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A Beer Store location in Oakville, Ont., shows the new branding and updated store style, with a walk in beer fridge, exposed wood and other new shopper-friendly features.

Deborah Baic/The Globe and Mail

The smell of stale beer is still there; the sometimes unavoidable by-product of a vast recycling program that leaves it to consumers to wash their empties. But olfactory suggestions aside, this is a Beer Store refreshed.

Gone is the joyless, industrial store where shoppers were forced to select their orders from a big plastic board to be hauled out from a dank warehouse. Rather, wall-mounted Samsung tablets can be used to browse, and an added cooler, framed in exposed wood, lets beer drinkers actually touch the product. Upbeat music plays and amber lampshades hang above the cash registers, manned by staff in uniforms labelled "Beer enthusiast" or "Beer champion," newly trained to suggest flavours and food pairings. In a Facebook-style re-brand, the "The" is gone. It is now, simply, Beer Store.

The test project by Ontario's beer oligopoly – most sales are controlled by three large multinational brewers – responds to years of customer frustration, and has been rolled out in four Greater Toronto stores, just in time for the May long weekend. In some pilot locations, a wall has been erected separating the returns area, and eliminating the smell altogether. "We're trying to enhance the customer experience," said Andrea Randolph, vice-president of retail at Beer Store.

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It's just one example of how liquor retailers across the country – both private and government-run – are attempting to make shopping for beer more pleasant. While beer is still the dominant alcoholic beverage, its market share has been slipping. Sales peaked in 1993, when it held 53 per cent of the alcoholic beverage market, while wine drew 18 per cent. By 2012, beer's market share was down to 44 per cent, and wine sales grew to 31 per cent of sales.

As the $20.9-billion alcoholic beverage market shifts, beer makers have launched a slew of new products to appeal to consumers' desire for variety. Now, it seems, attention has turned to the places where beer is sold.

The B.C. Liquor Distribution Branch has over the last five years introduced 22 "signature stores" offering "enhanced presentation and broader selection," and will roll out more changes over the next year and a half.

In Manitoba, where there is a mix of public and private liquor retailers, the government opened four Liquor Mart Express mini-stores, with the goal "to provide greater customer service and refresh Manitoba's retail model."

The Prince Edward Island Liquor Control Commission recently announced a re-branding of its government-run liquor stores, with a new name: "PEI Liquor." It is also changing its colour scheme, shelving layout and design of its stores.

The Société des alcools du Québec, which does not own its retail outlets, invests roughly $13-million per year on improving its look, refreshing its stores each time a lease comes up.

And the Nova Scotia Liquor Corp., which renovated the front of its stores years ago, has been working to overhaul the "cold zone" back room where customers can browse, to make it look less like a warehouse, with nicer-looking signs and more educational elements.

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Liquor retailers have no choice but to shift their shopping environments, and marketing, said NSLC spokesman Mike Maloney. He looks to grocery stores, with better lighting, wider aisles and attractive displays. "The grocery chains have changed dramatically, they've upped their game … We're playing catch-up."

While the Ontario Beer Store's newly renovated locations have generated some buzz, its business model, which has its roots in the post-Prohibition late 1920s, remains unchanged. Perhaps because of its staid image and slow pace of change, many Ontarians mistake the Beer Store for a government-run entity – the Liquor Control Board of Ontario's shabby cousin. In fact, it is a near monopoly, controlled by multinationals: Labatt Brewing Co. Ltd. (owned by Belgium-based Anheuser-Busch InBev SA), Molson Coors Brewing Co. (merged with Coors and based in Denver and Montreal), and Sleeman Breweries Ltd. (owned by Japan-based Sapporo Breweries Ltd.)

In the limited coolers of the old-style stores, shelf space is allocated by a beer's market share – the brands of the firms who run the retail outlet get primacy. As the Beer Store opens up the tightly controlled shopping process, the same can't be said for shelf space for craft brews.

"The first question that occurs to me is, which brands are going to be in those coolers? It wouldn't surprise me if it's the usual suspects," said Darren Smith, president of Lake of Bays Brewing Co. in Baysville, Ont. "The tablet is nice, but you're still browsing, without being able to touch the product, from a massive list of beers."

According to Gary McMullen, president and head brewer at Muskoka Brewery, and chairman of industry association Ontario Craft Brewers, the refreshed stores amount to little more than a "facelift."

"It doesn't change the fundamentals of the system … I don't know of any industry in the world where one company has to sell their product through another company that's a competitor. It's like Ford having to sell their cars through a Honda dealership," Mr. McMullen said. Behind the makeover, he said, is a system that makes it difficult and expensive (because of listing fees the Beer Store charges to carry products) to get products in front of customers.

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"It's absolutely critical. It's the way that almost any retail outlet functions in the world: the whole idea is that the customer can see and feel the product they're about to purchase," said Lake of Bays' Mr. Smith. "If you don't have mainstream recognition, that's all you have."

The majority of Mr. Smith's sales come not from the Beer Store, he says, but from the LCBO – common for the smaller craft beers. In fact, as craft beers have become more popular, and as the LCBO has done work to refurbish its retail environment, it has stolen a small amount of market share away from the Beer Store. In the 2008-09 fiscal year, the LCBO had 22.3 per cent of sales in the province with the remainder going to the Beer Store. By 2012-13, the LCBO's share had risen to 25 per cent.

The LCBO's popularity among a certain segment of beer drinkers hasn't gone unnoticed. In Toronto's trendy Distillery District and Liberty Village neighbourhoods, the Beer Store opened two "Beer Boutique" locations in 2011 to woo urban dwellers more attracted to the LCBO than the dingy Soviet-feel of a traditional store. Features include exposed brick walls, displays with rustic wood casks, and much, much more cooler space to allow customers to handle their own beer.

The Beer Store says the more recent changes have nothing to do with the noise about changing the model of beer sales in Ontario, or the myriad criticisms of that model. Ms. Randolph says they were hearing from customers that the stores felt old. "These stores needed a refresh," Ms. Randolph said. "If it turns out this is what people like … then you determine the fate of the brand."



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The cost of selling beer for any brands other than those owned by the firms that run Beer Store has been going up, according to the craft brewers. Here's how the system works:

At the LCBO: Product sale and placement is essentially at the discretion of the Liquor Control Board of Ontario. The Board will regularly put out product calls, outlining what they are looking for to add to their offerings. Once their brands are selected, owners have the right to get in touch with store managers to ask to be sold at each location. There are no listing fees. However, the LCBO charges fees for point-of-purchase marketing such as better aisle placement or bonus Air Miles offers.

At the Beer Store: The retailer charges a listing fee to brewers for the privilege of being sold at the Beer Store – which includes no guarantee of shelf placement.

The one-time fee starts with a base charge of $2,848.93.

Then, for each product and each format of that product (e.g. 6-pack cans, 12-pack bottles, etc.) there is a separate fee of $227.92 per store for the first 233 stores, $53.56 per store for the rest, and $535.63 per store for the 37 locations classified as "constrained" stores.

To secure placement at all 446 stores province-wide, this all adds up to a tab of more than $82,000 per packaged product.

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The post-Prohibition coalition

How did Ontario end up with a privately-controlled quasi-monopoly on beer sales, anyway? It goes all the way back to Prohibition, which was repealed in the province in 1927. Like others, Ontario's government set up a liquor control board to oversee the newly legalized sale and import of alcohol. And since it can be an addictive substance, harm reduction was also part of the mandate.

At the time, beer was still sold mostly in kegs and was not pasteurized. The LCBO did not "want to manage the unique challenges related to handling beer," according to the retailer, so it negotiated with the beer industry at the time to create the Brewers Warehousing Co. Ltd. (which is now officially called Brewers Retail Inc., but operates under the Beer Store name.) It operated under the Liquor Control Act of Ontario, which passed in April, 1927, and a provincial charter was granted to Brewers Warehousing Co. Ltd. on Oct. 26, 1927. The company also served as the retailing arm of 35 regional brewers, and in order to sell beer through its system, these brewers had to buy shares and become part-owners. Over time, the number of owners has gone up and down, and through consolidation in the industry the original 35 brewers have dwindled to just three currently. They are licensed to operate by the Alcohol and Gaming Commission of Ontario, and governed under the Liquor Control Act. But critics say there is no official oversight, and nothing about fair treatment of non-owner brewers in the Act.

The Beer Store now sells more than 370 brands from more than 90 brewers in more than 1,000 package combinations. According to TBS, 70 per cent of the brands listed for sale are not owned by the companies who run the beer store. (Critics say, however, that if you look at what's sold by volume, a large percentage of what's stocked is from owners or affiliates.)

Source: Beer Store, staff

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