Somebody teleported to one of Ontario’s ubiquitous Beer Stores might reasonably assume that the dreary set-up – with all the charm of a Soviet department store – is a government-run monopoly.
It is not. Rather, the province has to date opted for the worst of both worlds: the efficiency and customer service standards one would expect from government-run monopoly, but with profits flowing to private breweries.
In a long overdue move, Ontario Premier Doug Ford is looking to put an end to that oligopoly, dominated by foreign-owned Molson Coors Beverage Co. and Anheuser-Busch InBev SA. The province has not officially said what changes may be coming, but The Globe reported last week that convenience stores will be granted the right to sell beer.
Earlier tweaks have allowed grocery stores to sell six packs of beer, but sales of 12- and 24-packs are largely limited to the Beer Store. Within weeks, the province will need to give notice to Brewers Retail Inc. (the corporate name of the Beer Store chain) if it wants to cancel a 2015 master framework agreement, ending sales restrictions and opening the door for liberalizing beer sales in 2026.
The province has tried to move more quickly, passing legislation in 2019. At the time, Brewers Retail warned the Ontario government that terminating the master framework agreement would cost its organization billions of dollars in damages. That tells you all you need to know about who benefits from Ontario’s restrictive retail system for beer. (Hint: It’s not consumers.)
That effort died quietly but is now being resuscitated. There will be complications. The province will need to decide how to deal with bottle and can returns. Perhaps Brewers Retail could continue to provide that service; perhaps recycling can be spun out into a separate business, as is the case in other provinces.
More important is the role that the big breweries will play as distributors in any liberalized system, particularly since Brewers Retail has the right to continue its retail operations for seven years after the agreement with the province is terminated. A failure to ensure transparent and fair pricing for smaller vendors could strangle retail competition.
Ending the Beer Store quasi-monopoly should be the start, not the end, of reforming alcohol sales in Ontario. The role of the Liquor Control Board of Ontario (LCBO), which dominates non-beer retail sales of alcohol, also needs to be re-evaluated.
The immediate objection to any such proposal is that greater access to alcohol will increase consumption, along with associated social ills such as alcoholism and drunk driving. But that neo-temperance stance ignores a couple of salient points.
First, Ontario has the smallest number of alcohol outlets relative to population among the provinces. Second, there is not a straight-line extrapolation between a greater number of alcohol vendors and social ills. A 2017 study from the Canadian Institute for Health Information found that Quebec and Newfoundland, with greater alcohol availability, had low hospitalization rates.
The LCBO has evolved a great deal from its roots as a tool to corral the demon alcohol. Patrons can actually select bottles themselves rather than filling out a form and being handed their misbegotten purchase concealed in a paper bag, for instance. Today’s stores are relatively pleasant retail experiences, and the profits flow back to the provincial treasury.
Supporters of the status quo often cite those two factors as reasons to continue with the LCBO’s control – it is right there in the name, after all – of liquor retailing in Ontario. But that misses the point: Private retailers are more than willing to sell liquor, and indeed do so in several provinces. There is no principled reason to unduly restrict the private sector.
For the moment, privatization of the LCBO appears to be off the table, despite the billions of dollars a sale would deliver. A 2019 report commissioned by the Ford government summarily dismissed the idea, and the province has not since warmed to the idea.
Reform is still possible though, by allowing private vendors greater latitude to sell liquor and wine, along with beer. That would be in line with British Columbia’s system, where BC Liquor Stores compete with private vendors, and would build on Ontario’s modest pandemic-era liberalization.
Ontario is moving in the right direction, but the Ford government must ensure its reforms aren’t a half-measure.