Finance Minister Charles Sousa says there is profit in The Beer Store and consumers should get more of the benefit.
Following the Globe's calculation that the private monopoly is worth $400-million a year to The Beer Store's owners, Mr. Sousa on Friday reaffirmed his pledge to "maximize" the value of the beer market to the province.
"They will argue that they are a not-for-profit organization, and we argue that there is some profit in there," Mr. Sousa said before holding pre-budget consultations at a Toronto church. "We want to make certain that that's distributed accordingly."
The Beer Store's owners – Molson Coors, AB InBev and Sapporo – say that, because the company's retail system just covers its costs, they are running a non-profit enterprise. But this does not account for the revenue of the brewers themselves, who benefit from controlling a retail monopoly on most of the province's beer. The owners contend that these benefits are passed on to consumers, not pocketed by the brewers.
A government panel, led by former banker Ed Clark, has recommended Mr. Sousa get more money out of The Beer Store by levying a franchising fee on each of the company's more than 400 retailing outlets. Mr. Clark has also accused The Beer Store of pushing its owners' beer brands over beers made by other breweries.
Meanwhile, some restaurateurs, craft brewers and convenience store owners are calling for The Beer Store's monopoly to be abolished, so more beer could be sold at the LCBO or other retailers.
Mr. Clark's final report is expected within weeks. Mr. Sousa has indicated he will decide what to do with The Beer Store by the spring budget.
"There's also some inherent value in that system that can benefit consumers more, and we're looking at ways to maximize," Mr. Sousa said. He described The Beer Store as an "efficient system," adding that he understands cases of beer are priced lower in Ontario than in other provinces as a result.
The Beer Store's efficiencies and economies of scale – derived from pooling all distribution, warehousing, retail and logistics costs in a single system – result in cost savings for brewers. The Globe calculated that these efficiencies add up to $246-million in cost savings for The Beer Store's owners, compared to if they instead had the same distribution and retailing costs as in Quebec.
Mr. Clark has said Beer Store owners further benefit from additional market share by controlling the retail network. The Globe calculated the value of this additional market share at $150-million.
The cost savings and additional market share mean the brewers' monopoly is worth $396-million.
The Beer Store, however, says the system's efficiencies are actually passed on to consumers and the government. The company says the average retail price of a 24 case, or equivalent volume, is $33.31 in Ontario, compared to $33.96 in Quebec. Its figures also say the provincial government reaps $10.63 per 24 in tax – adding up to roughly $591-million annually – compared to a rate of just $7.04 in Quebec.
"These data illustrate that the Beer Store's efficiencies are not flowing to brewers as higher profits – they are flowing to government as high taxes and consumers as lower prices," Jeff Newton, president of the group that represents The Beer Store's owners, said in a statement Friday.
Mr. Newton said the efficiencies "deliver lower retail and distribution costs that benefit all brewers as well as beer consumers."
The question of price, however, is contentious. The Beer Store's estimate uses AC Nielsen data that looked at several Quebec grocery stores, but excluded more than half the market. A separate estimate for the C.D. Howe Institute found beer prices were an average of six per cent lower in Quebec than in Ontario – a figure The Beer Store says is not correct.