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"Each individual should allow reason to guide his conduct, or like an animal, he will need to be led by a leash."
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Saturday, November 26, 2011

Time to end Ontario's beer cartel

Most beer drinkers in Ontario don't realize that the neighbourhood beer retailer with the folksy name "The Beer Store" is not a branch of the Liquor Control Board of Ontario, nor is it run by any government agency at all. It is in fact a legal cartel run by Ontario's three largest brewers: Molson's (now owned by US brewer Coors), Labatt's (now a branch of Anheuser Busch InBev of Belgium) and Sleeman's (owned by Japanese brewer Sapporo). It jealously guards its monopoly and furiously resists attempts to allow competition, and it's not above strong-arming small craft brewers to do so.

In 2008, The Beer Store (TBS) harassed the Brick Brewing Company of Waterloo and threatened to cut off its supply of industry-standard long-necked bottles if it didn't stop bottling its Red Cap beer in distinctive stubby bottles. This prompted a lengthy and expensive court case which Brick eventually won:
The fight over the stubby is just one example of how tough it is to compete in a retail distribution system owned by some of his biggest rivals, Brickman told the Star earlier this summer. His comments came in an interview for a series examining the ownership structure at The Beer Store.

Though licensed by the province, the retail chain that accounts for more than 80 per cent of all beer sales in Ontario is owned and operated by Canada's three largest brewers, which in turn are foreign dominated.

They are Labatt, owned by Belgium's InBev SA, Molson, part of U.S.-based Molson Coors, and Sleeman, now owned by Sapporo of Japan.

Together they control $2.5 billion in beer sales in the province, with little government involvement.

So, when Brick got into a fight with The Beer Store over its use of the non-standard bottle, it had nowhere to go but court to complain – an expensive route for a small firm, Brickman noted.

"Our beef is that the owners (of the store) have their own agenda," he said.
That same year TBS squeezed the Beau's All Natural Brewing Company, a craft brewer in Vankleek Hill near Ottawa. Beau's sold its signature Lug Tread Lager in bottles with ceramic swing tops. Although Beau's didn't sell its beer at Beer Store outlets (opting for the LCBO, the only other legal retail outlet in the province), customers were returning the empties to the Beer Store and getting a refund. However, since Beau's was not carried by the Beer Store, TBS refused to give the company its bottles back. Beau's eventually set up a charity bottle drive through Operation Go Home, an Ottawa based youth shelter, just to get its bottles returned.

Beau's is again in the sights of the beer monopoly because it had the temerity to set up a home delivery service (proceeds were again being donated to Operation Go Home) which last week ran afoul of Ontario's Alcohol and Gaming Commission. Steve Beauchesne of Beau's explains:
Today we launched Buy Your Beau’s Online, our project with Operation Come Home to deliver beer to people’s homes in Ottawa, and promptly had the service effectively shut down by the AGCO.

That’s right, after less than a day of operation, BYBO has been closed, after another brewery (we weren’t told which one) complained. The complaint has nothing to do with the service or the fact that at-risk youth were involved, but over a technicality involving what I believe to be a typo in the regulations around home beer delivery services.

Our retail store operates as an authorized beer store by the LCBO, but the regulation around home delivery uses the wording ‘operated’ instead of ‘authorized,’ which is how it is worded to allow us to sell to special occasion permit holders, and retail customers. It is interesting to note that the Beer Store, which is not operated by the LCBO or government is somehow allowed to sell to home delivery services.

So…

No specialty beer delivered to our Ottawa customers.
No employment for homeless youth, to get them off the street.
No additional revenue for Operation Come Home.

What’s really got me irked about this situation is the complete arbitrariness of the regulation that is being used to kill a social enterprise designed to do good for the community and the malicious behaviour by another brewery in this province.

The Beer Store is a retail outlet owned by three breweries. Why would they be allowed to sell to a home delivery service and Beau’s (or any other brewery) not be? It doesn’t make any sense, it’s anti-competitive and it restricts choice to the residents of this province.

I know that there are a lot of cut-throat competitive tactics used by some of the less honourable members of the brewing community, but taking a job from a homeless youth to thwart us is beyond reprehensible.

I’m disappointed that the AGCO has decided to act this way, using the letter and not the spirit of the law to guide their decision-making, but ultimately I understand that they may not have had a choice once the complaint was lodged. I would have rathered more consultation from them or that they refused the delivery license application when they were informed how the service would work. If that had happened, at least Corey and Kyle, the two youths who had been hired to start this service, wouldn’t have had their hopes lifted and then let down in such a dramatic way.

I’m simply aghast, though that another brewery instigated this.

I’m really disappointed that this service is unfortunately going to be shut down.

I’m sorry to the youth who have been dealt yet another misfortune, to our customers who were looking forward to gaining better access to our beer and to other breweries who probably would have been able to use similar models to compete better in this Province.
Beer purchases are tightly controlled in Ontario. Beer drinkers can get their suds from the Beer Store, a cartel run by the three big brewers and regulated by the Ontario government, or from the Liquor Control Board of Ontario, a liquor monopoly run by the Ontario government. This crazy system was set up in 1927 after Prohibition ended to placate the nervous Nellies of the Women's Christian Temperance Union, and almost a century later we're still under its thumb. What kind of civilized country still treats its alcohol consumers like crazed underage teenagers and permits a cartel run by three foreign multinationals to control the beer supply? The province has a paternalistic assumption that the citizens of Ontario are not mature or responsible enough to handle wider more unrestricted access to alcohol. It's embarrassing and insulting.

By the way, if you want to sign a petition urging the Ontario government to end the Beer Store's monopoly, go here. Free the oppressed microbrewers of Ontario! And if you're in the Ottawa area, pick up a case of Beau's Lug Tread Lager - it's really good.

7 comments:

Frank said...

Up north in cottage country, you can buy beer at the variety store. Our society is clearly one of different rules for different people, and we're all a bunch of spineless ninnies for putting up with it. Someone in government needs to sell me my beer and liquor because I live in southern Ontario, what a bunch of horse crap!

NeilD said...

I haven't been in an Ontario Beer Store in a long, long time. I buy all of my beer in the friendly Tops grocery store across the border in New York and the only complaint I have about that is the selection from micro brewers is so great that it takes up much of my shopping time to make a choice. I tend to go for unusual labels.

Anonymous said...

I have been complaining about the Brewers Retail monopoly for 30 years. No politician has the balls to speak up. MADD and others would raise too much of a stink. I now live in Quebec, which while has it's own unique issues, I buy a 24 of Coors Light with my groceries for 22 bucks weekly. Instead of owning the distribution system here, the major breweries have been on a 5 year price war. Works for me. Unfortunately I am soon moving to BC, where the price of 12 is roughly the same as a 24 here in Quebec. Funny thing is kids aren't getting access to beer nor is everyone drunk all the time. I works.

onefineguy said...

Oh, for the day in Ontario when beer will be sold in convenience stores, grocery stores and Costco.

Should we think ourselves lucky that microbrews are allowed in local pubs ?

Strong Conservative said...

A free market for beer and liquor, just as there is for any other legal product is essential. Monopolies controlled by the government or business hurt consumers. The old system needs to be replaced as quickly as possible.

Martin said...

The day of grocery store beer sales is already here, for over 200 LCBO agency stores in rural Ont. including southern Ont. I buy my beer along with milk, bread, tickets, wine and liquor at my variety store. Being non-union, these stores set their own hours, till 10 PM most nights if they wish, and all holidays, even Boxing day.These stores would serve as a trial project for full grocery sales, as they have been around since 1960s. The real opposition is not so much MADD, as the LCBO unions; they attempt to bargain for no more agency stores in their negotiations. There is no legitimate argument against the stores, they operate very efficiently,and have for years.

Madman2001 said...

Once they dissolve the Wheat Board, maybe the politicians can address this other monopoly.

It amazes me that the folks who think that a government run monopoly is a fine fine thing, all the while complain about Microsoft's and Google's near-monopoly.

You've written some great columns lately, Eric. Glad to see you posting more.