tweeted.

Ontario's arrangement with The Beer Store – in which the government enforces a private monopoly for the benefit of foreign corporations – is somewhat unusual. It dates back to 1927, when Ontario repealed prohibition but gave control of beer retail to a co-operative of all Ontario brewers to keep tight control of sales and appease temperance-minded citizens.

Over the years, through mergers and acquisitions, The Beer Store ended up in the hands of just three brewers, which were then bought out by multinationals.