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Managing Craft brewers worry they will get shut out of Ontario convenience stores

Matt Johnston, owner of the Hamilton-based craft brewery Collective Arts, worries that smaller craft breweries will miss out on shelf space in convenience stores.

The Globe and Mail

Independent craft brewers in Ontario are worried that reforms allowing beer in convenience stores could spell trouble for their businesses. Without a minimum percentage of shelf space mandated for their products, they worry multinational beer giants may swallow up most – if not all – convenience-store space dedicated to alcohol.

Forthcoming reforms, triggered by the Ontario Progressive Conservative government’s decision to rip up its Beer Store agreement, come after years of craft brewers fighting for more access to consumers after getting frustrated with the control the Beer Store has over distribution and sales in the province.

The government has said the changes will offer craft brewers “greater reach and visibility,” but while such brewers are hopeful, some say the benefits from the reforms hinge on the province forcing convenience stores to stock their products.

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“If the changes put us in a situation where we now have 1,000 convenience stores who only carry macro beers owned by the multinationals … we could be in a worse situation,” said Matt Johnston, co-founder of Hamilton-based craft brewery Collective Arts.

Brewers such as Mr. Johnston would still have access to existing venues, including the LCBO, grocery stores, bars and restaurants, but carving out space in corner stores would be key to tapping new customers and picking up sales from existing ones who may move their purchases to convenience stores instead.

“Ontario is by far our most important market. For most Ontario craft brewers, it is their only market, so to hear that your livelihood may change drastically, is a very scary thing," Mr. Johnston said.

When the Ford government announced it was mulling Beer Store reforms, it trumpeted the move as a way to benefit craft brewers and bring consumers more choice by breaking up the monopoly held by the foreign brewing giants behind Labatt, Molson and Sleeman, which own the Beer Store and its hundreds of locations. Under a 10-year agreement signed with the previous Liberal government in 2015, beer was permitted to be sold in several hundred grocery stores, but the Beer Store retained its long-held, exclusive right to sell beer in 12- and 24-packs. The trio of big brewers has threatened legal action and warned about financial penalties should the agreement end.

Legislation killing the agreement was passed June 6, but has yet to be proclaimed.

If independent craft brewers can eke out considerable convenience-store space, some predict it’ll be a bright spot because they’ve long faced difficulties with the Beer Store. Listings at the Beer Store cost several thousand dollars for a single product and if brewers don’t meet sales minimums, they lose their listing. Stores are often arranged so customers order on an iPad or at a counter and their beer is fetched by an employee from a back storage area. The arrangement, independent craft brewers say, is more favourable for multinational goliaths blessed with deeper pockets and bigger brand names.

Mr. Johnston figures independent craft brewers need the government to mandate at least 50 per cent of corner-store space for their products in order for brewers like him to benefit from forthcoming reforms.

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“If you have convenience stores that only have two refrigerated doors … and they are only required to carry 20 per cent [craft beer], that could literally only be two products,” he said, pointing out that there are more than 200 craft brewers in the province.

“I think the smaller the store, the higher the percentage needs to be.”

Steve Beauchesne, the owner of Beau’s All Natural Brewing Company in Vankleek Hill, Ont., says he believes mandating convenience-store space for independent and small brewers is a reasonable ask because grocery stores and the LCBO both must keep 20 per cent for small brewers.

“If the new stores that are brought in don’t have the same requirements, then literally the large brewing companies could take over the shelf space to the point where small brewers have no access,” he said.

“I am one of the larger of the smaller brewers, so it wouldn’t necessarily impact us quite as much as it would a smaller brewery, but I think every independent brewery in the province would suffer if [a percentage] wasn’t put in place.”

Ontario Craft Brewers president Scott Simmons, whose organization represents about 100 of the almost 300 craft brewers in the province, is calling for the government to allow independent craft brewers to open stores that don’t have to be attached to a brewery and that can stock products from companies other than their own. His organization would also like to see an end to listing fees and a minimum of 30 per cent shelf space dedicated to their products.

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“If that is a government-mandated percentage that is great, but I think consumer demand will dictate that anyway,” said Mr. Simmons, who added there’s been an explosion in interest around craft beer in recent years.

Even amid increasing demand for such products, he said Beer Store conditions mean craft beer only makes up 2 per cent of sales at the Beer Store, but 13 per cent at the LCBO and more than 30 per cent in grocery stores.

Robert Gibson, a spokesman for Finance Minister Vic Fedeli, told The Globe and Mail in an e-mail that “at this point, it would be premature to speculate on the outcome of the process.”

But Mr. Simmons, Mr. Johnston and Mr. Beauchesne all feel good about the chances they’ll see some wins when final decisions are unveiled.

“Our basic strategy is to keep the lines of communication open,” Mr. Beauchesne said.

“Until we have got some assurances from government that this is going to be done in a way that protects the gains that we have made, we can’t be overjoyed yet."

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