(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.)
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The Beer Store is an outdated model.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.