Worth Repeating: The Beer Store boondoggle continues, thanks to Kathleen Wynne


Only in Ontario would the news that consumers will be granted the great privilege of purchasing a six-pack of beer at fixed prices in a strictly limited number of grocery stores be hailed as the makings of an “exciting day.” But that’s Ontario, and so that’s what Premier Kathleen Wynne called it when she made just such an announcement last month.

Ms. Wynne was so overcome with excitement, in fact, that she compared her government’s magnanimity to the giving spirit of the Christmas season, with the loose hook being that the first 60 stores will be selling their tiny allotment of beer by December.

The deal, signed by Brewers Retail – a.k.a. the Beer Store – and the three foreign-owned breweries that control it, has a 10-year term. By grudgingly granting a few minor concessions, the beer companies have guaranteed that their provincially-protected monopoly will continue to at least 2025. They’ve bought 10 years of silence on a highly charged political issue. It’s all on paper, signed by the provincial government, and enforceable in the courts.

The deal has modest pluses. Craft breweries will have more access to consumers than before,thanks in part to an earlier deal that guaranteed them more shelf space in Beer Stores, and because they will soon be in grocery stores. The province has also repealed a regulation that effectively limited craft breweries to a single retail storefront.

And there is no question that over time, in creeping increments, beer will start to appear in grocery stores across the province. There will be 60 such outlets by Christmas, a maximum of 150 by May 2017, and the rest in whatever dribs and drabs the province deems fit after that. Who knows? By 2025 there may even be the promised (but unambitious) total of 450.

The deal also commits Brewers Retail to the spending of $100-million on improving their Beer Stores, many of the older of which smell like stale beer and have the ambience of a Soviet-era shoe store. As a protected monopoly, Brewers Retail has no compunction to make its consumer experience anything more than the most grubby transaction: You give us your money and we give you some beer.

Under the deal with the province, renovated and new Beer Stores will be self-serve and have open-concept formats, something that retailers in competitive markets have only been doing for, you know, the past 30 years.

But that’s where the positives end. Most of the deal is about what can’t be done, lest it interfere with the Beer Stores’ precious protected markets.
根据新协议,菜店只能卖6瓶包装的啤酒,买多少包没有限制。但是,如果你要买4包啤酒,你不会得到你到专卖店里买24瓶一箱的价格。另外,菜店只能在啤酒专卖店开门时卖酒,价格不得比专卖店卖得便宜,而且菜店不得与其他独立的酿酒商合作搞啤酒促销。如果菜店卖酒卖得太多,给菜店供货的安省酒局( LCBO)得倒贴钱给三大酿酒公司。是的,你一点也没有看错:协议中规定了菜店只能卖一定数目的啤酒。如果他们卖过这个数,省府要向三大酿酒商赔钱。

Grocery stores will only be able to sell six-packs; you can buy as many as you like but there will be no discount that comes with buying a case of 24 at a Beer Store. These new outlets will have to operate on Beer Store hours and sell beer at Beer Store prices – no competition allowed! They can’t do promotional deals with individual brewers. And if they sell too much beer in a year, their supplier, the Liquor Control Board of Ontario, has to pay compensation to Brewers Retail. That’s right: There is an annual cap on how much grocery stores can sell in total, and a financial penalty if they go over the limit.

When you get right down to it, the majority of grocery stores will not be allowed to sell beer, and convenience stores will still be shut out of the business. And it’s not just the private sector that is forbidden from competing with the Beer Store.

The government-owned LCBO is bound in other strange ways. If it wants to open a new outlet that sells beer in a community that doesn’t have a Beer Store, it is obliged to give Brewers Retail 90 days notice, during which Brewers Retail can decide to open a Beer Store instead and lock down the market for itself.

The deal also includes a one-year “pilot project” in which 10 LCBO outlets will be allowed to sell 12-packs of beer, rather than the current six-pack limit. Only 11 brands of beer, most of them sold by the multinationals that control Brewers Retail, can be sold in this format, and only in LCBO stores that are at least two kilometres from the nearest Beer Store. It’s like watching a cautious botanist introduce a new species into a fragile ecosystem, lest too rapid a change cause the biome to collapse.

But the kicker is the deal’s 10-year term. The issue of the Beer Store monopoly has dogged successive Ontario governments for 20 years. There are no valid economic reasons for allowing three foreign companies to control beer sales in a protected market. The government-granted monopoly is a holdover from the Prohibition era. What possible argument can be made for continuing a system based on the market and social conditions of a century ago?

The owners of Brewers Retail love it, though. Anheuser-Busch InBev and Molson Coors are the majority shareholders, at 49 per cent each, with Sapporo holding the remaining 2 per cent. Thanks to the provincial government, they are blessed with much lower distribution and marketing costs than they would face in a free market. While the Beer Stores operate on a break-even basis, they are worth $400-million a year to their owners in real savings.

“It is a complex thing in Ontario to sell beer, apparently,” Ms. Wynne said at the announcement. Well, it is but it shouldn’t be. The government has made it complex for its own reasons.

This boondoggle is only perpetuated today by the money that Brewers Retail and its owners give to political parties in Ontario, where corporate donations are still gleefully accepted. It’s a monopoly that should have ended years ago, but which will now, thanks to Premier Wynne, continue unchecked for at least another decade.
Merry Christmas.
Note: The Editorial was published by The Globe and Mail on October 9, 2015. Translated by Jack Jia, Chinese News.

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