The Beer Store

The Beer Store is the trading name for Brewers Retail, a privately owned chain of retail outlets selling beer and other malt beverages in the province of Ontario, Canada, founded in 1927. Owned at its inception by a consortium of Ontario-based brewers, subsequent national and international consolidation has resulted in control now being shared by three multinational brewing companies, two foreign owned and one which is 50% controlled by non-Canadian interests.^{[nb 1]}

Under Ontario's Liquor Control Act, The Beer Store was formerly the only retailer permitted to sell beer for off-site consumption, besides stores on the site of a brewery, locations of the provincial government-owned Liquor Control Board of Ontario (LCBO), and LCBO-authorized agency stores in certain smaller communities.^[3] The act and the company's articles of incorporation further stipulate that Brewers Retail cannot sell "hard liquor" (spirits), or consumer goods (like groceries).

The Beer Store's monopoly ended on December 15, 2015, with the legalization of 6-pack beer sales at selected supermarkets in urban centres due to concerns over the retailer's near-monopoly position. A 2013 Angus Reid survey commissioned by the Ontario Convenience Stores Association found that 13% of Ontario residents were aware that "The Beer Store monopoly is not a government-owned enterprise".^[4][5]

Company

A Beer Store shop.

Forty-nine percent of the company is owned by the Labatt arm of Anheuser-Busch InBev of Belgium; forty-nine percent is owned by Molson Coors Brewing Company which has headquarters in both the United States and Canada, and is jointly controlled by the namesake families;^[2] and the remaining two percent is owned by Sleeman Breweries, an arm of Sapporo of Japan.

It is regulated by the Alcohol and Gaming Commission of Ontario (AGCO), an agency of the Government of Ontario. As of December 2014, the company operates 448 retail stores which sell beer to the general public. Owing to its legal monopoly The Beer Store (TBS) is the largest distributor of domestic beer to Ontario bars and restaurants, over 16,000 of which are licensed to sell alcohol. The LCBO sells imported beer to bars and restaurants. Many imported beers are available at The Beer Store, but they are imported by the LCBO and then sold to TBS.

TBS has a policy of accepting any brewer in the world to sell its product, as long as the brewer meets the requirements set by the LCBO.^[6] Furthermore, unlike many other retailers, a brewer is given flexibility with regards to how many and which stores it would like to sell its product in.^[6]

Currently, workers are represented by the United Food and Commercial Workers (UFCW) Local 12R24 union.

History

The company began in 1927, with the end of prohibition in Ontario. Although prohibition had proven to be unsuccessful, the provincial government still needed to placate angry temperance advocates and agreed that beer would be sold through a single network of stores. However, the government did not want to operate this network itself (as was done in some other Canadian provinces), and so permitted brewers to organize the Brewers Warehousing Company Ltd., which later became Brewers Retail/The Beer Store.

The Beer Store today

The Beer Store truck

Estimated profits

The Beer Store operates as a not-for-profit entity, however, a study in August 2013 by professor Anindya Sen of the University of Waterloo stated that the near-monopoly the Beer Store has in Ontario allows it to capture as much as $700 million in "incremental profits" each year.^[7] The study focused on beer prices for 24-bottle (341 ml) cases of beer. The data on beer prices were collected from two major grocery stores in Quebec, and from The Beer Store in Ontario. Beer prices were similar between different grocery stores in Quebec. However, there were significant differences between average prices in Quebec and Ontario. For example, the pre-tax average price for 24-bottle packs of brands including Molson Canadian, Molson Dry, Coors Light, Budweiser and Bud Light were $25.95 in Quebec and $35.56 at The Beer Store in Ontario.^[7]

Green policies

Since 1927, the Beer Store has refunded deposits on all empty beer containers purchased in Ontario. In February 2007 the Ontario Deposit Return Program (ODRP) was launched by the Government of Ontario. The ODRP’s goal is to ensure that 100 per cent of all packaging sold at the LCBO follows the same path of all packaging sold at the Beer Store, to be reused or recycled.^[8] All alcoholic beverage containers purchased in Ontario are accepted for deposit return at any Beer Store location that returns empty containers. ODRP continues to make a meaningful contribution to Ontario’s waste diversion objectives, with the return rate increasing more than 16 percentage points since its first year of operation in 2007. Between the ODRP and Blue Box, an estimated 63,909 additional tonnes of glass is being diverted from Ontario landfills. These materials continue to be directed toward higher-end recycling supporting Ontario’s green economy and generating environmental benefits. “This success means we have recycling factories making new products, instead of higher piles of waste in landfills,” said Jim Bradley, Ontario Minister of the Environment, in an April 2014 statement.^[9] As a result of the ODRP, Ontario is now the principal source of quality glass cullet for Ontario glass manufacturing – previously Ontario glass manufacturers had to source glass cullet from other jurisdictions to support production. In 2013-2014, the Beer Store and ODRP program combined, avoided 196,332 tonnes of GHG emissions - equivalent to taking over 41,333 cars and trucks off Ontario roads.^[10] Combined, these programs avoided over 2,694,461 gigajoules of energy - equivalent to over $41 million of oil (Note ($94.73/barrel and 6.1 GJ/barrel of oil).

Between 2013-2014, the Beer Store achieved a system-wide recovery and re-use rate of 99 per cent for the industry standard bottles, which are reused 12 to 15 times.^[9] The Beer Store has received praise from local and national organizations including the Conservation Council of Ontario, Environmental Defence Canada, The Recycling Council of Ontario, and Toronto Environmental Alliance.^[11]

TBS’ recycling efforts translate into cost savings for municipal governments as municipalities need not spend tax revenue on recycling packaging that TBS sells. In 2008, TBS estimated that its return program has saved taxpayers $38 million in avoided waste management and recycling program costs per year.^[12] In 2012, the TBS estimated that savings had increaed to $40 million with 94% of beer containers and 81% of LCBO containers recycled.^[13]

The Beer Store also is actively engaged in reducing its carbon footprint by finding innovative ways to reduce its energy consumption, a key input for any retail organization, especially one with a need to constantly refrigerate its product.^[12] A notable initiative is the use outside air to cool beer when outside temperatures provide for such a tactic.^[12]

Pierre Sadik, Senior Policy Adviser at the David Suzuki Foundation has stated, "Ontarians should be proud of The Beer Store's environmental achievements. It's time businesses across the province follow The Beer Store's lead and turn their talk about waste diversion into real action."^[11]

Corporate responsibility

TBS maintains a strict policy of WeID 25 and the right to refuse any customer who appears intoxicated or who is underage. Furthermore, TBS empowers its retail management to actively monitor and track every employee’s refusal rate to ensure proper conformance to company policy.^[12] In 2013, TBS challenged over 3.7 million sales of beer at its retail locations, refusing service for 59,000 individuals.^[14]

Returns for Leukemia

Since 2006 The Beer Store, UFCW Local 12R24 (the union representing its employees), and the Leukemia & Lymphoma Society of Canada have partnered together to help raise awareness and funds for blood cancer research through the collection of empty bottles.^[15] The bottle drive is formally called "Returns for Leukemia" but many refer to it as the "Leukemia Bottle Drive". It is held on the last Saturday and Sunday of May and is also the world's largest bottle drive. Over the last 10 years, through donations of cash and empties, the event has raised over $10 million for the cause.

Criticism

Brewer neutrality

The Beer Store employees are not allowed to recommend one brand over another. Staff can tell customers about the products but cannot encourage customers to choose a specific brand. This policy is known as brewer neutrality. The Beer Store is permitted to charge non-shareholding breweries listing fees, for each beer carried in stock, that many critics perceive as substantial.^[16] Listing fees have been criticized as restricting competition in the huge Ontario beer market, especially from smaller brewers who often cannot afford the fees, especially for multiple brands.

The Beer Store historically operated on a cost-recovery basis. This kept listing fees at a minimum for smaller breweries. In fact, TBS actively engages in a discounted program to help small brewers gain entry into its retail outlets. Furthermore, TBS provides reduced volume rates for brewers who produce under 75,000 hectoliters and steeper discounts for brewers who produce under 25,000 hectoliters.^[12] The current Brewers Retail Inc. ("BRI") User Agreement (2010) that brewers are asked to sign includes a statement that is a departure from this cost-recovery tradition. It states, "...the cost to BRI of providing a service shall include a reasonable margin of profit to BRI". Previous agreements read, ..."the cost to BRI of providing a service shall include a reasonable margin of profit that was envisioned in the original Memorandum of Understanding" (MOU). The removal of any reference to the MOU is problematic for small craft brewers who must access consumers through their largest competitors.

When one compares certain policies that The Beer Store has now implemented to agreements laid out in the Canada-United States Memorandum of Understanding on Provincial Beer Marketing Practices,^[17] it appears that some of the current policies violate the MOU. One example is the universal listing policy. This policy assured brewers that they would be able to have at least one stock-keeping unit (SKU) of a listed brand in any store they desired in spite of sales volume, so long as the required listing fee was paid. The current policy allows The Beer Store to delist any and all SKUs if they do not meet certain sales thresholds. Historically the MOU was a fundamental tenet in determining Beer Store operating policies.

Some Canadian provinces have since allowed privately owned stores to compete for sales of beer and wine while retaining tighter controls over the sale of spirits, while Alberta has privatized all retail liquor stores. In Ontario no changes have been made, and The Beer Store continues to sell over 80% of the beer sold in the province, which many critics believe constitutes a monopoly. However, TBS must compete for retail sales with the government-owned LCBO and individual brewer retailers, located on-site at most Ontario breweries.

With regards to distribution, TBS operates its own fleet and provides service to over 16,000 licensed establishments in Ontario. TBS also delivers beer to Beer Stores on behalf of brewers who may choose to avoid the high cost of self-distributing. Critics have stated that TBS does not provide any credit terms for licensed clients, forcing them to pay cash on delivery, causing friction between TBS and the hospitality industry. However, TBS does provide credit terms and flexible payment options for customers. Customers may receive up to seven days of credit terms.^[18]

Consumer prices

Critics say TBS constitutes a foreign-owned monopoly over retail beer sales in Ontario, costing the consumer more in the long run in terms of convenience and price. However, while the consumer price index (CPI) rose 8.37% between 2004 and 2008, the consumer price for beer actually fell in Ontario between these years from $3.60 per hectoliter to $3.57 per hectoliter.^[12][19]

Critics state that if retail beer sales were opened up, then the average price to the consumer would drop. TBS has stated that it believes the price of beer will increase if this happens.

Political controversy

The Beer Store has been subject to criticism following the Molson-Coors merger, whose 49% stake in TBS was the last 100% Canadian-owned share of the venture under the pre-merger Molson Breweries. In 2005, Ontario's alcohol laws were reviewed and proposals to allow the sale of beer in grocery and convenience stores were put forth. A report called the Beverage Alcohol System Review was released on March 24, 2005 by the Ontario Government. However, the report’s findings dealt centrally with the LCBO and the economic and social impact of its privatization.

An online petition was started by a private citizen, Derek Forward, to ask the provincial government to end the monopoly enjoyed by the Beer Store. The petition has received coverage in the Toronto Star, and has generated enough support to allow it to be formally presented to the provincial legislature in the fall of 2008 for consideration (petition No. P–146: "Practice and arrangement of retailing beer"). However, on December 9, 2008, the Ontario government dismissed the petition citing the effectiveness of the TBS system.^[20]

At the start of the 2007 provincial election campaign, The Brick Brewing Company of Waterloo made headlines when it claimed The Beer Store engaged in a number of discriminatory practices and policies, such as restrictions on price advertising, for causing a decline in company sales. TBS representatives denied that their policies are hurting small brewers and implicitly questioned the timing of the Brick Brewing Company's statement, suggesting that in their view it is unethical for a brewery to use an electoral campaign to forward self-interests.^[21] Additionally, Brick claimed that TBS allegedly used monopolistic tactics to force what is now Ontario's largest independent brewer to stop offering beer in "Stubbies" by withholding supplies of industry standard "long-necked" bottles. The Beer Store claimed that Brick signed an agreement in 1992 to use the industry standard bottle and Brick said it never signed such an agreement. This dispute was settled out of court with the terms of the settlement undisclosed.^[22] Brick has since stopped selling beer in "stubbies" because the cost was too high.

A July 2008 Toronto Star article estimated the three foreign entities that own TBS earned $1 billion in profit per year in Ontario.^[23]

Ontario Craft Brewers is the main lobby group for Ontario's smaller brewers, and has been increasingly critical of BRI/TBS. The 29 OCB members currently employ several thousand Ontarians. OCB wants to either acquire shares in TBS or be permitted to set up their own competing chain. Premier McGuinty responded by saying that his government would not consider any application to form a competing chain, and that his government would not consider compelling TBS shareholders to sell any shares, although some Liberal and Conservative backbenchers have said they would expect BRI to at least negotiate in good faith with craft brewers who made a serious offer. BRI responded by saying that it was not considering and would not consider selling shares at any price, and that they do more than enough to accommodate non-shareholding brewers already. Canada's National Brewers (the lobby group that represents the BRI shareholders) further said that in the event OCB did get to set up a competing chain, they would refuse to stock their products there.^[24]

In February 2012, the website Canadian Beer News reported that The Beer Store has made thousands of dollars worth of political donations to the BC Liberal Party and BC NDP. The report noted that it was odd for an Ontario-based company to be making such large donations to political parties in another province, and suggested that the co-owning breweries were funneling this money through The Beer Store in an attempt to put pressure on the BC government to give their brands favourable placements in BC Liquor stores.^[25]

Non-competitive business practices

On December 9, 2014, Toronto Star investigative journalist Martin Regg Cohn exposed an agreement between The Beer Store and the LCBO to limit competition and the products offered to Ontario beer drinkers.^[26][27] The document of June 1, 2000, provided to him by a whistleblower, entitled “Serving Ontario Beer Consumers — Framework for Improved Co-operation and Planning Between the LCBO and BRI", was signed by then head of the LCBO Andrew S. Brandt and head of BRI Daver Perkins, of which a copy was sent to Ministry of Consumer & Commercial Relations Deputy Minister Sandra Lang.^[27]

The agreement ensured that the LCBO would not offer beer products in large format sizes, being cases of 12 or 24 beers, it would not sell major brands to restaurants or bars, and would inform the Beer Store of any store it was planning to open in a new community.^{[28] [29]}

Regg Cohn says both retail consumers and the food and beverage industry are being gouged by this non-competitive business agreement. Former TD Bank CEO Ed Clark, in a 2014 report to the government on maximizing assets, says that the LCBO (and the Government of Ontario) forgoes $515 million of revenue by not allowing sales of larger format beer packages and forgoes $500 million of revenue by not selling major brands to restaurants.^[26]

Andrew S. Brandt, former highly successful head of the LCBO, is very critical of the agreement, and says it was forced upon him by the then Mike Harris Progressive Conservative government.^[28] When Regg Cohn questioned the Beer Store representatives about the agreement, suggesting it is collusion, the reply from the BRI lawyer Michael A. Eizenga of Bennett Jones LLP stated the "use of the term 'collusion' which has significant legal meaning," and "This is an inaccurate and inappropriate characterization, to which my client objects."^[30]

Liberal Finance Minister Charles Sousa, in response to these revelations, says he has "got the investigation underway" and that "I'm trying to ensure that what you’re suggesting doesn’t happen any further ... You're right, there's a monopoly, a duopoly, oligopoly — call it what you will."^[30]

On December 10, 2014, Restaurants Canada filed an official complaint with the Competition Bureau. "'We did not know the depth of the complicity,' it said, pointing to 'new and disturbing information' in the Star that detailed price gouging of restaurants and bars forced to buy from The Beer Store ... A Competition Bureau spokesperson said it is 'reviewing it to determine whether the conduct in question could raise concerns under the criminal or civil provisions in the Competition Act.'"^[30]

Also on January 15, 2015, Michael Hassell, co-owner and chief legal counsel of Barge Craft Beer Distribution & Retail Co. in Toronto, filed a notice with the Government of Ontario threatening legal action within 60 days. Hassell asked for the provision of the Ontario Liquor Act which provides for the Beer Store's monopolopy be changed to allow any licensed retailer to sell beer in Ontario. ^[31]

On April 15, 2015, Premier of Ontario Kathleen Wynne announced changes to provincial liquor laws that would, among other changes, allow up to 450 supermarkets in "urban population centres" (roughly equating the number of Beer Store locations) to be authorized to sell beer subject to conditions, require The Beer Store the improve the placement and marketing of Ontario craft brews, and allow LCBO locations to trial carrying 12-packs. Wynne stated that The Beer Store had become a "de-facto monopoly controlled by a small number of companies".^[32] The new regulations took effect on December 15, 2015 with 58 designated supermarkets, and additional locations to be added in the future; all products must be below 7.1% alcohol by volume, and at least 20% of a store's stock must be Ontario craft brews. Loblaw Companies elected to go beyond the minimum quota and committed to stock 50% Ontario craft brews at its participating stores, in an effort to provide a wider array of options for "beer enthusiasts".^[33]

As map publisher

In the 1980s, Brewers Retail published a directory of its retail locations in a booklet with a small map to each location. It had a picture of an animal, (a penguin, for example) on the covers. The booklet when closed was approximately 4 by 3 inches (10.2 cm × 7.6 cm). The 1972 version issued by Brewers Retail had cartography by Rand McNally.^[34]

In popular culture

In the film Strange Brew the McKenzie Brothers visit a Brewers Retail store demanding a refund after they attempt to return a bottle of beer that contained a mouse (the mouse was however placed in the bottle by the brothers). Due to the nature of the scene, Brewers Retail refused to allow the use of one of their actual stores for the filming, and also refused to allow the use of the name "Brewers Retail". In response, the filmmakers built their own replica store, and called it "The Beer Store". Coincidentally, several years later, Brewers Retail changed the name of its stores to "The Beer Store", and they continue to operate under this name.

The Beer Store was also showcased in episodes of Late Night with Conan O'Brien during O'Brien's week-long tenure in Toronto during the week of February 10, 2004.

Related companies

Brewers' Distributor Ltd. (BDL) operates in Western Canada and is owned by Anheuser-Busch InBev and Molson-Coors (Sleeman has its own distribution operation in the West). Unlike BRI, BDL only warehouses and distributes beer and is not in the retail business.

Footnotes

References

External links

• Media related to The Beer Store at Wikimedia Commons
• Official website