Dan Malleck is associate professor of health sciences at Brock University in St. Catharines, Ont.
Although people often complain about the Liquor Control Board of Ontario's near-monopoly on booze distribution, the other side of provincial alcohol sales – the private monopoly known as the Beer Store – often flies under the radar.
So it shouldn't have been surprising that brewers were caught unprepared recently when former banker Ed Clark, who is leading an advisory panel on Ontario's government assets, said the Beer Store's owners should either pay the province franchise fees or surrender their beer-selling monopoly. Contrary to popular belief, the Beer Store is not a Crown corporation, and commenting on a private business was beyond Mr. Clark's mandate. But in doing so, he amplified a discussion that hasn't been loud enough.
The Beer Store is operated by Brewers Retail Inc., a monopoly owned by three major brewers. But many beer drinkers don't realize that these companies aren't Canadian-owned. They don't know that the iconic Canadian brand Labatt's Blue is brewed by multinational AB InBev (head office: Belgium), or that Molson Canadian is, ironically, half-American, brewed by Molson-Coors (head office: Colorado). Looking for a good Canadian craft beer? Don't look at Sleeman's; it's owned by Sapporo (head office: Tokyo).
Brewer's Retail operates Ontario's major beer distribution network, handling nearly 80 per cent of all beer sales in the province. The LCBO also sells beer, but is limited by an agreement with Brewer's Retail to selling only six-packs. Breweries (as with wineries and distilleries) may also sell out of their own stores on-site.
Here's where it gets confusing, and frustrating.
Other brewers, mostly small craft brewers, can also sell through the Beer Store, but must pay a listing fee – not just for each product, but for each package size. When Wellington County lists its Arkell Best Bitter in six- and 12-packs, it pays two fees to list one beer. These breweries also pay a "handling fee" per listing. These fees are paid only by non-owner breweries, and when fees exceed the costs, residuals go back to the Beer Store's owners. So what most would call profits (but the Beer Store calls fees) go to the very companies craft brewers are competing against.
It's a crazy system. It's also despised across the political spectrum. Those on the right dislike how it quashes free-market competition; those on the left dislike its private monopoly.
As with the LCBO, the Brewers Retail monopoly is a remnant of the end of prohibition. But unlike the LCBO, which was based upon similar models in other provinces and countries, the Beer Store is uniquely Ontarian.
In ending prohibition, the Ontario government created the LCBO to oversee the manufacture and sale of booze. LCBO stores often couldn't accommodate the volume that beer sales represented – barrels, kegs and bottles took up a lot of space – so the breweries were allowed to consolidate operations at co-operatively operated warehouses, inspected and overseen, of course, by the LCBO.
Thus was born the Brewer's Warehousing Co., which became Brewers Retail Inc.
Within a few years, many small breweries, financially crippled by prohibition, were bought by larger breweries, which then reduced the number of brands and expanded their markets. The march to monopolistic beer distribution had begun.
For all its flaws, the provincially owned LCBO does contribute profits to government coffers. (It wiped out Ontario's debt within a few years of its creation.) Contrast this with the Beer Store, whose profits enrich private, mostly foreign owners.
So if the Beer Store is so problematic, why haven't previous governments messed with it? That's the billion-dollar question. When premiers as diverse as David Peterson and Mike Harris suggested making changes, opposition came from several quarters. While various groups resisted privatizing liquor distribution, the big breweries themselves presented the main opposition to meddling with the Beer Store. Yet, as the craft brewing industry expands, consumers and brewers are demanding, finally, that action be taken.
Opening this Pandora's box will release a flurry of questions, opinions and suggestions, before revealing what may be the most substantial changes in provincial liquor distribution in almost a century. Grab a drink, because it should be quite a show.
Dan Malleck is the author of Try to Control Yourself: The Regulation of Public Drinking in Post-Prohibition Ontario.