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Breaking Up is Hard to Do: Ontario and the Beer Cartel
Why are three foreign beer giants allowed to run a government-protected monopoly?

In Ontario, drinking on long weekends involves planning ahead. Not only are stores closed for civic holidays, but you may have to schedule an extra hour of shopping in the days before, so that you can stand in lines that snake through all of the aisles of liquor you’ve traditionally avoided.  While it may be an opportune time to familiarize yourself with the various varieties of peach schnapps the LCBO offers, the whole experience might be more palatable if they let you open a beer and get social with your sweaty partners in frustration. Unfortunately, drinking at liquor stores is frowned upon by law, and in Toronto, conversing with strangers is taken for a sign of madness. Should the LCBO employees go on strike, as they have threatened to do this Victoria Day weekend, Ontarians will either have to endure longer lines at The Beer Store or purchase their bottles of Canadian Club a week in advance. 

The Ontario Convenience Stores Association has taken advantage of the looming strike to agitate for the right to sell beer and wine at corner stores.   “The threat of an LCBO strike highlights the need for Ontario to modernize its system of alcohol retailing – it hasn’t changed since 1927 and Ontario consumers are paying the price today,” said OCSA CEO Dave Bryans.  Maybe so, but it is likely that beer, not wine, will be the typical Canadian’s preferred method of toasting the dead queen. Eighty per cent of Ontario’s beer market is controlled by The Beer Store, making it the OCSA’s chief antagonist in their fight to liberalize sale of the beverage.

The Beer Store’s employees will not be going on strike because they are not public sector employees.  That may seem obvious to some, but according to an independent survey cited by a government report, 60% of people in Ontario believe The Beer Store to be a state-run entity.  No doubt they benefit from the confusion, which may placate customers wondering why they pay so much more for beer than districts such as Quebec and New York state, where beer is sold in corner stores. The Beer Store fosters this ambiguity by designing their stores to be about as welcoming as a Service Ontario outlet. 

In fact, the retailer is co-owned by three of Canada’s largest brewers, Molson, Labatt’s, and Sleeman, none of which are entirely Canadian companies.  Molson merged with Coors of Denver in 2005, Labatt’s is owned by Anheuser-Busch InBev of Belgium, and Sleeman is owned by Sapporo of Japan.  Aside from the LCBO, which enjoys a far more modest market share and generally does not supply restaurants and bars – and microbreweries, which are allowed to sell retail beer only on premises – The Beer Store maintains a government-protected monopoly. 

This is the beer distribution regime the OCSA hopes to change, delivering last year what they claim to be the provinces largest petition ever in support of their cause. Petitions continue to be circulated by the Free Our Beer! campaign at participating stores and on their website which boasts of an Angus Reid study that found most Ontario voters support their goals.

Ted Moroz, president of The Beer Store, has shot back at critics of his company’s exclusive rights. Among several points, he claims that his store is more responsible when it comes to keeping beer out of the hands of underage drinkers. This despite a study that found convenience stores to be far more effective at denying age-restricted products to minors.

Even if you don’t believe the study, funded by the OCSA but conducted by an independent firm, fears of underage drinking are overstated.  The reality is your teenager probably drinks. They either have a fake ID, an older sibling, an exceedingly precocious beard, or at least one friend with one or more of the above.  This does not mean underage drinking should be encouraged, or allowed, only that it is common and the kids are alright.  If the little delinquent you are raising does like to party, take comfort in the fact that they too will grow old and overprotective, perhaps one day finding themselves overcome with righteous indignation because booze is finding its way into the hands of children. 

Moroz also warned of higher prices should corner stores start selling beer.  An odd claim to make since convenience stores are generally patronized not because they are cheap, but because they are convenient.  Some of us don’t have cars and may wish to stock our fridge at 7 o’clock in the evening on a Sunday.  He also warns of losing the 6,900 jobs which The Beer Store provides. Moroz is either making veiled threats to raise prices and/or close up shop should his monopoly be busted, or he is offering poorly constructed arguments in the hopes that nobody is paying close enough attention to him. In any event, he is being disingenuous. 

For instance, Moroz says that corner stores will have less of a selection than his own big box stores.  The claim may be true, and it is a sentiment shared by some craft brewers.  The Kensington Brewing Company’s website argues that the convenience store market will only provide the big brewers another avenue in which to dominate microbreweries in both sales and visibility. Other craft brewers have made similar arguments, but the opinion is not unanimous.  Though it may seem that Moroz is defending his craft brewing competitors, he’s framing the issue only in reference to the OCSA campaign.  Microbreweries have long complained of having to go through their rivals to mass market their beer, as well as being denied the right to set up their own retail stores either alone, or in partnership with one another. The requirement to brew retail beer on site presents a major barrier to expansion for small businesses. It is not an obstacle the Big Three must face.

Meanwhile, brewers who aren’t part of the beer cartel must pay what they describe as exorbitant listing prices to have their products placed in Beer Store locations and, once they do, their visibility is generally limited to a coaster-sized listing on the wall, often nowhere near eye-level.  Anyone who doesn’t live next door to a Beer Store is likely to pass several billboards for multinational swill on the way and, not frequenting an LCBO, one may not be aware of the many local craft beers available. Those who are near-sighted, and have forgotten their corrective eyewear, may just end up walking out of there with a two-four of Coors Light and a sad look in their eyes.

Revoking Beer Store exceptionalism should be a matter all Ontarians could agree upon, regardless of ideology. A state sponsored monopoly defies the free-market principles of conservatives, while special privileges for multinational corporations should not sit well with supporters of either one of the left-of-centre parties.  Furthermore, the largely foreign ownership of Canada’s big breweries means that The Beer Store in no way compliments the economic nationalist tendencies of the NDP. 

Unfortunately, not every politician acts on principle. In February 2012, a west coast blogger, using the Elections BC website, discovered that The Beer Store, along with its associated lobby group, made tens of thousands of dollars in contributions to the BC Liberal party, along with a smaller contribution to the provincial NDP.  It would be a leap to suggest that Dalton McGuinty refused to consider the OCSA’s petition last year because of these political contributions, but clearly something is unethical about one provincial branch of a political party defending business interests in Ontario, while another benefits from the financial contributions of those same businesses in BC.  This is an example of what both unwashed hippies and cranky right-wingers call crony capitalism, and it should be uniting us as a people.

Instead, as with the LCBO, we are stuck with a relic borne of an early 20th century approach to alcohol governance. “This government believes that Ontarians are well served by the current retail system for beverage alcohol,” said a spokeswoman for the McGuinty government in response to the last OCSA petition.  With such masterly crafted non-answers to the concerns of over 100,000 voters such as this, we can be assured of maintaining the status quo for years to come.  Tim Hudak has expressed willingness to reexamine the issue, but not all who agree are conservative voters, nor will many prioritize beer law in the voting booth, and be willing to buy into the entire Tory platform.  Even if the Progressive Conservatives are able to form a government some day, Hudak may just be the latest in a line of provincial politicians to offer false hope for beer drinkers. It’s unfortunate for Ontario’s convenience stores, craft brewers, and consumers, but The Beer Store is likely here to stay.

____

Anthony Matijas lives and writes in Toronto. Follow him on twitter at @A_Matijas.

For more, follow us on Twitter at @torontostandard and subscribe to our Newsletter.

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