Revisiting the Beer Store monopoly (and why it sucks)

Many tend to think fondly of visits to The Beer Store as a unique, Ontario experience, whether it be grabbing a six pack and heading to the park, filling the trunk with beer and ice for a weekend barbecue, or grabbing a 2-4 on the way up to the cottage.

With its dusty wall of labels to choose from, metal conveyor belts, and line-ups, it's easy to think of the Beer Store as a sort of provincial institution — a no-nonsense, government-controlled, beer distribution centre. The truth is, of course, that The Beer Store is not a government institution at all. It's a privately owned company. And, while the experience of visiting The Beer Store is indeed unique to Ontario, these days it really has less and less to do with the beer companies who are actually based in the province at all.

Because when you buy beer at The Beer Store, you're actually supporting massive corporations based at least in part in the States, in Brazil, in Belgium, or in Japan — regardless of the brand of beer you actually buy.

The Beer Store, as you probably already know, is actually owned by Labatts, Molson-Coors, and Sleeman, and however Canadian these household brands may sound, they're not. Molson isn't really just Molson anymore. It's Molson-Coors, a company with equal ownership in Canada and the United States. Labatt Brewing Company is owned by Anheuser-Busch InBev, a Belgian-Brazilian multinational company headquartered in Leuven, and, since 2006, Sleeman has been owned by Japanese brewer Sapporo.

As the owners of The Beer Store, these three brewers are not only taking in an astounding 79.2% of the market share of all beer sold in Ontario, but they also gets to make up standards and fees to which any other brewer must adhere if he or she wants the store to stock his or her products.

A report from the Fraser institute entitled, "The results of beer regulation in Ontario" recently detailed those fees:

There are two fees that TBS charges breweries to have their products sold in its store. The first is a one time listing fee with a base charge of $2,650.14 plus $212.02 per store that the product is sold in. This amount is paid per product that the brewery would like to sell. For example, if a brewery had six distinct brands of beer and wanted to sell each brand in packages of 6, 12, and 24, they would need to pay a listing fee for 18 products. The second is what TBS refers to as a "handling fee." This fee is charged at between $43.40/hectolitres and $49.40/ hectolitres or between $3.65 and $4.15 for every case of 24 beers. Both of these fees only apply to non-owner breweries.

So the big brewers profit not just from sales of their own massively popular beers and the sale of other beers in The Beer Store, but also just for letting other breweries sit on their shelves.

Of course, as an old Toronto Star article explains, The Beer Store doesn't use the term "profits." Instead "the stores operate on a "cost-recovery" basis, meaning the fees are supposed to cover its costs. When the fees exceed the costs, the store issues a rebate - but only to The Beer Store's owners. If costs exceed the fees, the owners make up the difference. No one knows when or if the owners get a rebate because the privately-owned chain isn't required to make that information public."

Surprisingly, the historical roots of this system come from a desire to protect small brewers. The Beer Store (then the Brewers Warehousing Company Ltd. and later Brewers Retail) was originally a co-operative established after the end of Prohibition in 1927 after the government decided it didn't want the responsibility of distributing beer in the province. It was originally owned by every brewer then in business in Ontario.

Now, thanks to years of successive consolidation of brewing companies, ownership rests in the hands of these three companies, putting us in the weird position of living in a province whose government's regulation is protecting multinational companies.

Of course, The Beer Store touts its considerable charity work, notably positive environmental impact (saving the province countless dollars in recycling costs by accepting bottle returns), and its friendly fee structure for smaller brewers as evidence that they're not the controlling monopoly they're made out to be.

And the argument can also be made that The Beer Store offers brewers the ability to present their products to consumers in over 430 stores across Ontario, a market they wouldn't otherwise have access to given Ontario's strict liquor laws that dictate where booze can be sold.

Which seems like a fair argument, until you consider that the "exposure" being offered is typically no more than a spot with all the other brands on the wall of labels. Thanks to the The Beer Store's lack of any real "browsing experience" or signage, it's highly unlikely a consumer will wander into the get-in-and-get-out set up of a Beer Store and come out with a new craft brand that seemed interesting.

What little "marketing" does happen at the Beer Store likewise only serves to help the big guys. The "Ice Cold Express" for example, that wall of refrigerated beer, is really just a showcase of brewers with a willingness to shell out some more money for the right to be there (and guess who has that kind of dough to spend?).

Other "marketing" measures like "The Big Ten," that list of The Beer Stores' top sellers, also serve to further compound the problem by helping the big guys continue to push their own brands--because they are already the best-selling beers.

Ever see "Ten Ontario Beers You Should Try" or "Ten Great Craft IPAs" listed at The Beer Store? Not bloody likely, and you probably won't any time soon.

The Beer Store is a wildly successful monopoly wherein the three biggest players in the market are somehow being allowed to not only dictate the terms by which their smaller competition gets to enter the biggest outlet for their products but actually force them to pay for the right to do so!

So how does this effect you? Because this province's craft brewers, who make delicious, complex, and interesting beers, have to pay more and work harder simply for the right to sell their beer somewhere, we, the consumers, typically have to pay more to enjoy their products. They need to up their prices to cover the expenses of producing their beer and, if they so choose, paying The Beer Stores fees.

They also have to work extra-hard to market their products against the guys that have millions and millions to spend on advertising, so we're forced to pay more to support Ontario's craft brewers. The alternative is that we turn a blind eye to the situation and buy lagers off the Big Ten list whose most redeeming feature is how very cold their beer can be. Either way, we lose.

Photo by Metrix X in the blogTO Flickr pool