Panel recommends squeezing more money out of Beer Store, LCBO

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The Ontario government should take away the Beer Store's monopoly if its owners won't pony up more cash. That is the stark advice of Ed Clark, the veteran banker appointed by Premier Kathleen Wynne to get more money out of the province's liquor-distribution and electricity systems.

The private cartel that owns the Beer Store – made up of brewing giants Molson Coors, Anheuser-Busch InBev and Sapporo – has threatened higher beer prices if the province forces it to pay more for its monopoly. But Mr. Clark said if the Beer Store doesn't agree to pay up and still keep prices low, Queen's Park can simply take the monopoly and auction it off to someone else.

"They say they don't want to give it up, but they don't want to pay for it. We don't think that's a reasonable position," Mr. Clark told reporters Thursday after releasing an interim report on his council's recommendations. "If you really think this thing is valueless, then give it up and we'll auction it off and see whether people would pay something for it."

The largest revenue source in Mr. Clark's report is Hydro One's electricity distribution business, which he recommended selling to the private sector. Mr. Clark estimated the province could net up to $3-billion for it. Under the proposal, the province would hive off the distribution businesses, including Hydro One Brampton, encourage them to merge with other electricity companies and then sell the majority of shares.

To compensate for the lost dividends that Hydro One pays the government, Mr. Clark's council proposes squeezing both the Beer Store and the government-owned Liquor Control Board of Ontario.

Ontario Finance Minister Charles Sousa, who is expected to include Mr. Clark's recommendations in Monday's fall economic update, signalled he would push forward with the proposals. The council's job now is to come up with more detail on how to implement the plan.

"The government agrees with the council's initial proposals, and is asking the council to move to the second phase of its review," Mr. Sousa said in a statement. "Business-led decisions that optimize our assets ensure that every public dollar goes further for the people of Ontario."

The group that represents the Beer Store's owners repeated its threat of higher prices Thursday.

"Many of the Council's proposals would raise the cost of beer in Ontario. Higher costs mean higher prices for consumers," Jeff Newton, president of Canada's National Brewers, wrote in an e-mail.

The Beer Store's monopoly is spelled out in the Beer Framework Agreement, a deal between the Beer Store and the LCBO. This agreement can be terminated with six months' notice.

Mr. Clark also wants the Beer Store to agree to treat smaller breweries fairly. Currently, he said, the Beer Store gives preference to big-brand beers while making smaller craft beers harder to find. Breweries not part of the Beer Store's ownership group must pay the cartel a fee in exchange for selling their products at the Beer Store.

The council is also calling on the government to allow craft brewers to set up their own stores, which would both compete with the LCBO and give them another option for selling outside the Beer Store. The LCBO said it was willing to implement Mr. Clark's recommendations.

"With government support, LCBO can and will make the changes necessary to further maximize profitability and enhance the customer experience, while maintaining socially responsible service," spokeswoman Heather MacGregor said.