St. John's Wort Beery Musings And Amusing Beers

The Ontario Beer Revolution – Distribution

While it’s very important to take into consideration the wishes of the consumer when discussing Ontario Craft Beer, one of the things that you have to factor into the consumer experience are the various methods of distribution for independent Ontario Breweries. I know that there are an ever increasing number of pubs carrying craft beer and I think the we can leave them out of the discussion for the time being since they deal directly with the brewers whose products they’re selling. Additionally, we can take for granted the on-site brewery stores as being part of the solution. They are, after all, one of the only tools of promotion for some of the beers manufactured by Ontario Brewers (Look at Black Oak’s Ten Bitter Years, which won a Tappy for best seasonal beer and was only available through these two avenues of distribution.)

The discussion always comes down to the two government sanctioned retail outlets that are licensed to sell beer: The LCBO and The Beer Store.

Over the last couple of years, what with hanging around and paying attention to increasingly agitated conversations within earshot, I’ve heard a lot about LCBO policy as it regards various issues. I suspect that many of the things that I have heard in passing are exaggerations, if not totally apocryphal (The LCBO never actually gave anyone a swirlie during recess.) I know that some of the things I’ve heard are completely accurate and those are things that have to do with the difficulty of doing business. Consider momentarily that there are two independent companies that exist solely to bring products from other provinces to Ontario: HMH Negotiants and Cecktor Ltd. According to RateBeer.com Dieu Du Ciel, which is brewed in Montreal, is available in Denmark, Finland, Sweden, Puerto Rico, Alaska and Australia.

It was unavailable in Ontario until last year despite the fact that we share a border with Quebec. Consider momentarily the number of additional Canadian breweries that are unavailable at the LCBO, or the difficulty of conforming to packaging guidelines. There’s currently a shipment of Dieu Du Ciel in a warehouse somewhere that was meant to be released on August 15th, and each and every one of those bottles has a little adhesive strip over the top of it, ostensibly to ensure that there has been no tampering.

It’s easy to suppose that the LCBO is run by foul tempered ogres, but I don’t think we should attribute to malice that which is adequately explained by bureaucracy. The fact is that they’re the single largest importer of alcohol in the world and they’re also a giant bureaucracy with concerns about labour problems, image management, and an increasingly litigious public. If you walk into the Summerhill store, which is a flagship, there’s relatively little floor space given to beer. I’m not saying there isn’t a lot of variety, but in terms of the building, it’s not a lot of space. That’s a good way to think about the LCBO: Beer makes up maybe 15-20% of their stock. I’m guessing that just in terms of day to day business they have more pressing concerns than Craft Beer; Not getting sued; Not violating trade or labour agreements; Managing what must be a labyrinthine warehousing and inventory system. If I had to guess, I would probably say that Ontario Craft Beer is somewhere around 21st on their list of priorities behind work stoppages and acquiring revenue for Dalton McGuinty.

I have observed that it’s possible to affect change, but it takes a lot of work and it happens slowly. Large bureaucracies are resistant to change at the best of times and in the case of what is essentially a governmental monopoly like the LCBO, there’s not really a great deal of impetus to change. Public demand might eventually have an effect on the selection of craft beers available, but it will not happen immediately. You can’t say that the LCBO is intentionally making it difficult; They are simply not motivated to make it easy.

“If only,” I hear you say, “there were some organization that was licensed by the AGCO that existed specifically to market beer in locations that were not attached to breweries within Ontario.” Well, there is, and its familiar orange signage and the clickity-clack of its conveyor belts are iconic. The Beer Store! I think we can safely assume that they have our best interests at heart. After all, they’re owned by Labatt, Molson and Sleeman.

Let’s talk about these three purely Canadian institutions who own The Beer Store: Labatt was purchased by Interbrew in 1995 and is now part of Anheuser-Busch InBev, headquartered in Belgium. Molson merged with Coors in 2005 and is now a huge bi-national company. Sleeman is, of course, a Guelph institution owned by Japanese brewing giant Sapporo. Of the three controlling partners, currently about half of one of them is Canadian owned. Why would Ontarians permit foreign interests to run what is essentially a governmentally licensed agency? Why isn’t this being examined thoroughly? Surely there would be some outcry if OHIP was run by Blue Cross or if the functions of the Ontario Provincial Police were outsourced to Hyderabad?

In addition to my cynicism about the intentions of these companies, I feel I have to point out a policy listed on their website:

“Operated on a cost recovery basis with a standard service fee schedule, The Beer Store is a unique retailer. Unlike other retailers, including the government owned LCBO, The Beer Store does not pick and choose the products it sells, nor does it set the prices at which those products are sold. These choices are made by individual brewers.

The Beer Store system is open to any brewer in the world with common rules for users and service fees based on volumes sold. … Any brewer in the world can sell their beer through The Beer Store provided the product has been approved for sale in Ontario by the LCBO (i.e. has met LCBO quality control, labeling and price approval requirements).”

It is written to sound like it’s an equal opportunity retailer. Not so. In order to get a listing, you first have to meet LCBO product guidelines and then you have to pay for the privilege of being listed, based on the volume that you will be able to sell. Each brewery chooses its products and is also responsible for their own marketing. See if you can think of the last time you saw marketing for The Beer Store. Not only that, but there’s a top ten list of most popular products prominently displayed immediately in front of the entrance. I’m sure that holds no sway whatsoever over the public. Small breweries can’t compete in The Beer Store in terms of marketing, price point or shelf space. Consider the listing fee: A trifle for a multinational company whose executives can afford to travel first class; A seriously limiting consideration for a brewery whose president also makes the keg deliveries.

In terms of Ontario Beer Revolution, this is the rhetoric that you need to use: Why won’t the provincial government license an Ontario Craft Beer Store to promote craft brewers? I have never heard a good reason to preclude this development. Is it because they are too invested in the entrenched foreign-owned monopoly that they have allowed to develop at the cost of locally owned interests? This is the kind of strategic rhetorical argument that could put enough pressure on the AGCO to make an Ontario Craft Beer Store happen if it’s played correctly.

7 Thoughts on “The Ontario Beer Revolution – Distribution

  1. I don’t think I can comment on this without being reprimanded for what I have to say.

    Hit well on the head though ;)

  2. Jordan,
    You left out the ray of hope in the whole situation: The Wine Rack. Those small shops in grocery stores (and at least one storefront that I’ve seen), comitted to selling only Canadian wine (okay, I’m actually still a bit unclear about them, to be honest. Initially they seemed only to sell VQA Ontario wines, now they sell more then just VQA, and even wines made in Ontario from grapes originating in other countries. Not sure about their mandate). But the point is, not only do they provide small wineries an opportunity to sell their products, they’re doing it *gasp* in a grocery store. And, completely surprisingly, total anrchy has not rolled through Ontario.

    I have no idea how long it took whichever interest group it was that campaigned for this to succeed, but they did. So we can too. Imagine with me: You pay for your groceries, wander over to the Wine Rack and buy a bottle of Ontario Cab Franc, then walk 30 more feet, and find yourself in the Copper Kettle (okay maybe not, that’s a little too Creemore) where you buy a 4-pack of Beau’s Lug-Tread, two bombers of Duggan’s #8 Stout, and a 12 of Bendale’s Best Bitter (from one of the breweries that doesn’t yet exist). I think that’s, perhaps, closer in the future then a lot of people would think.

  3. I had heard rumours a while back that Longo’s was considering experimenting with something like that, but unfortunately I couldn’t exactly figure out how to fact check it.

    It’s a good idea whose time has come, I agree. I’m currently mostly interested in defining the rhetoric that will allow it to become a reality. The arguments that I have heard against it are that the protectionism involved violates the spirit of NAFTA (which is bunk, given that the market share we’re talking about it minimal) and that the wine rack only exists because it was grandfathered in. I get the feeling that the AGCO can license whatever they want. They just haven’t yet because there has been no pressure to do so.

  4. Mark Murphy on August 24, 2010 at 9:54 pm said:

    The wine rack always perplexed me as well, and although I have figured it out I still have a lot of questions.

    The wine rack is owned by Vincor Canada:
    http://www.vincorinternational.com/keybrands.htm

    That’s why they only sell giants such as jackson triggs, Inniskillin, naked grape and sawmill creek.

    You will not find “craft” vinters at this store. Which raises the question, why does a single company have a monopoly on private wine stores???

  5. You are too kind, Jordan. The whole Molson/Coors duo-company is a farce. The company, like all companies in North America, is indeed incorporated. In the US. A company the size of Coors wouldn’t let Molson’s walk all over them. It is indeed American.

    The LCBO caved in to VQA pressure pre-VQA. There was a concerted effort to get domestic favouritism. In the case of the brewing industry, it wouldn’t be favouritism, but equality, if given the right to start a craft brewers retail.

    And don’t forget the commercial side of distribution. Warehousing, etc. You know, the things that make every other business out there efficient. I’m sure Sears Canada doesn’t ship directly from the manufacturing company.

    And then there’s the AGCO. Those clowns are legally blind when it comes to large brewers. They have stated they operate “on a complaint basis”. How about building an online system where craft brew fans can submit complaints to them through wireless devices? I could build that. It would actually get them off their ass, as evidence through reporting with pictures/video could take place that’s hard to deny.

    It’s poorly legislated, and poorly enforced, with 100% in favour of foreign companies. Not a single politician gives a damn. So, I say craft brewers break some rules and use social media to get away with much better marketing.

  6. Let’s do it!

    By Ontario law, the Wine Rack can only carry products that Vincor “owns” which is those giants. It is kind of like the Beer Store…

    So, what does it take to open 1 craft beer store?

  7. Pierre Levert on August 27, 2010 at 12:09 pm said:

    Here in Quebec, beer is also among the low priorities for the SAQ. But, at least, beer-crazy convenience store owners can stock on most craft brews from anywhere in the province. Distribution is always an issue for these small breweries but efforts can be rewarded !

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