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Ontario should heed lessons of other provinces for new beer system: experts

shutterstock_773619718As the Ontario government prepares to move ahead with its plans to overhaul the province’s 92-year-old beer distribution system, experts say it should heed lessons from retail sales systems in other provinces.

Doug Ford’s Progressive Conservatives have made it clear that their goal is to give Ontarians more choice and convenience when it comes to alcohol sales, but details are scant as to how they hope to achieve this.

The PCs have the option of adopting the systems used in Quebec, Alberta or British Columbia, or they can develop something unique.

“The lack of detail suggests that they just have this principle of liberalizing but they haven’t got a vision of what kind of system they want,” says Dan Malleck, a beer expert and associate professor applied health sciences at Brock University.

The B.C. model uses provincially owned and private liquor stores but doesn’t allow purchases in supermarkets. Alberta’s system is entirely private with no limit on the number of stores. Quebec allows sales in grocery stores, convenience stores and big box outlets like Costco in addition to government-run liquor outlets.

Most provinces restrict beer sales to provincially owned stores but Newfoundlanders can pick up a cold one from corner stores and gas stations, while New Brunswickers will be able to buy beer in select grocery stores starting in October.

Ontario retail groups are pushing the province to adopt a system similar to Quebec where distribution is widespread and retailers can set their own prices after negotiating directly with breweries. That allows them to pass along any savings to consumers instead of being constrained by a universal selling price set by producers.

“Our preferred model is essentially the Quebec model,” says Karl Littler, the council’s senior vice-president, public affairs.

That would not be as financially beneficial for the owners of The Beer Store, he acknowledges, but they would still prosper.

“It doesn’t seem like they’ve had any difficulty selling in the province of Quebec or in the province of Alberta or indeed in any province,” he said in an interview.

The Beer Store, which is owned by the foreign brewing giants that control Labatt, Molson and Sleeman, accounts for almost 70% of beer sales volume in Ontario, which generated $3.3 billion in sales in 2017-18, according to a recent report by consultant Ken Hughes which recommended changes Ontario should adopt.

Littler said the Beer Store is looking to defend a system that gives its owners substantially greater margins in Ontario than they enjoy in Quebec because of the way that they control both wholesale and retail prices.

Expanding the number of points of sale is sure to increase distribution costs as it has in Quebec where beer is delivered to about 8,000 locations instead of Ontario which has the fewest per capita retail locations in the country, says Dave Bryans, CEO of the Ontario Convenience Stores Association.

“Right now the extra savings go to the beer companies, not to the consumers,” he said in an interview.

Bryans said minimum prices need to be set to protect craft brewers from predatory prices by the global brewers, but he has no problem with beer prices being a little more expensive in convenience stores than at grocers or The Beer Store.

Craft beer sales represent less than 2% of sales at The Beer Store but more than 10% at government-run LCBO locations and more than 15% at grocers.

Allowing sales of beer, especially craft selections, in family-run independent corner stores can help to save a sector that’s been losing five stores a week in the province for the last decade, said Bryans.

“I actually think the craft beer business will bring more millennials into the sector as well and really help shore up the future business model in every community.”

He thinks Ontario will select an open and competitive market like Quebec’s, but with a bias towards craft beer because it is more developed in Ontario than Quebec where the dominance of the big breweries has long controlled shelf space.

The future of Ontario’s beer distribution system remains a mystery because the law that rips up a 10-year agreement with the Beer Store signed in 2015 by the previous Liberal government has yet to be proclaimed more than a month after receiving Royal Assent.

Industry observers believe the provincial government is using the threat of rescinding the legal rights of The Beer Store to compensation as a hammer to force a deal with the retailer.

The Beer Store declined to comment but said after the law was introduced that it would “fight this legislation vigorously through the courts.”

A spokeswoman for Ontario’s new finance minister, Rod Phillips, said the government plans to stick with its campaign promise despite a cabinet shuffle and threat of legal action, but declined to provide any details about the how the system will change or answer questions about the timing of implementing a new law.

“We will continue to work towards getting the best deal possible for Ontario consumers and businesses, and at this time cannot speculate on the outcome of this process,” said Emily Hogeveen in an email.

Canada’s retail council expects the Beer Store will remain a viable competitor even though it estimates that grocery and convenience stores might get about half of the current Beer Store retail business following the changes.

“I think the story that they’re just going to somehow wither on the vine is a little strange,” he said. “Obviously it would be significant or they wouldn’t be spitting bullets like they are currently about the prospect of change.”


Industry “thrilled” as Ontario passes bill allowing beer, wine and cider sales at corner stores

Photo: Canadian Press

Photo: Canadian Press

It’s official. Buying alcohol in Ontario is about to become a whole lot more convenient.  Almost 300 more stores, including corner stores, in Ontario will be selling beer, wine and cider as of next spring.

Finance Minister Vic Fedeli says the number of LCBO agency stores in under serviced areas will rise to 60 in August, and to 200 by spring 2020.

The new locations will be called LCBO Convenience Outlets.

Another 87 grocery stores will also be allowed to sell alcohol starting in September, bringing the total to 450 across the province.

The government has promised to make beer and wine available in corner stores, grocery stores and big box stores.

It passed a bill today to end a 10-year agreement with The Beer Store that limits the number of stores that can sell alcohol.

The Ontario Convenience Stores Association (OCSA), which represents 6,000 neighborhood and family-run businesses, released a statement saying it is “thrilled” at the passage of Bill 115, the Bringing Choice and Fairness to the People Act (Beverage Alcohol Retail Sales), 2019.

“This is fantastic news for Ontarians and the neighbourhood retailers who are a part of every community in this Province,” says OCSA CEO Dave Bryans. “It’s good news for consumers who will get more choice and convenience, good news for Ontario craft breweries and wineries, and sets the stage for job creation for all of our industries.”

The group believes today’s passage of Bill 115 will help bring the system into the modern era: “The diverse selection of craft breweries, wineries, and cideries in Ontario is unique and consumers want to enjoy the products they love while supporting local businesses. Ontario convenience stores believe that expanding to convenience, grocery and big box retail stores will unlock new valuable opportunities.”

The OCSA started its ‘FreeOurBeer.ca’ campaign in the summer of 2011. “Since then we’ve connected with millions of Ontarians in our stores, collected over 400,000 petition signatures, and been having a dialogue with government and industry about the benefits of modernizing beer and wine retailing for Ontario,” said Bryans.  “There is still more work to do, and we look forward to collaborating with all brewers, wineries, and the government to create a system that works to deliver on the goals that Premier Ford committed his government to.”

The group maintains convenience store owners and employees are more than equipped to bring their expertise selling age-restricted products to alcohol sales and states: “The Ontario government is setting up a win-win situation for consumers and businesses. More retailing space for breweries and wineries means more opportunity for business growth and job creation for both producers and retailers – jobs in communities across Ontario and choice and convenience for consumers. Strong growth is possible if small industries are given the opportunity to compete on a more level playing field.

Doug Rosencrans, vice president & general manager, 7-Eleven Canada Inc. released a statement calling the decision good news for for consumers and producers: “7-Eleven is… one of the largest beer retailers in the U.S. – from larger, better-known brands, to craft breweries we help support. We look forward to providing our Ontario customers the same service through beer and wine retailing that’s on the horizon. In our discussions with Ontario craft brewers, we understand that showcasing their products in our stores, and having availability to our customers is a welcomed opportunity. Access to our retail network is open to all beer and wine producers. These positive changes will provide exceptional convenience and choice to our Ontario customers.”

Ontario craft breweries are also welcoming the provincial government’s move to expand beer sales to corner stores, saying the current system limits their products’ exposure to customers.

“I just think it’s fantastic news,” said Scott Simmons, president of the Ontario Craft Brewers, a trade association composed of nearly 100 brewer members.

The way The Beer Store operates makes it difficult for smaller breweries to sell their products there and attract customers, said Todd Lewin, president of Muskoka Brewery. The foreign brewers that own Molson Coors, Labatt and Sleeman mostly own the chain, which operates more than 450 retail stores.

It’s expensive to buy a listing at the store, said Lewin. He estimates it would cost more than $100,000 to sell one type of beer at all the chain’s locations. First, there’s a several-thousand-dollar listing fee and a $230 fee per store, he said. If brewers don’t sell a certain volume every six months or so, Lewin said, they lose that listing.

It’s also hard for craft brewers to have their products noticed in a conventional Beer Store, he said. Many locations prevent consumers from perusing store shelves that may hold new brands to sample.

As a result, craft brewer sales volumes tend to be lower at The Beer Store than at other avenues, like grocery stores, he said.

The change would benefit not only craft brewers, but also consumers and taxpayers, said Simmons. Consumers will have more choice and convenience, and the move will give the economy a boost, he said.

While most of the association’s members express support for corner store beer sales, Simmons said some have asked questions about distribution.

Lewin, for one, wondered how a new distribution model would work to cost effectively bring the brewery’s beers to thousands of new locations.

The Ontario chamber has been working out how distribution will work in this new environment, Simmons said, and has been speaking with third-party organizations.

“I have no concerns whatsoever that we can’t come up with a model that will make it beneficial for our membership to have an expanded retail footprint in the province,” he said. “I wouldn’t even call it a concern. I’d call it a question mark.”

With files from Canadian Press


‘Beer insiders’ fuelling online criticism of Tory government tweets: Fedeli   

Beer “insiders” are fuelling online mockery of a social media blitz promoting the government’s bid to expand alcohol availability to corner stores, Ontario’s finance minister said Monday.

Vic Fedeli said the brewers who own The Beer Store are fighting to hang onto a near monopoly afforded them under a 10-year agreement with the previous Liberal government.

Screen Shot 2019-06-04 at 10.12.20 AM

Caroline Mulroney was one of several PCs who took part in a social media blitz that involved visiting convenience stores across the province to support government measures to change the rules around selling beer and wine.

The Progressive Conservatives have introduced legislation to scrap that deal, which could pass as soon as Thursday, and launched a social media campaign over the weekend.

“If there was any commentary on Twitter, it would have been from the beer insiders who will do anything and say anything to stop this contract from being opened,” Fedeli said.

Tory politicians, including Premier Doug Ford, posted similar messages promoting the legislation to rip up the contract with the brewers—Molson, Labatt and Sleeman—who are all foreign owned.

Fedeli said the multinationals that own The Beer Store are not acting in the best interests of the people of the province and that is why the government needs to act.

“Why is The Beer Store fighting so hard against the government putting more of their product in more stores?” he said. “It’s because they were given a sweetheart deal and they put profits ahead of people.”

Ford has repeatedly indicated he plans to broaden the sale of beer and wine to corner stores, saying the current system is a bad deal for consumers and businesses.

Scrapping the deal could trigger steep financial penalties but the government’s legislation contains provisions to nullify any such costs. The Beer Store, however, warns it will fight the legislation in court.

Company spokesman Bill Walker said the company was not behind the response to the government’s social media campaign, which drew reaction from a mix of celebrities, doctors, educators, business leaders and politicians.

“The sheer volume of responses to MPPs and the fact that there were people who generally aren’t sided with The Beer Store coming out against the government is enough to show the effort was organic and unprompted,” Walker said.

One Twitter user slammed Fedeli’s comments saying she wasn’t a Beer Store insider.

“I’m a parent who lost a child to a flu outbreak. I grew up near Walkerton. My kids go to public school. I’m appalled by your government’s wastefulness while gutting health care and education.”

Another Twitter user criticized the strategy behind the tweets.

“I’ve never, in decades of working in communications, seen a campaign #fail as bad as #fordnation #?OntarioPCParty & the stagedconvenience store schtick,” he wrote.

On Monday, Green party Leader Mike Schreiner attributed the negative reaction to Ontarians concerned about the costs of breaking the deal.

“The people of Ontario have spoken and said we want you to have priorities like health care, education, the climate crisis,” Schreiner said. “I guess, according to the premier, we have a beer crisis in Ontario.”

NDP Leader Andrea Horwath said people are questioning the direction of the Tory government.

“It’s pretty clear they fell pretty flat with Ontarians whose priorities are about ending our hallway medicine problems and making sure our kids get the education that they need and deserve,” she said.

This isn’t the first co-ordinated social media campaign launched by the Tory government to face online mockery. Earlier this year, a series of similar messages posted by government politicians at gas pumps complaining of higher fuel prices due to the federal carbon tax came under fire.

Late Monday afternoon as legislators debated the legislation to break The Beer Store contract, NDP House Leader Gilles Bisson compared the government’s communications strategy on the issue to the methods of Nazi propagandist Joseph Goebbels.

The veteran NDP legislator apologized for his “insensitive and inappropriate” remarks a short time later.

“I regret any offense my flippant comment may have caused to the community of survivors from the dark history of the Second World War,” he said in a statement.

But Bisson’s reference to Goebbels isn’t the first time the Nazi propaganda minister has been mentioned during this session at Ontario’s legislature.

Debate records show that late last year Progressive Conservative politician Daryl Kramp compared the previous Liberal government’s communications strategy on the Green Energy Act to those used by Goebbels.

Kramp’s remarks were not discovered until Monday and he expressed regret in a statement posted online.

“Apparently I used the name Goebel in passing reference during a parliamentary comment,” he wrote on social media. “I regret any negative impression it may have had.”

 


Convenience industry welcomes Ontario’s plan to end Beer Store deal

Photo: Canadian Press

Photo: Canadian Press

Ontario plans to rip up an agreement with The Beer Store in order to allow the sale of beer and wine in corner stores, but the retailer has already signalled it will fight the move in the courts. Meanwhile, convenience store associations and their members are welcoming the announcement.

The Progressive Conservatives tabled legislation Monday that would terminate a 10-year contract with The Beer Store that was signed by the previous Liberal government. The deal permitted an expansion of beer and wine sales to hundreds of grocery stores.

Premier Doug Ford has repeatedly indicated he plans to broaden the sale of beer and wine to corner stores, but he has to break that agreement signed with Beer Store co-owners Molson, Labatt and Sleeman to do so. In explaining Monday’s move, Finance Minister Vic Fedeli said the current system is a monopoly that is a bad deal for consumers and businesses.

“The province’s current beer distribution system is owned by three global giants who were handed a sweetheart deal by the previous government, and who are more interested in protecting profits than providing convenience or choice for average people,” Fedeli said.

Scrapping the deal could trigger steep financial penalties, but the legislation contains provisions to nullify any such costs.

The Beer Store, however, suggested it was not willing to accept voiding any financial claims, saying it will fight the legislation through the courts.

“The government cannot extinguish our right to damages as outlined in the Master Framework Agreement,” president Ted Moroz said in a statement.

“It is critical to understand that The Beer Store has, in good faith, based on a legally negotiated 10-year operating agreement with the province of Ontario, invested more than $100 million to modernize its stores and to continue to upgrade the consumer experience.”

The Beer Store’s lawyers sent a letter to the attorney general, saying they reserve the right to start litigation challenging the bill and seek compensation.

“The bill is unconstitutional and constitutes misfeasance in public office by certain ministers and officials involved,” they write.

When the brewers signed the deal in 2015 they also agreed to spend approximately $100 million on capital investments in Beer Store locations, to freeze prices on most Labatt and Molson products for a year and were required to give more shelf space to small brewers.

The deal also allowed the Beer Store to keep the exclusive right to sell 24-packs and most 12-packs in the province, while grocery stores would only carry six-packs. The agreement also opened up ownership of The Beer Store to smaller breweries.

NDP finance critic Sandy Shaw said ripping up the deal sends a signal to businesses that government agreements are not worth the paper they’re written on.

The Beer Store and its union have been embarking on a public relations campaign to push back against having beer in corner stores, with the brewers taking out an ad saying they keep prices down with their distribution system, and the union taking out ads warning that cancelling the Beer Store’s deal could hit taxpayers hard.

The United Food and Commercial Workers local representing Beer Store employees said Monday that the government’s decision could cost thousands of jobs.

“We will fight this government and this premier to keep our jobs and to save the taxpayers the billions Ford is willing to pay to put beer in corner stores,” president John Nock said in a statement.

On Friday, the province’s special adviser on alcohol delivered a report to Fedeli on ways to improve consumer choice and convenience.

Asked about the short turnaround time between the report being completed and the legislation being tabled, Fedeli said he had always been working on all options.

The Tories have also announced a number of loosened alcohol restrictions, including allowing alcohol to be served at 9 a.m., seven days a week, letting people consume booze in parks, and legalizing tailgating parties near sports events.

Interim Liberal Leader John Fraser said the government has an obsession with alcohol.

“There’s six more years left on this deal,” he said. “What’s the hurry? Why not negotiate a transition to get to where you want to? There’s a whole bunch of things that are way more important in Ontario right now than beer and wine in corner stores.”

The Canadian Federation of Independent Business and Retail Council of Canada applauded the legislation.

The Ontario Convenience Stores Association released a statement saying it “supports the Ford government’s work to allow convenience stores to support Ontario craft brewers and wineries, create jobs and deliver more choice and convenience to customers.”

The group believes the Bringing Choice and Fairness to the People Act is also a step towards job creation in communities across the province, even in areas where it may otherwise be challenging to attract new businesses.

“We are keen to play a role in helping the Government increase revenues, create jobs and offer consumers more convenience,” said OSCA CEO Dave Bryans. “We’re ready to provide new retailing space for Ontario craft brewers and wineries to showcase their products in their communities, while continuing to be responsible retailers.”

The Convenience Industry Council of Canada (CICC), which represents Ontario’s 7,500 convenience stores and the distributors that service them, including banners like Circle K, Petro Canada, Canadian Tire, 7 Eleven, Parkland, and MacEwen, also welcomes new provincial legislation that seeks to expand the sale of beer and wine in corner stores.

“The Convenience Industry Council of Canada (CICC) supports the Ford government’s decision to bring Ontario’s beverage alcohol policies into the 21st century,” said CICC president and CEO Anne Kothawala. “As the only organization representing all aspects of the convenience store supply chain from manufacturer to sale, I can attest to the excitement felt by all of our members who are working to make expanded beverage alcohol sales a reality.”

A survey conducted by Abacus Data in early April found that 73% of Ontarians who regularly consume beverage alcohol support the expansion of beverage alcohol in convenience stores. Additionally, 64%t of those surveyed say the convenience of alcohol close to home is important.

“Our industry has a strong track record in the sale of age restricted products, from lottery to tobacco and we have drawn on lessons learned from other jurisdictions and rolling out significant age-testing training in our stores across the province,” said Kothalwala. “We look forward to working with the Ontario government to bring choice and fairness to the marketplace and putting the needs and convenience of our customers first.”

With files from Michelle Warren


OCSA launches website to debunk myths about alcohol deregulation

Screen Shot 2019-05-21 at 12.29.30 PMThe Ontario Convenience Stores Association and its affiliate property, FreeourBeer.ca, are partnering with the Ontario Government on a new website designed to educate the public and convenience store operators about plans to expand alcohol sales in the province.

The site (www.choiceandfairness.ca) is available in English and French.

According an email from OCSA CEO Dave Bryans, the website is designed “to clarify all the fictional stories or myths around beer retailing and sales in the province. The new site covers all areas of concerns and facts about ownership etc. as we look to a better retailing future for all Ontarians going forward.”

The easy-to-navigate site delves into ownership structures at the LBCO and Beer Store. It also features a section that counters what it labels “Fiction” with “Fact” and touches on subjects from job losses to age-checks, responsible use, market competition and more.  Screen Shot 2019-05-21 at 12.03.39 PM

 

 

Screen Shot 2019-05-21 at 12.14.45 PM

In addition, the site includes six ads to be shared on social media. The ads feature quick taglines, such as “Grabbing beer and snacks for the game should be a one-stop shop.” and “Say goodbye to long weekend lines, hello to choice and convenience.”

According to Bryan, “Beer/wine is sold responsibly in 1000’s of Convenience Stores in North America and could finally arrive in Ontario…. The OCSA is proud to represent the economic interests for over 6,000 regional chains and family run Convenience stores as we work to develop a better future and a new (long awaited) category for our members.”

The OCSA has spent seven years working with governments, stakeholders and researchers to encourage a move to an open beer retailing market and this week stated on its website that “this file may be moving quicker than anticipated in 2019.”


Ontario to expand beer, wine to convenience stores, finance minister says

Ontario’s finance minister says the province will be moving ahead with an expansion of beer and wine sales into corner stores, big box stores and more grocery stores, promising the move will cut prices and prevent any potential privatization of the LCBO.

Vic Fedeli said Thursday that the Progressive Conservative government will make good on a pledge made during last spring’s election to offer consumers more choice when it comes to where they can purchase booze.

20387772_5bdd6d49a5_z“Our government is actively working to expand the sale of beer and wine to corner stores, box stores, and even more grocery stores,” Fedeli said during a speech to a business audience in Toronto delivered ahead of his first provincial budget on April 11.

“We made a commitment during the campaign to provide consumers with greater choice and convenience, and we plan on delivering.”

Fedeli gave no timeline for the move but said greater competition in the sector will lower prices for consumers and expand product availability.

Ontario currently has the lowest density of retail outlets selling beer, wine, cider and spirits in Canada, Fedeli said, with less than 3,000 outlets selling alcohol compared to Quebec’s approximately 8,000.

The minister also said the government has no plans to privatize the LCBO despite receiving a report last fall that recommended consideration of the sale of some government assets.

Fedeli called the chain of over 600 LCBO outlets a “prestige asset in Ontario” and said a sell-off would not be part of the government’s plan to eliminate a deficit that the Tories have pegged at $13.5 billion.

“We believe this will open it all up without any need whatsoever to privatize that valuable asset,” he said of the move to have alcohol sold in corner stores and big box stores.

Fedeli said the idea of selling government assets to address the deficit won’t help the government in the long run. He said the previous Liberal government’s sale of its General Motors shares and part of its Hydro One ownership stake just temporarily covered for budget problems.

“We have a structural deficit. That means the day-to-day bills that are being paid with borrowed money,” he said. “Selling an asset doesn’t solve that, it only puts a band-aid on it for a year.”

NDP Leader Andrea Horwath said she would be focused on enhancing services for people of the province if she were premier, not expanding access to alcohol.

“We have a government that’s taking teachers out of classrooms, reducing autism services for kids but making sure that we can have beer in every corner store,” she said. “I think they have the wrong priorities.”

Last year, the Tory government cancelled a scheduled increase in the provincial beer tax, forgoing $11 million in potential revenue, and brought back so-called buck-a-beer.

Buck-a-beer lowers the minimum price of a bottle or can of beer to $1 from $1.25. Brewers are not required to charge less and the minimum price doesn’t apply to draft beer, nor does it include the bottle deposit.

Interim Liberal leader John Fraser said the move to greater availability of alcohol in corner stores is something that could require more public consultation.

“Change in alcohol and beer and wine (availability) in Ontario has always been very incremental,” he said. “We should talk to people. If we do something like that it has to be done in a responsible way.”

The previous Liberal government had expanded alcohol sales beyond the LCBO during their term, authorizing more than 350 grocery stores to sell beer and cider, and 70 to sell wine.


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Beer, cider to be sold in 80 more grocery stores in Ontario this summer

The provincial government has opened up bidding for grocery stores looking to get in on sales of suds, and will announce the selected locations in May. Read more