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Category Archives: The Ontario Beer Revolution

LCBO 12 Packs and Grocery Store Sales

(ed. note: This is longer than usual. It is hard to have a discussion about nuanced topics in short form. If that’s what you’d like, Buzzfeed is looking for 12 Readers Who Can’t Believe What Happened Next.)

You may have noticed that when they announced the changes to Ontario’s beer retailing system back in April, I didn’t actually write much of anything about it. You may additionally have noticed that the frequency of Ontario beer writing in general dropped off a cliff at about the same time as the announcement. A victory against The Beer Store, however small, was more or less the end of a narrative arc. I think everyone who had been covering it was more or less exhausted on the topic.

I’m brought back to thinking about the problem by last week’s announcement that the pilot project for 12 packs in LCBO’s had started.

Now, I agree with the skeptics on that one. The LCBO has limited shelf space and 12 packs don’t make a lot of sense in that context. The problem is that the LCBO has to perform the pilot project due to the optics of the situation. The lynchpin of reform was their not terribly secret agreement to allow The Beer Store to handle 12 and 24 packs exclusively. Somehow that made the public very angry and allowed for other concessions to be made.

I don’t care about whether I can buy a 12 pack at the LCBO (you could already buy two sixes), but some people in more rural areas might view it as a win. I do like the idea that this might open up the possibility of beer advent calendars getting stocked in the Christmas lineup further down the line, but I think you’ll agree that’s a minor point. The success or failure of the pilot project is immaterial; all it does is fulfill an obligation to be seen to invalidate the agreement with The Beer Store.

That said, I think that the sale of beer in grocery stores is going to prove to be a really significant victory and I’d like to tell you why.

First off, it’s really important to remember the chronological scale that we’re working on. When you consider that The Beer Store’s roots come from Brewer’s Warehousing in 1927 and a co-operative distribution system with individually owned stores, it’s easy to forget that there were eleven years of prohibition before that. That means that with a projected date of about Christmas, it has literally been a hundred years since anyone was allowed to handle beer outside a monopolistic system.

I can already hear your argument: “Because of the fact that they still have to use the LCBO as their supplier, this is still a monopoly.”

You’ve been paying more attention than usual, fictive strawman reader.

Yes. You’re absolutely right: this is more or less an extension of the existing system. The condition that people seem to overlook is that it’s a necessary extension because of the way the shape of the market has changed.

Secondly, there’s the caveat that change is coming slowly. There are projected to be 450 grocery stores selling beer eventually, but something like 150 by May 1, 2017. I’ve seen otherwise rational people complain that nothing had yet happened something like 70 days after the announcement. Even with permission to start immediately, it would have taken that long to renovate the retail space. It has taken decades of arguing and lobbying just to get to the point where beer in grocery stores was on the table. In this situation, any change is good change because it is likely to lead to more change later.

Thirdly, and this is the one I find pretty baffling, there’s the argument that “this is only going to help the big guys.”

This kind of crab bucketing mentality is one of the reasons I haven’t written about this yet. It’s massively depressing because beer nerds are most often the ones making this argument. They argue, despite having seen grocery stores in the USA, that the international conglomerates will buy all of the shelf space. That’s not the case there and it won’t be here. They also argue that the only companies that will benefit are “big craft” like Steam Whistle and Mill Street.

Neither of those are big breweries. 100,000HL is chump change in perspective. Sam Adams does 35 times that annually. I think that somewhere along the way we’ve lost sight of the actual economic scope of things. I’ll break down Ontario’s production over the last six years in order to help you understand what I’m talking about. These numbers are from Beer Canada’s 2015 statistical report. They are derived, as I understand it, from Revenue Canada.

HL 2009 2010 2011 2012 2013 2014
<2000 23000 28000 28000 26000 45000 48000
<5000 24000 15000 23000 31000 22000 92000
<15000 43000 56000 55000 61000 38000 48000
<50000 107000 17000 33000 122000 292000 260000
<100000 110000 209000 252000 221000 254000 388000
>100000 9077000 8095000 9323000 8000000 7815000 6731000


In the case of this table, which I’ve borrowed from the report, we’re talking only about beer that’s produced in Ontario over the last six years. This doesn’t take imports into account, but it gives us a pretty real idea of the size and shape of the industry up to the end of 2014. What these numbers display fairly clearly is that the international conglomerates Molson Coors and AB InBev are bleeding incredibly badly. Between 2009 and 2014, they have lost 2,346,000 HL of production in Ontario. They are producing 26% less beer than they were in 2009. You may feel like laughing at them, but remember that the entire industry lost 19.3% even taking small brewers into account.

The volume produced by small brewers grew by a factor of 2.7 over the six year period. They now account for something like 12.4% of the beer produced in Ontario. I suspect that if you include Brick, which is over 100,000 HL, it’s actually more like 15%. When you think about what this means in terms of the percentage of brewers represented in The Beer Store, they were actually doing a worse job than you thought of being inclusive. It also means that the three brewers that own the beer store somehow managed to lose production to the tune of a quarter of their business while holding a defacto retail monopoly. That deserves a sarcastic slow clap.

Beer Canada’s statistical report says that there were 140 breweries in Ontario at the end of 2014. It is actually significantly higher than that now, and growing fairly rapidly to the chagrin of chroniclers. Almost no one can keep up. Numerically, the growth has been most prodigious in categories less than 5000 HL. Those breweries increased 75,000 HL in production between 2013-2014. That’s impressive as it goes, but that entire increase is still smaller than Steam Whistle. On the other end of the small brewing spectrum, between 15,000 and 100,000 HL, you’ve got an increase of 431,000 HL in six years. That segment tripled. In 2015, we’ll pass 1,000,000 HL in production fairly easily.

It’s hard to argue that really large breweries will benefit very much from Grocery Store sales. At the moment Molson Coors and AB InBev are floundering about trying to sell you apple flavoured Lager. I know that you think they will, despite the fact I just showed you they lost a quarter of their production with a monopoly. They’re already at more or less peak advertising. They’re actually going to have to spend more promotional budget on Grocery Store sales. I suspect it will be significantly worse for them than the current system. Remember: the limit on package size is going to be a six pack and the large brewers thrive on volume. Their entire model in Ontario has been predicated on selling 24’s of beer. Here are 450 new locations where they can’t do that and where everyone else can grow their overall volume selling 473ml cans.

There’s also the grocery store shopping experience to be taken into account. People are acting as though we’re going to get a purely No Frills experience. I wonder where people are shopping when I see some of the online arguments about this. You’re going to get huge chains attempting to replicate the relatively pleasant experience of the LCBO in their largest locations because they’re competing against it for traffic. They’re not just going to stock the ten most popular products because this isn’t a loss leader. This is a guarantor of foot traffic through their grocery store. I predict a significant bump in impulse bought gourmet snack foods.

Yes, this is going to take time. I don’t know that we have an end date on the 450 store model that has been suggested. I don’t believe that the changes will end there. I think that any change is going to lead to more change. My colleague Josh Rubin pointed out to me the other week that the arbitrariness of licensing based on square footage will probably lead to significant lawsuits from a competition standpoint. I rather suspect that the Convenience Stores have not given up either.

No, the system we’re getting is not ideal. It looks to me, based on the statistical evidence, as though it is intended to be economically protectionist of Ontario producers and to steward further growth in a calm and measured way. It favours increasing excise tax rather than focusing on consumer convenience.

The important thing is to remember that nothing was ever going to happen overnight. This is better than things have been in a hundred years. The complexity of the market has increased dramatically due to the number of players involved in retailing. While past performance doesn’t necessarily indicate future growth, the production of small brewers has been growing at an average factor of 1.3 annually. That was in an unfavourable environment with distribution controlled by very large competitors. We just added 450 stores over the next half decade in retail environments that will likely be tonally similar to the LCBO, but specializing in beer. Even without those additional stores, small brewers were managing production growth at 30% a year. It’s fairly likely based on the statistical evidence that they’ll make up something like 30% of the volume of beer produced in Ontario by 2020.

Grocery store sales are going to function as a tool that allows small brewers in Ontario to increase their market share to the point where they have an increased ability to influence legislation. I think that’s a good thing, but it does call into question what happens after that. Will the largest players ever legislate against themselves? Probably not. We may never get a free market in Ontario, but the best way to get anywhere near such a thing is to reduce the power of MolsonCoors and AB InBev in the sector. This will help do that. Any other outcome is unknowable.

How You Win in Ontario

Let me tell you about how things change in Ontario.

In 1837, the rebels in Upper Canada met at breweries. They met at John Farr’s brewery and they met at John Doel’s brewery. John Doel was a Methodist. He wanted exactly the same thing that the rebels wanted: responsible government, democracy and a slightly smaller slice of the pie for the fat cats running the show.

If you know your history, you know that the rebels met at Montgomery’s Tavern and proceeded to march down Yonge Street. They probably met at Montgomery’s Tavern because they were marching against troops commanded by John Colborne. They were ill equipped to fight a man who beat Napoleon’s Imperial Guard at Waterloo. The fact that they bothered at all meant that they were very brave and possibly slightly drunk. They never had a chance.

Change came in Ontario through demographic shifts and through consensus building and it took a long time. A lot of that was done by Methodists who built schools and churches and temperance halls. Some of that was done with money they’d earned selling beer. They changed the mores of society and they changed opinions. In Ontario change doesn’t come from the barrel of a gun. It comes through waiting and working patiently. When William Lyon Mackenzie was finally allowed back into the province it was John Doel who sold him back his property and the Methodists had already changed Ontario.

It’s hard to say how much responsibility anyone has for the changes made by the province to Beer Sales on Thursday. Martin Regg Cohn did some sterling work, at first annually around Christmas and then more frequently over the last six months. Ben Johnson over at Blog T.O. has left nary a feather unruffled in bringing the public’s attention to matters beery. Just about every beer writer in the province has made some contribution, including but not limited to Stephen Beaumont, Crystal Luxmore, Dan Grant, Chris Schryer, Nick Pashley, Robin LeBlanc, Greg Clow and David Ort. There are others, too. If you’re left out, be sure it’s not intentional. We reached critical mass so quickly over the last year that it’s hard to keep track. (ed. note: I can’t believe I left out Josh Rubin. Dude’s great.)

I don’t know how much responsibility I can claim, but the answer is “some.”

I wrote nine blog posts about The Beer Store and, with Alan McLeod, one book that summarized its place in the history of Ontario. The link to the book is to the right.

The first three blog posts didn’t exactly fall on deaf ears, but they reeked desperately of policy wonk. The first post talked about the basic problem with reform (that the issue only cropped up every six months). The second post talked about the OCSA commissioned study written by Anindya Sen and the reason it had failed to persuade. The third post talked about the OCSA’s second study, which I had discussed with Dr. Sen and which talked about economic theory.

Eventually I realized that asking people to understand any economic theory more difficult than supply and demand was going to be fruitless. It doesn’t matter that you’re right if you can’t explain why you’re right.

The fourth blog post was simply called Understanding The Beer Store. By this point I was researching their history with Alan and I realized why people couldn’t get their heads around the business model. To this day I still hear people say “but they must make money.” All you have to do is explain that it doesn’t need to be profitable because it’s saving its owners money. The foreign owned Beer Store was actually preventing its owners from having to push capital into the economy.

The good part about creating easily understood talking points is that they filter out to other places. People started talking about that. The Convenience Store poll from November 2013 said 14% of the population polled were aware of the foreign ownership. By the time I got Lorne Bozinoff to run polling for me in April of 2014, we were up to 22%. I wanted pure data so we made the questions as neutral as possible. By this time, I think everyone realized that the key to the situation was raising public awareness on the issue. All we had to do was keep the flag flying so people would see it. Critical mass of coverage helped a LOT.

I wrote to my MPP, Eric Hoskins who was Ontario’s Economic Development Minister at the time highlighting the massive potential for economic growth. I encouraged others to do the same. I can’t tell you if anyone did, but I’d hope it’s a positive number. I wrote later about the Ontario Problem and the inequity of the situation and how the demographics had changed. When Ontario’s brewers were tempted by The Beer Store in January, I rallied ‘em by aiming for St. Crispin’s day and letting it rip. Eventually, I simply wrote about the necessity of change.

I got name dropped in the C.D. Howe Institute study on The Beer Store and on the Agenda with Steve Paikin. I somehow got a professional polling firm to work for me for free. I co-wrote the history of beer in the province of Ontario (which seems Machiavellian in retrospect, but I’m not that clever. I lucked into that.) which made me into the go-to media interview on The Beer Store’s history. I was interviewed on Global Morning and CBC Radio One (three times this month). I was interviewed by the Globe and Mail and Metro and wrote my own columns in the Sun. I helped Adrian Morrow at the Globe fact check his figures on the beer store’s cost offset after I was let go from the Sun.

I retweeted others and others retweeted me. It was a group effort. The important part was keeping the ball in the air; making sure that the narrative didn’t disappear from the airwaves and from the internet. We fought The Beer Store for the best part of two and a half years. It’s owned by companies with billions of dollars of assets and I fought them with no budget and facts and arguments and rhetoric. I didn’t lose my temper and I didn’t raise my voice and I didn’t give up.

I see people complaining about the changes that have been instituted. That they’re not enough. That they’re a smokescreen. That the Liberal Party are only making changes because they’re in dire financial straits.

I’ll take it.

The thing is this: We’ve got the demographics. We’ve got 245 breweries extant and in planning. We’ve got grocery stores we can browbeat and campaign against. We’ve got MPPs we can write. We’ve got a rabid base of craft beer fans and we’ve got momentum. We just won a thirty year fight and people are worried about whether we can get craft beer on grocery store shelves.

We can. We just have to keep pressing forward politely and persistently.

A Word of Advice To The People Of Ontario…

The question, as always, is “do you believe they’ll do it?”

The idea of beer in grocery stores is presently transitory. It exists only in an article in Martin Regg Cohn’s column in the Toronto Star. His word, although convincing and no doubt backed by leaks from the provincial government, is impermanent. At this point, beer in grocery stores exists only as an idea.

It is a good idea.

When Brewer’s Warehousing was started after prohibition, the main idea was to take the onus off the provinicial government. They wanted control, but could not afford the warehousing that went with storage and transportation of beer. Originally, Brewer’s Warehousing was a co-op between the brewers of the province. They worked together to have their products spread out as far as the individual breweries deigned fit.

The 20th century, both here and in America saw consolidation in breweries. The part unique to Canada was that the organization was government sanctioned. It ended up eventually with a small number of foreign owned corporations in control of a system that was meant to benefit small, local business. Currently, The Beer Store does not do the thing it was designed for. That enough is reason to seek reform.

It is inequitable. It is perverse: It perverts the intent of fair dealing that was established by the government in 1927.

It is unlikely that you will see the small brewers of this province come out in their own support in the coming days. They are terrified of the punishment that may be exacted against them. They deal with a system in The Beer Store that will gladly cut them down at any sign of trouble. They depend on the goodwill of their competitors at the moment for their existence. In what world is that a fair deal?

The Ontario Brewers, whether they be members of the Ontario Craft Brewers or not, are subject to poor circumstances. They may sell their product at their own brewery, of course, but further afield they run into difficulty. The LCBO is not obligated to take their product, and frankly, were they obligated so to do, they do not possess the shelf space to accommodate. The Beer Store requires that small brewers pay an organization owned by their largest competitors for the privilege of wholly inadequate representation. Even if everyone foolishly wished to do business with their largest competitors there would not be shelf space. It is an anachronistic model, outdated now by decades.

The difficulty is simply this: There must be change.

At last count, there are 233 breweries extant and in planning in Ontario and no room for them. In every county, maybe in every town, there will soon be a craft brewery. Mind you that the quality of the beer may vary from county to county, but I am not speaking to you as a critic. I speak only of the pride in geographical place that brewery may offer you. It is an additional institution in your community of which to be proud. It will provide business and tourism, employment and philanthropy to your community. It has been so in the United States for decades and in Europe for centuries.

I see legitimate complaint about the idea of beer sales through grocery stores. At most recent hearing, the information is that there will be 300 licenses auctioned off to large grocery stores. Naysayers are of the opinion such action will favour the large brewers. Personally, I believe them shortsighted. Were you to find yourself in America today in a grocery store in even the smallest town you would find craft beer. In Chattauqua County, New York, the Southern Tier Brewing Company brewed a beer that came second only to Busch on local shelves. In Anniston, Alabama, on the shelves of the Piggly Wiggly, you’ll find craft beer. In Utah, though it be only 4% alcohol, you will find small, local breweries on grocery store shelves.

The addition of grocery stores to the market will create hundreds of thousands of feet of shelf space in which craft brewers are adequately represented. For perhaps the first time in a hundred years in a non-governmentally sanctioned space, consumers will be able to view the product they are buying with their own eyes.

It is not an action without its problems: Larger craft brewers will dominate. Mill Street and Steam Whistle, Muskoka and Nickel Brook (once its expansion is complete) will take the majority of the craft beer space. This is simply a question of scale. Smaller brewers may not have the ability to compete immediately. This is an opportunity for the strong. If ever there were a tailfeather with which to attract investment, this is it. The craft sector will see expansion if the rumoured legislation is tabled and approved.

I worry about the smallest brewers: Those only now starting up. After all, had things gone only slightly differently, I could have been one of them.

Currently before the Ontario legislature (having passed its second reading) is Bill 67. Raised by Todd Smith, MPP for Belleville, it would see Ontario breweries enjoy cross sales. That is to say that the smallest breweries would be able to help each other along by offering the sales of each other’s products in their own stores. It costs taxpayers nothing and allows for growth and expansion in the parts of the market that are most helped by incremental improvement. It will serve the consumer with additional selection at little or no additional cost. It will help the small brewers immensely in the short term. To fail to lend them your support will simply strangle industry in its cradle and rob your community of employment and tax revenue.

As citizens of Ontario, it is in your interest to forget the question of whether grocery store sales are the best step forward in terms of consumer consumption. At this point ANY step forward is positive and the status quo will kill jobs. 233 businesses hang in the balance and in that number exist thousands of jobs that cannot be challenged by automation or outsourcing. Each of these breweries houses an entrepreneur who is doing his or her damnedest to provide you with a quality product. In a province where businesses like Blackberry and Heinz lay off employees to the detriment of the towns they exist in, it is ridiculous not to to support your local brewery. Your local brewery will provide a partner in your community for the long term in a way that the large brewers that own The Beer Store simply cannot.

I will ask you only this: to bet on the future of Ontario. Support beer in grocery stores and support Bill 67. Do not wait to see whether the government will do it. You employ them. Make them do it.

A Word of Advice for Ontario Breweries…

If you’re a brewer in Ontario you are probably weighing the changes that The Beer Store proposed yesterday. I’d like to review them for you.

First of all, there’s the concept of ownership. On The Beer Store’s conference call last night Ted Moroz made much of the idea that by offering ownership to Ontario Breweries, we would be going back to the way The Beer Store was intended to be; that we would be reclaiming its heritage.

The offer is a snare and a delusion. The Class E and Class F shares that are on offer do not buy you a stake in the company. You do not get a stake in the capital of the organization. They simply buy you the ability to vote for a representative on The Beer Store’s board. Now, it is worth pointing out that the three positions offered by The Beer Store on their board amount to 20% of the total board vote. There is no feasible situation in which Molson and Labatt will vote against their own interests in your favour. Your three board positions are therefore entirely meaningless. It is pointless busy work. Do not fall under the sway of the idea that your brewery’s President might gain status by being on the board. It’s an empty seat only a fool would covet.

Secondly, much was made of the idea that “owners” would be given five free store listings for two products. The initial product fee would be waved and also the listing fee for the five Beer Store locations nearest you. Let us do the math on this. The listing fee is something like $2650.00 and the per store fee is something like $230.00 per store. They are offering you a one time concession of something like $7600.00 in the hopes that you will stop pressing for reform.

Let me explain something about the changes they are proposing. They are founded in a deep arrogance. They believe that by giving you some crumbs that they will be able to keep the whole loaf. They think of you as dogs to be fobbed off with scraps.

The worst part of The Beer Store’s offer is that it is calculated to divide you. They believe that some one of you will want to claim the role of board member. They believe that you will turn on each other for $7600.00. That’s the amount of money The Beer Store believes will sway you. They want you to be so excited about their $7600.00 that you forget the following key detail.

You will still be in the thrall of a system that has disregarded you until this moment. The Beer Store offers you these scraps in order to prevent having to make any more concessions. They hope that it will be enough. They will not change. Your input will be disregarded. Your stock will not be displayed in the front of the store. You will not be treated equally. They have had thirty years to change the business model. They pretend to do so now only under duress.

We are at a crossroads. You have the opportunity to think of the future of your brewery. There is every possibility that you will have your own stores in the near future. That you will prosper in business and be a scion of your community. That you can build a system of your own and with it bolster the economy of a province that sorely needs the aid. That you can achieve your dream of building a business that might live on in your family.

The Beer Store would have you sell your dreams, would have you sell your future, for $7600.00

The Beer Store did not consult with the Ontario Craft Brewers about these changes. They did not consult with the Provincial Government. They believe that this will be enough compromise to bring you to heel. They believe it will stop you in your tracks.

Let me tell you something. It’s not the size of the dog in the fight. It’s the sheer bloody number of dogs in the fight. They are worried enough to offer these concessions unprompted and it’s because they fear there is worse coming. They know that the number of brewers that have been maltreated by The Beer Store has increased to the point where their very existence is in jeopardy.

This would be a good time to take advantage of your numeric superiority. Stand together. Make some noise with your Members of Provincial Parliament. Let them know that the time for change has come. Let The Beer Store know that your dignity, your integrity and your future are worth more than the pittance they offer.

Do not ask what they will give you. Ask what you can take from them. It may very well be everything.

The Ontario Problem

Since I started writing about beer about four and a half years ago, the Ontario situation has become more and more interesting. There are more breweries competing for market share and there’s increased media coverage of the beer retailing problem. Martin Regg Cohn, for instance, has been on fire of late pointing out the Beer Store’s lobbying practices. I’m not going to accuse anyone of peddling influence because I don’t have a lawyer on retainer. Instead, I’ve decided to see if I can recap the problem and explain why change is extremely likely to happen in the next couple of years.

The Beer Store was never intended to be for the benefit of customers. What Brewer’s Warehousing was designed to do from the start was to take beer retailing out of the hands of the province. Even in 1927 the idea was that it would take the necessity of warehousing out of the hands of the provincial government. This was a pretty good idea as long as it was a co-op. Breweries were getting larger and the fact that everyone had a hand in the distribution system was a good thing. It made it equitable.

E.P. Taylor exploited the obvious flaw in this system and started buying up breweries left, right and center. By the early 1980’s, there were very few breweries left. Allen Winn-Sneath’s Brewed in Canada suggests there were 40 breweries left in Canada in 1980 and only 8 were not owned by Molson, Labatt or Carling O’Keefe. In Ontario, this meant Amstel and Northern Breweries. I have put the plants on a map so you can visualize what that might have looked like. The vast majority of these plants are now gone. WatPL30858f

This was a pretty good deal for the large brewers. The Beer Store’s organization is such that it works in your favour if you are a very large company. The fact that your beer can only be sold in predetermined locations and that the organization that runs those locations stocks those stores from centralized warehouses means that you don’t have to pay for delivery, storage or a sales force. It’s a gigantic savings. The large breweries don’t generate profit from owning and running The Beer Store and this is something critics frequently fail to understand. The monopoly is not profitable for the owners because it extracts profit on sales. It is profitable for the owners because it saves a frankly ridiculous amount of money on outlay. Large brewers don’t have to pay for a labour force for sales and delivery in the way you might have to in a completely privatized market.

The problem is that the beer industry doesn’t work the way it did in 1980 and never will again. The breweries that operated in 1980 were all capable of producing well over 300,000HL of beer at once. The largest craft breweries in Ontario at the moment hover around 75,000HL for tax reasons. There are currently 220 craft breweries extant or in planning over on the Mom and Hops directory. If you would like to visualize what that looks like, here is a map that was put together for me by a talented young geographer named Kevin Roy. (He would like me to tell you that the brewery data came from the Mom n Hops Brewers Directory 4.0 in March, and the population data is calculated from Statscan’s 2011 Census of Canada.)

CraftBrewing wGraphicsCited

The high point for Canadian beer consumption was 1978. We drank 106.5 litres of beer each. We’re currently down to about 64 litres a piece. That’s about 42.5 litres of beer per person less. That volume loss did not hurt craft brewers. Many of them didn’t exist yet. The large brewers lost that volume. They have shut down plants in Barrie and Etobicoke and Edmonton and Halifax and bottling lines in Vancouver. They lost 40% of their volume in 36 years and that’s terrible.

The truth of the matter is that The Beer Store is losing. Look at this polling data that Lorne Bozinoff at Forum Research was good enough to run for me last spring. People under 45 are equally likely to buy beer at the LCBO and at The Beer Store. The LCBO didn’t really sell beer until the mid-1980’s when The Beer Store had a month long lockout and managed to alienate beer drinkers province wide. Since then they have lost 50% of their customer base in what is practically a monopoly.

Let me say that again. In about 30 years, the large brewers who own the beer store have lost approximately 40% of their volume in sales and 50% of their customer base despite sweetheart deals, lobbying and a practical monopoly. If it were a real company rather than a cost offsetting device operated for the benefit of the owners, a series of CEOs would have had to resign in disgrace.

In contrast, there are the small breweries. Every year we get statistics from the LCBO about how much the Craft Beer retail segment has grown. The number is usually something like 30%. The total number is 575% since 2006. In truth, we don’t know how much Ontario Craft Beer could have grown if there had been an equitable distribution system for it. It has grown as much as the LCBO has allowed it to grow, so the 30% average growth is sort of nonsensical. The number could probably have been much larger than that except that there are really significant problems.

If the 1980 version of the beer industry was built around monolithic brands, the current model is built around niche products. To extend the metaphor from a previous blog post, we’ve got a distribution system designed for Network TV but what people are increasingly interested in is Netflix.

If you are a small brewer, you have a couple of options for distributing your product. First of all, you can attempt to get into the LCBO. The LCBO is not designed for beer sales. It does not have anything like the shelf space required to stock all of the products submitted. The LCBO is not obligated to stock your product. In fact, the shelves are so crowded at the LCBO that it is a nightmare attempting to find anything in a store. Sometimes, instead of your product, they will stock Norwegian Barleywine for no discernable reason.

This one. This cack was on the shelves for nine months in some stores whle other products were sku'ed out.

This one. This cack was on the shelves for nine months in some stores whle other products were sku’ed out.

Any brewery can get into The Beer Store. All you have to do is pay a listing fee for each packaging iteration of your product and then pay a shelving fee for each store. It’s about $30,000 dollars for 100 stores for a single packaging format. If you’re a small brewery starting out, that’s an employee that you are going to have to forego. Additionally, since you are a small brewery, you probably make seasonal products. It would be ridiculous to pay $30,000 to shelve a beer for three months in a retail setting that discriminates against your product. Even Moosehead’s Hop City brand doesn’t do it and they have deep pockets. Barking Squirrel may be at the Beer Store but all the rest of their beers are LCBO only. (Next time you see an Oland brother making an argument in favour of The Beer Store feel free to ask him about this in a loud and vocal manner.)

If you’re a small brewery, there’s no guaranteed avenue of sales that doesn’t force you to pay your largest competitors. People have been making this argument for a very long time. It is not new information.

The difference is this: There are 220 small breweries out there already existing or in planning. There will be more. Each of these represents a business that is going to be someone’s life’s work. Even a very small brewery probably employs four or five people. If you look at the 2014 map from earlier, you’ll see they are everywhere. Until the last couple of years this wasn’t the case. Just about every city in Ontario now has a brewery. More than ever before, the public is identifying with the small brewers because they are their neighbours. The media coverage of the problem is not slowing down even a little and everyone is more aware of The Beer Store’s foreign owned monopoly than they were five years ago. The public is increasingly aware that small businesses owned by Ontarians are suffering at the hands of foreign owned companies.

Those are small businesses that probably employ a couple of thousand people directly and which are going to grow over the course of the next twenty to thirty years. They provide jobs upstream and downstream. More than that, they provide employment locally rather than in a central location. They provide a sense of local pride and let’s not forget those tourism dollars.

The large brewers, on the other hand, are shrinking. They are selling less volume and all you need to do is google Molson or Labatt and “layoffs” to see how they have been trying to achieve more with less over the last half decade.

If we don’t change the system in the near future we force the small businesses which have the potential to grow over the next twenty years and generate tax revenues and employment to stagnate by forcing them to compete in a business model that was outdated by the mid 1990’s. The large brewers will continue to shrink and as their size dwindles so will their ability to generate tax revenue for the province. Additionally, very large craft breweries from the United States who are not hampered by distribution as restrictive as we have here will be able to buy shelf space in The Beer Store eating away at both ends of the Ontario beer market from the middle. Sierra Nevada, New Belgium, Oskar Blues, Lagunitas, Stone are names that beer drinkers may welcome but which both Ontario’s brewers and government should fear.

If we do change the system in the near future, we have the prospect of the growth of small breweries over the next twenty years. We have the employment that they create and the revenue that they generate. We might have an export manufacturing industry. The American breweries are coming, but with Ontario’s small breweries freed up to compete, they will mostly take share away from the large brewers who are already losing.

Now, if I were a recently elected Premier of Ontario who had made it into office attached to a large scandal and it was being intimated by the Toronto Star (who recently brought Rob Ford and Jian Ghomeshi down and who do not ever seem to give up) that lobbying is the only reason The Beer Store continues to exist, I would think very seriously about pulling the trigger on The Beer Store’s situation. We are very nearly at the point where it would pay off as both a short term strategy for economic protectionism and as long term investment.

The majority of the public is in favour of getting rid of it and it can actually be spun as a long term economic strategy. What a PR coup it would be to be seen to be investing in the future of Ontario instead of maintaining a status quo which provides dwindling benefit and does not exist to serve consumers! The best part is that there is no reason not to go ahead with Ed Clark’s plan to bleed The Beer Store for a hundred million a year while reforming the system outside The Beer Store. If they complain of unfair treatment, remind them that they had 30 years to change their model and that they spent that time replacing dusty bottles with an iPad.

For the first time since I started writing, I’m actually optimistic that we’re within about 12 months of significant change.

The Ghost Tour

“Such is the uncertainty of Human Life we know not the moment we may be called off – the hand that guides this pen may ear another day be stiff and cold” – William Helliwell. April 7, 1837

These were the words of William Helliwell on finding that a maltster that he previously employed, Thomas Woodly, was burned to death in a barroom fire. William Helliwell was the brewer at Todmorden in the Don Valley and he was typically a very brave man. In 1837 in Toronto, people were acquainted with death in a way that is removed from us now. He had lost members of his family on several occasions and in 1832 lost several acquaintances to contagious disease that gripped the city. It wasn’t until the death of Thomas Woodly that he began to realize that he might not live forever; this despite surviving a truly gruesome brewing accident in 1834.

Writing history is difficult, especially if you’ve got source material like the Helliwell Diaries. It’s a biographer’s dream. There’s no need to ascribe any characteristics or intention to the man’s actions because he’s written everything down. He even copied his correspondence by hand. The level of detail is not worthy of Samuel Pepys, but William fared pretty well for a provincial lad from Upper Canada.

The difficulty, then, is in writing the other 16 chapters of your book. It’s hard not to think of William Helliwell as a character; a kind of archetypal pioneer figure slogging through knee deep mud to get to Yonge Street. But he isn’t a character. He was a man. It would be like, to take a modern example, thinking of Jim Koch as the protagonist of a Don Delillo novel. It would exploit some marvelous Jungian memetic structures and create a wonderful base for thematic exploration, but Jim’s just this guy, you know?

In writing Lost Breweries of Toronto, I harnessed two of my greatest skills: monomaniacal drive to research effusively and sitting motionless for hours at a time. No one could have written this book before now. I don’t mean to say that I’m singularly brilliant: I mean to say that the technological resources didn’t exist. The Globe is all archived online from 1844 to the present day. To get correct details of Toronto’s 19th century breweries, I’ve have to comb through half a dozen search strings for each chapter to turn up information: Literally hundreds of disparate articles of dross to find an additional detail; to create another avenue of inquiry. I once spent three hours researching a bear for this book. It amounts to a sentence in the finished version.

If you’ve read Ian Bowering’s book The Art and Mystery of Brewing in Ontario, you will appreciate how long that research must have taken. I believe that he wrote that in 1988, which means that he did it all manually. I can’t even imagine. If you’ve read that book you know that most of it reads as a list or chronology more than anything else. Alan Winn Sneath’s book Brewed in Canada also has a chronology.

Those were more or less the starting point. Mining those two chronologies for data I created a spreadsheet. Using the spreadsheet I created profiles of each brewery. I intentionally avoided using secondary sources where possible because I don’t trust anyone to get the details right. Many of the secondary historical sources conflicted with each other. I used contemporary accounts and guides to Toronto, obscure legal records and first hand accounts, newspaper advertisements. I was able to source quotes from some of the late Victorian brewers. In one incredibly lucky instance I discovered an entire manuscript that was written by William Copland. I discovered the existence and location of three breweries no one seems to have known about. One of them was on the block I live on at Davisville in midtown Toronto. One of them was basically on the site of Bar Volo.

William Helliwell created a difficulty. We know everything about him. That sentence above is a young man realizing that he’s not going to live forever. He’s not a research subject: he’s a man with hopes and dreams and fears. He was clever and observant and detail oriented. He was desperately in love with his young wife. The poetry he wrote her was, from a critical standpoint, awful, but it was enough to win her heart.

The realization that you come to writing history is that you have to stick to provable information. The dozens of other brewers that feature in the book cannot possibly allow for the same level of detail. In culling information from every possible source, you begin to build up pictures of these people in your head. Some of them spring to life more readily than others.  The difficulty is knowing where to draw the line. The respect I’ve tried to accord them is not to assume motivations where they are not obvious; not to ascribe characteristics. It is the respect they are due.

Lost Breweries of Toronto has all the information that you’d expect of such a book: “This brewery was here and the brewers where such and so and it existed from then until then and they made X. X was 6.7% alcohol in 1897. Phew, that’s a strong beer.” Don’t worry. There’s plenty of that.

Mostly though, I ended up writing a book about Toronto. I wrote about the larger social context the breweries existed in. I figured out how all of the brewing families were intermarried. I tried to uncover how the capital from brewing built our city and how that history was more or less whitewashed in the name of Toronto the Good.

I stared for what must be days at fire insurance maps from the 1880’s and 1890’s; At this city’s growth and expansion through maps of acreages and geological surveys and maps of sprawling Victorian redbrick and maps of annexed towns. As I walk around Toronto now, I catch myself thinking of streets that no longer exist and buildings long since gone and taverns that no one has thought of in generations. The geography has changed, but the soul of the place is one that we continue to grow into.

All I’ve done is use beer to explain that.


In Which I Realize I Have An MPP

(Editor’s Note: I once had an aunt who wrote letters to politicians. I believe she once lambasted Prime Minister Chretien over the rise in the price of a head of cabbage. It seems that the frivolity of subject has skipped this generation even if the letter writing impulse has not.

My MPP is Eric Hoskins. I met him once at an announcement of funding for the Ontario Craft Brewers. I don’t know who your MPP is, but I’m sure that they would appreciate hearing from you on the current debate about deregulation.)

Hello, Minister!

I am emailing you because I’m one of your constituents. I am periodically greeted by your smiling face when I check the mail and receive flyers. I am also Canada’s only national beer columnist, with Sun Media. I see the beer industry from a lot of angles. I work with brewers of all sizes and I have just written a book about the history of beer in Ontario.

I’d be writing to you as my local MPP, but you’re also in charge of Economic Development, which is a nice bonus.

I recently had Forum Research conduct a poll for me because I wanted to understand the mood of the province with regards to deregulation of The Beer Store. It turns out that people under 45 seem to be largely in favour of having beer sales in convenience stores. Rather than waste your time quoting numbers at you, I’m going to try and explain the history of the thing. It’s quite a niche subject, if I’m honest, so please don’t feel I’m being patronizing if I over explain.

The Beer Store is an outdated model. There was a time in the early 1980’s when it was perfectly adequate. When The Beer Store started in 1927, they didn’t have anything to do with retail sales to the public. They were meant to be a distribution system that the brewers in the province could take part in as a sort of co-op. It was partially owned by the participants. Over the decades, breweries consolidated and took each other over. In 1941, The Beer Store got into retail. By 1980, there were about three large brewers left. They owned the entirety of The Beer Store amongst them. This was alright because they were the only ones making beer. It made sense.

The problem is that they got arrogant. In February of 1985, they locked out the workers and shut The Beer Store down for a month. They forgot that they were not entitled to the support of the public. I can tell you that beer is a luxury good. No one really needs beer. Brewers depend on the public more than the public depends on them. If you’re a brewer of any size and you don’t listen to your market, you deserve what you get.

The problem is that since 1985, the market has changed immensely, but the structure of The Beer Store has not. Molson Coors is partly American owned and Labatt is owned by a Belgian/Brazilian consortium. The Beer Store, a system designed to serve the public of Ontario and sanctioned by the provincial government, is not even partly owned by Canadians.

Now, if I’m you, I’m thinking to myself, “Sure, but the jobs are onshore and they’re not going anywhere.” You’re right. Those jobs are important and retaining them is good.

However, currently there are something like 100 breweries active in Ontario. If the projections I’m seeing are correct (and I’m using actual declaration of intent from the breweries) we’re going to have something like 200 by the end of 2015. Some of these include the Ontario Craft Brewers, but realistically, 150 of those breweries will have no lobbying interest acting on their behalf.

There are going to be more breweries in Ontario than there have ever been. The high point was 155 at the time of Confederation.

The problem that we’re going to face as a province is that there is no shelf space for these 200 breweries. The LCBO is not obligated to stock their products. If you take a walk through the Summerhill LCBO in our riding, you’ll see that the beer section is stocked completely to the gills. I grant you that it’s a flagship store, but if you cast your mind back five years, it was not that way.

The Beer Store naturally claims that they’re doing a great job. They are doing a great job for extremely large brewers. The logistical system they have in place ensures that the very large foreign owned brewers do not have to compete against each other in convenience stores for the market. Even given that advantage, their sales figures are dwindling year over year. Simply put, they own a distribution system that is massively to their advantage and as Ontarians we have allowed this because up until 30 years ago, they were the only brewers.

But if you look at distribution from a small brewer’s perspective, it’s ludicrous. Let’s say that you’re a brewer based in Owen Sound. There’s an LCBO that is not obliged to stock your product. There are two Beer Stores and to get shelf space in them, you would need to pay a listing fee for the SKU and then a shelving fee for each location. It comes out to around $3000 to be able to sell beer in your hometown. It’s not equitable for a number of reasons, including the fact that you’re paying the money to a business your competition owns. The largest breweries will have their brands prominently displayed. Craft breweries could sell beer in The Beer Store in their hometown and no one would ever know they were there.

Oddly enough, the layout of the 200 breweries in the province of Ontario is going to more or less duplicate the map at Confederation. Before rail, every small town had their own brewery. With craft beer, there’s a locavore tendency against globalization. That’s kind of nonsensical since most of the ingredients that go into making beer are shipped very long distances, but people don’t think about it that much.

This means that across the province of Ontario there are start up businesses that don’t have a reasonable avenue of sale to the public. There are going to be 200 of them. That’s a lot of jobs, and these businesses are going to grow and expand. There will naturally be a period of levelling where some of the lower quality ones are jettisoned from the market, but on balance 150 survivors might not be unreasonable.

The Beer Store could have addressed this. They could have adapted to the market at any point since 1985 when we started to have craft beer in Ontario. Currently they are attempting to dictate to government and to the people of the province of Ontario what is best for us. They have once again forgotten that they’re meant to be serving us and not the other way around.

We’re in a situation where there’s massive economic growth to be had. Failure to change the existing situation will actively hamper small town business in Ontario.

Now, I don’t mean to suggest what should happen. I don’t know that it should be convenience stores or grocery stores. I don’t see why we couldn’t allow a separate co-op for Ontario Brewers (people quote NAFTA at me on that. I have not read NAFTA. It is long.) If all else fails, we could always nationalize The Beer Store. All I know is that something has got to give.

One of the reasons I’m taking the time to write this to you is that, as MPP for St. Paul’s, you’re fairly likely to be around for a while. It’s a liberal stronghold. I appreciate that the Liberal party seems to have come out against change recently.

I don’t think that this is an electoral issue. It is demographic. Something like 50% of people under 45 are buying their beer at the LCBO. Breweries are cropping up all over the province. The writing is on the wall, especially when you consider how badly you have to perform as a monopoly to lose 50% of your potential clientele over 25 years. This isn’t going away and the citizenry are going to get vocal. No matter who is in charge, something’s got to happen.

I don’t know what you’ll be able to do with the information, but the good news is that as an electoral issue, it’d be a soft landing. 70% of citizens would be fine with the grocery store or convenience store. That number is going to increase if the PSA The Beer Store is running keeps getting airplay.

Thanks for your time. I hope I’ve provided some context for the issue.

On Mediocrity

In undergrad, a friend of mine adopted a principle that allowed him to spend more time playing cards than doing coursework. While he was very interested in doing his best when it came to the courses pertaining to his major, he viewed elective courses as something of an intrusion into his spare time. As a result he would aim for a balance between the highest mark that he could possibly get and the lowest amount of effort that would allow him a respectable grade. He called it “The Gentleman’s C.”

I am not sure that it served him well subsequently, but we always had a fourth for euchre.

I’ve been thinking a lot about The Gentleman’s C in recent months because I’ve noticed something interesting: Given enough time, everything, regardless of its quality will end up with a mark somewhere between 3.25 and 3.75 on Untappd. For those of you who don’t know, Untappd is an application that lets you check in the beers that you are drinking and give them a score out of five. It’s generally fairly pointless and ultimately gameifies the consumption of alcohol by giving you badges. That’s very probably a bad thing in the long term.

I think that this has to do with the sheer quantity of beer being made across North America at the moment and the amount of enthusiasm that the market is seized with. In terms of criticism it’s difficult because there’s only so much meaningful output that any one person can create. In Ontario at the moment there are so many new breweries that I think it unlikely that anyone has eyes on all of them.

Understand this: As little as thirty years ago, it would certainly have been possible for a single critic to have tried every beer in production in North America. It would not even have taken all that long to do it. Possibly less than a year. It was not as though there were fourteen new kinds of session IPA hitting the market each week.

My numbers are bogus here, but follow me on the concept. There are something like 3000 breweries in Canada and the USA. I think we can safely give those breweries an average of five brands a piece, although in practice I suspect it to be higher than that. This means that there are something like 15,000 brands of beer being brewed in North America (excluding Mexico because I don’t know enough about that to wrap my head around it.)

At one beer a night that would take you 41 years. Even were you to dedicate your entire life the process and call it 8 three ounce samples a night, you’re never going to catch up with the growth forecasted and you’re going to zeno’s paradox yourself right into oblivion.

(edit: kudos to astute reader David Horatio Ort, who kindly pointed out that my bogus math was three times as bogus as it ought to have been.)

For that reason, there’s a significant tendency in criticism to focus on the absolute best of the best. It’s impossible to have context for everything, so why wouldn’t you focus on the things that you know you’re going to like and be able to review positively? If you try something you don’t like why would you waste your time reviewing it? Many people I’ve talked to are pleased to simply not write about things that they don’t like or things that are poorly made. I do it myself. I’ve got books to write and I’d prefer to recommend good things in the column than excoriate bad things.

With that huge and ever expanding number of beers out there, I think that we’re probably doing a disservice to people who read about beer by accentuating the positive when we should really be eliminating the negative with extreme prejudice. If a beer is simply not very good, then we should probably be telling the public that.

Untappd is a poor substitute for reality. Not everything is worth 3.5 stars out of 5. There’s some rough work being pulled at the fermenter and I’m seeing that increase rather than decrease. There are beers being launched into the world that are uninspired and really serve no purpose other than being something to market. There are some woeful mediocrities out there that deserve nothing but scorn. I don’t mean mass market brands from the big guys. I mean small craft beer producers who are more interested in a marketing strategy than a quality product. Brewers whose grasp has exceeded their reach.

The directory over at Mom n’ Hops is telling me that there are 184 breweries and brewing companies open or in planning in Ontario. When I started writing about beer in 2010, I think we had something like 35 in Ontario. For that reason, you wanted to be a bit gingerly. It was a big deal when someone got a new product on a shelf. You wanted to be a bit supportive even if the product was mediocre because at least it meant there was choice.

Choice is no longer a problem, but mediocrity is becoming one. Average is going to get you lost in the shuffle. Aim for something a little higher than a Gentleman’s C, folks. Just existing is for plankton.

The OCSA vs. The Status Quo

The second of the studies that the Ontario Convenience Store Association released in August is a good deal more broad in scope than the first. It is entitled An Economic Analysis of Increasing Competition In Retail Liquor Sales in Ontario. It is also written by Dr. Anindya Sen from the University of Waterloo. If you really like reading economic papers, you can download it by clicking the title.

I am going to attempt to explain the gist of the paper as best I can given my limited understanding of the economic model employed between pages 18 and 24. I think I get most of it, but if there are any economists out there, you might want to lean in on this one.

This paper is intended as a study to provide information on the possible effects of partial privatization of alcohol sales within the province of Ontario. It is an attempt to provide substantive academic research into the problem. This is something of which I am generally in favour. Too often we argue on internet forums about the likely effects of privatization without any real research to point to.

The initial findings which guide the study are as follows:

1)      The vast majority of the money the LCBO makes is on markup, which is generated in their capacity as a wholesaler. (This is usually true with specific amounts based on product type. Here is a link to the current pricing structure.)

2)      Comparatively speaking, federal excise and federal and provincial ad valorem taxes typically make up a smaller percentage than the markup,

3)      Based on empirical evidence, increased market competition is significantly correlated with an increase in per capita gross income, net income and government revenue generated by the provincial liquor authority.

The arguments that follow are largely based on the concept of consumer and producer surpluses and it basically goes like this:

Say you’re standing in the LCBO at Summerhill, checking out all the groovy new craft beers and thinking about what to drink this weekend. For the purposes of this argument, you’re all about buying a bottle of Panil Enhanced because it looks interesting and you liked the Bariquee that came in last year. You check the price tag and it is $15.00. The absolute most that you’re willing to pay for a single bottle of beer at retail is $16.50. That measure of $1.50 difference counts as your welfare based on consumer surplus.

Now, on the other end of the scale, Panil is trying to sell their beer for as much money as they reasonably can. It’s good beer and they feel they deserve to be paid a premium for it. I don’t know exactly what price the LCBO is buying Panil Enhanced from the importer at, but let’s assume for the sake of argument that it’s about $6.50 a bottle. That’s more than the $5.00 the importer would have taken at a minimum. Their producer surplus is $1.50.

All this means is that the system works tolerably well towards an equilibrium between consumer surplus and producer surplus at $15.00. Also, you go home with a bottle of Panil Enhanced and everyone’s happy.

If you could remove some of the markup that the LCBO adds as a wholesaler from the equation and keep the producer surplus the same, your consumer might suddenly be paying $13.50 for that bottle of Panil, creating additional consumer surplus.

Without competition, there’s no compelling reason for the LCBO to change the equilibrium point in the model. They would make less money in markup, and, because the product is cheaper, the province would take less PST. “Everything is worth what its purchaser will pay for it,” said Publilius Syrus. You’ll pay $15.00 for Panil Enhanced because it’s worth that to you.

There is also a concept here that you should understand that is called Deadweight Loss that’s associated with a monopoly on various products. Since a monopoly allows the retailer to charge the most beneficial price for themselves, some consumers are not able to afford Panil Enhanced at all, resulting in a loss of market utility. They have frowny faces.

Dr. Sen is essentially arguing that the LCBO voluntarily enter into a position in which they are creating their own retail competition.

Theorize that some kinds of alcoholic beverages are available for sale at convenience stores. The study assumes that convenience stores would be allowed to accept a lower markup, resulting in decreased cost to the consumer. For this the convenience store would pay some of the markup as licensing fees. As a result of that move, the majority of rational consumers would shop at the convenience store. This would in turn result in lower sales at the LCBO, which would force them to lower their prices.

This would lead to a significant reduction in government revenue due to the loss of markup and ad valorem taxation. The good news is this: The lowered costs to the consumer mean that the people who counted as Deadweight Loss and could not afford Panil Enhanced at all can now do so and that the people who were experiencing mild consumer surplus on their $15.00 bottle are now paying $13.50 and those suckers are doing backflips of joy in the streets, let me tell you. “Whoopee hoo,” they yell “I’m gettin’ enhanced tonight.”

“The LCBO in the short run is worse off, because of lowered sales and profits generated by its own stores” says the study. “However, it is quite possible that overall LCBO net revenue and transfers to the province will actually increase. Recall that in this model, convenience stores must also transfer their markup revenue to the province. Since they charge a lower price (compared to the LCBO), the total amount of liquor sold is obviously more than the quantity sold by the LCBO as a monopoly retailer. Otherwise, the LCBO would have earned these higher profits as a monopoly retailer by setting a lower price.”

Got that? Convenience stores charge a lower price and the LCBO charges a lower price but ideally the increased volume of sales that results from the decreased prices bridging two sales channels might theoretically increase once you take the additional taxation revenue into account.

I agree completely with Dr. Sen’s finding. That’s exactly what would happen given those conditions.

Those conditions will be met on the day that hell freezes over.

The model depends on a simplified version of the system as it currently exists which thinks solely about the benefit in terms of consumer surplus. The issue is that since the LCBO’s profits and the general tax revenue from the LCBO and Beer Store make up approximately 1.5-2% of the annual provincial budget, the real world also has to take the consumer into account as a citizen who benefits from services derived from that revenue.

The ignored cost implications are staggering. The LCBO’s reduced profitability would probably result in a decreased operational budget and therefore a decrease in staffing. Think about the amount of work that would have to be done in order to figure out what the decreased price structure would look like.

Think about the fact that you as the OCSA are pitching this fanciful study whose empirical data analysis does not account for demographics or trends in the marketplace and a conclusion section which contains a woefully large number of conditional statements. If I’m the government, I’m shutting you down because the LCBO is a guaranteed cash cow in a time of economic uncertainty and you are offering a potential 5% – 9% theoretical increase at some point in the future if everything goes right and there are no unforeseen eventualities.

Peace, order and good government means that “if” and “maybe” and “should” don’t get a seat at the table.

On a final note, consider the main precept of the OCSA model: additional sales. Additional sales mean additional consumption. If the core tenet of your model hands your opponent a social responsibility argument to beat you about the head with, you can’t be surprised when you lose.

So You Want To Be A Brewer: Lazarus Breakfast Stout

The nice thing about planning an event like the Feast Of St.John for Toronto Beer Week is that I’ve managed to create a certain amount of context for myself over three years or so that I’ve been writing about beer. I’ve collaborated on beers with a number of breweries, frequently with pretty good results. I have never really understood whether that is because I have some idea of what I’m doing or possibly just because I pick really talented people to work with.

If you don't make it a Great Lakes day, you will make Troy Burtch sad. That would be monstrous.

If you don’t make it a Great Lakes day, you will make Troy Burtch sad. That would be monstrous.

It’s hard to believe that the first of these collaborations was almost three years ago now. The original batch of Lazarus Breakfast Stout was brewed in Mid-November 2010. It was before I was working for Sun Media, if that gives you any indication of the time span. In that time period Project X at Great Lakes for which the beer was originally brewed has ceased to happen on a routine basis. The experimental brews that developed out of it have become the “Tank Ten” series. The fruits of Project X resulted in Great Lakes becoming the best brewery in Canada this year at the Canadian Brewing Awards. Mike Lackey has not yet been awarded the Nobel Prize for Peace through Zymurgy, but I’m sure that as soon as they found one, he’ll be considered.

A few facts, gentle reader, about Mike Lackey:

Mike Lackey’s brewing prowess is not actually attributable to his beard, as I may previously have indicated. The truth is that Mike Lackey was actually barrel aged for the first six years of his life, receiving his meals through a specially drilled bunghole. His first language was not English, but rather the nearly imperceptible hum of cerevesiae. It is the great tragedy of his life that he has never been able to reproduce by mitosis. The beard is only window dressing.

It’s no wonder he’s done so well.

This time around, it seriously occurred to me as we stood there talking about his various projects (He’s creating a beer concept called SMASHASS) and my various theories (food and beer pairing should be derived from scientific first principles) that we’re getting old. We talked about some of the new breweries that are popping up and what we thought their chances were.  We talked about how much more stuff there is now. In November 2010, when we first worked together, there were about 50 Ontario breweries, many of whom were doing very little. According to Mom and Hops today? 137 active and in planning.

The smell that comes off a wort with this percentage of dark malt is pretty hypnotic.

The smell that comes off a wort with this percentage of dark malt is pretty hypnotic.

This batch of Lazarus sort of reflects the changes. Originally, I brought the idea with me because I really liked Founder’s Breakfast Stout and I really liked Oaxacan Mole sauce. I continue to like both of those things, so the ingredients have not changed. It’s still an oatmeal breakfast stout with a really significant amount of roast and dark malt. It still has cinnamon, chocolate, and ancho chili. It still gets a half pound of coffee in the whirlpool (you avoid the leeching tannins that way.) The main difference this time around is that the alcohol content is a little lower. Originally, we think Lazarus was supposed to be 7.0% alcohol and near 50 BU’s. We lost the sheet after the first batch, so we were going from the second version, which we had already tweaked.

Here’s an important tip to all you well meaning lugs out there starting your own brewery: Don’t lose the freakin’ sheet. It’s black box crash test time. Without the sheet, if people criticize you for inconsistency, you deserve the rich, velvety, lambasting you get. Don’t be a chump: keep the sheet. Laminate it. Put it in a safety deposit box.

We decided that we’d rather have more beer at slightly lower alcohol. The flavour isn’t really dependent on the alcohol in this beer, but rather on the vast number of elements that contribute flavour. I don’t really think anyone is going to feel cheated if the beer drops to 5.5% alcohol. The novelty is the Oaxacan Mole thing.

Mike and I discussed briefly whether the nice folks at Aztec in Vista, California borrowed the idea for the beer for their Noche De Los Muertos. We figure that they probably arrived at theirs independently and that it doesn’t matter since the label is so cool. I actually got to try their version at the San Diego Zoo while holding a python. I like ours better, but I’m biased.

Once you add the coffee in the whirlpool, the rolling foam gets darker and darker. I love that part.

Once you add the coffee in the whirlpool, the rolling foam gets darker and darker. I love that part.

In terms of the Feast Of St. John, one of the great things is that Lester Garcia at the Wallace Gastropub has actually inserted mole sauce into the menu. I’m not sure exactly what the food pairing is going to be for the Lazarus Breakfast Stout, but I do know that I’m finally going to get to put it together with the thing that inspired it. Actually, the awesome part is that Lester’s version of the mole sauce is lighter in colour than a Mole Negro, so we’re going to get a fantastic range of flavours. His version incorporates a lot of fennel seeds, so it’ll be really interesting to see how that interacts.

I’m told that Lazarus will also be available as part of the tap takeover at Bar Hop on the 19th of September. That’s going to be a fun day. See the Michael Jackson movie and then go try your own beer on tap at a takeover hosted by Great Lakes and Bellwoods. Sometimes you’re given a reminder that you really don’t have the right to complain about your job.

How much more black could it possibly be? None. None more black.

How much more black could it possibly be? None. None more black.