The Beer Store

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Brewers Retail Inc.
The Beer Store
Joint venture
Industry Beer distribution
Beer retail sales
Founded 1927; 90 years ago (1927)
Headquarters Mississauga, Ontario, Canada
Number of locations
450 retail stores (2016)[1]
Area served
Ontario
Key people
Ted Moroz (President)
Services Distribution and sale of beer
Owners Sleeman Breweries
Labatt Brewing Company
Molson Coors Brewing Company
Number of employees
7356 (2010)
Website thebeerstore.ca

Brewers Retail Inc. (doing business as The Beer Store), is a Canadian privately owned chain of retail outlets selling beer and other malt beverages in the province of Ontario, Canada, founded in 1927. Owned at its inception by a consortium of Ontario-based brewers, it currently operates as a unique open retail and wholesale system jointly owned by 30 Ontario-based brewers.[2] Under this ownership model, all qualified brewers are free to list their products without discrimination and set their own selling prices.[3] These prices are subject only to basic LCBO price approval which must comply with legislated minimum and uniform pricing requirements.[4]

Under Ontario's Liquor Control Act, The Beer Store was formerly the only retailer permitted to sell beer for off-site consumption, besides stores on the site of a brewery, locations of the provincial government-owned Liquor Control Board of Ontario (LCBO), and LCBO-authorized agency stores in certain smaller communities.[5] The act and the company's articles of incorporation further stipulate that Brewers Retail cannot sell "hard liquor" (spirits), or consumer goods (like groceries).

Amendments made to the Liquor Control Act have since allowed for the sale of single and 6 packs of beer at select supermarkets in Ontario. This was done with the goal of enhancing customer access and convenience. The Beer Store however continues to maintain pricing exclusivity in providing consumers discounts on larger packs of beer along with retail partners, agency stores, combination stores and manufacturer outlets. What distinguishes the Beer Store however is its characterization as a sort of “beer commons”.[6] A 2013 Angus Reid survey commissioned by the Ontario Convenience Stores Association found that 13% of Ontario residents were aware that "The Beer Store monopoly is not a government-owned enterprise".[7][8]

Company[edit]

A Beer Store shop.

The Beer Store follows an open ownership model whereby any qualifying brewer is allowed the opportunity to become a Beer Store shareholder. Currently, the Beer Store is owned by a consortium of 30 Ontario based brewers. In order to qualify, the brewer must operate at least one facility in Ontario, conduct the full brewing process and sell beer through the corporation. Valid Ontario and Canadian manufacturing licenses are required and the brewer must not produce beer in any other jurisdiction, or else meet minimum annual capacity and production goals.[9]

The Beer Store is governed by the Liquor Control Act (LCA) and is therefore regulated by the LCBO.[10] As of December 2016, the company operates over 450 retail stores which sell beer to the general public. This makes The Beer Store (TBS) the largest distributor of domestic beer in Ontario, selling to over 20,723 licensed customers. Although many imported beers are available at the Beer Store, the LCBO serves as the primary importer. Once imported, the product is then sold to the Beer Store for further distribution. As the primary retailer of Ontario, The Beer Store sells more than 720 brands of beer and over 1,000 home consumer beer selling units from 180 different brewers around the world.[11] Larger Beer Store outlets typically stock around 600 beer selling units with the smallest Beer Stores stocking around 200 units.

TBS has a policy of accepting any brewer in the world to sell its product, as long as the brewer meets the requirements set by the LCBO.[12] Furthermore, unlike many other retailers, a brewer is given flexibility with regards to how many and which stores it would like to sell its product in.[12] Because The Beer Store operates on a cost-recovery basis, listing fees for smaller breweries can be kept at a minimum. In 2016 TBS implemented a new lower tier rate for qualifying small brewers that is significantly less than the basic service rate paid by the larger brewing companies.[13] Smaller breweries who produce under 1,000,000 hectoliters a year of beer qualify for this lower tier rate on their first 50,000 hectoliters of beer produced that year. Additionally, qualifying small brewers who produce under 10,000 hectoliters a year are now provided with 2 free guaranteed product listings at 7 of their most proximate Beer Stores.

Currently, workers are represented by the United Food and Commercial Workers (UFCW) Local 12R24 union.

History[edit]

The company began in 1927, with the end of prohibition in Ontario. Although prohibition had proven to be unsuccessful, the provincial government still needed to placate angry temperance advocates and agreed that beer would be sold through a single network of stores. However, the government did not want to operate this network itself (as was done in some other Canadian provinces), and so permitted brewers to organize the Brewers Warehousing Company Ltd., which later became Brewers Retail/The Beer Store.

The Beer Store today[edit]

The Beer Store truck

Operating Model & Pricing Market[edit]

The Beer Store operates on a self-sustaining basis as a low cost, efficient distributor and retailer of Beer in the Province of Ontario.[14] Operations take place on a fee for service basis, requiring brewers to pay a fee to sell their products through the Beer Store. The Beer Store publishes an annual rate sheet outlining their necessary financial requirements and consistency with annual budget and business plans.

The open nature of the Beer Store combined with pricing freedom for individual brewers has created a highly competitive beer pricing market. The Beer Store processes hundreds of price changes every month and the average retail selling price in the system has only increased 2.8% from 2003 to 2014 while the general rate of Ontario inflation over the same period was approximately 20%.[6] Although Ontario’s uniform pricing regulation precludes price competition between beer retailers such as the LCBO and the Beer Store, price competition between individual brewers and brands within the Beer Store system is significant. Furthermore, lower priced products are not restricted to larger outlets in urban centers, but are available at all Beer Store locations throughout the province, hence rural consumers benefit as much as urban consumers.

Estimated profits[edit]

The Beer Store operates as a not-for-profit entity, however, a study in August 2013 by professor Anindya Sen of the University of Waterloo stated that the near-monopoly the Beer Store has in Ontario allows it to capture as much as $700 million in "incremental profits" each year.[15] The study focused on beer prices for 24-bottle (341 ml) cases of beer collected from two major grocery stores in Quebec, and from The Beer Store in Ontario. Correcting for tax differentials between the two provinces, positive price differences of $1.3 - $3.3 were found to exist between their average price of 24-bottle packs of brands including Molson Canadian, Molson Dry, Coors Light, Budweiser and Bud Light. Using Molson Canadian as an example, the adjusted 24 pack price from Quebec IGA and Metro flyers was found to be $26.81 versus $28.12 for Ontario TBS locations.[16]

Green policies[edit]

Since 1927, the Beer Store has refunded deposits on all empty beer containers purchased in Ontario. In February 2007 the Ontario Deposit Return Program (ODRP) was launched by the Government of Ontario. The ODRP’s goal is to ensure that 100 per cent of all packaging sold at the LCBO follows the same path of all packaging sold at the Beer Store, to be reused or recycled.[17] All alcoholic beverage containers (over 100ml) purchased in Ontario are accepted for deposit return at any Beer Store location that returns empty containers. ODRP continues to make a meaningful contribution to Ontario’s waste diversion objectives, with the return rate increasing more than 16 percentage points since its first year of operation in 2007. Between the ODRP and Blue Box, an estimated 63,909 additional tonnes of glass is being diverted from Ontario landfills. These materials continue to be directed toward higher-end recycling supporting Ontario’s green economy and generating environmental benefits. “This success means we have recycling factories making new products, instead of higher piles of waste in landfills,” said Jim Bradley, Ontario Minister of the Environment, in an April 2014 statement.[18] As a result of the ODRP, Ontario is now the principal source of quality glass cullet for Ontario glass manufacturing – previously Ontario glass manufacturers had to source glass cullet from other jurisdictions to support production. In 2013-2014, the Beer Store and ODRP program combined, avoided 196,332 tonnes of GHG emissions - equivalent to taking over 41,333 cars and trucks off Ontario roads.[19] Combined, these programs avoided over 2,694,461 gigajoules of energy - equivalent to over $41 million of oil (Note ($94.73/barrel and 6.1 GJ/barrel of oil).

Between 2013-2014, the Beer Store achieved a system-wide recovery and re-use rate of 99 per cent for the industry standard bottles, which are reused 12 to 15 times.[18] The Beer Store has received praise from local and national organizations including the Conservation Council of Ontario, Environmental Defence Canada, The Recycling Council of Ontario, and Toronto Environmental Alliance.[20]

TBS’ recycling efforts translate into cost savings for municipal governments as municipalities need not spend tax revenue on recycling packaging that TBS sells. In 2008, TBS estimated that its return program has saved taxpayers $38 million in avoided waste management and recycling program costs per year.[21] In 2012, the TBS estimated that savings had increased to $40 million with 94% of beer containers and 81% of LCBO containers recycled.[22]

The Beer Store also is actively engaged in reducing its carbon footprint by finding innovative ways to reduce its energy consumption, a key input for any retail organization, especially one with a need to constantly refrigerate its product.[21] A notable initiative is the use outside air to cool beer when outside temperatures provide for such a tactic.[21]

Pierre Sadik, Senior Policy Adviser at the David Suzuki Foundation has stated, "Ontarians should be proud of The Beer Store's environmental achievements. It's time businesses across the province follow The Beer Store's lead and turn their talk about waste diversion into real action."[20]

Corporate responsibility[edit]

TBS maintains a strict policy of WeID 25 and the right to refuse any customer who appears intoxicated or who is underage. Furthermore, TBS empowers its retail management to actively monitor and track every employee’s refusal rate to ensure proper conformance to company policy.[21] In 2013, TBS challenged over 3.7 million sales of beer at its retail locations, refusing service for 59,000 individuals.[23]

Returns for Leukemia[edit]

Since 2006 The Beer Store, UFCW Local 12R24 (the union representing its employees), and the Leukemia & Lymphoma Society of Canada have partnered together to help raise awareness and funds for blood cancer research through the collection of empty bottles.[24] The bottle drive is formally called "Returns for Leukemia" but many refer to it as the "Leukemia Bottle Drive". It is held on the last Saturday and Sunday of May and is also the world's largest bottle drive.[citation needed] Over the last 10 years, through donations of cash and empties, the event has raised over $10 million for the cause.

Criticism[edit]

Brewer neutrality[edit]

The Beer Store employees are not allowed to recommend one brand over another. Staff can tell customers about the products but cannot encourage customers to choose a specific brand. This policy is known as brewer neutrality. The Beer Store is permitted to charge non-shareholding breweries listing fees, for each beer carried in stock, that many critics perceive as substantial.[25] Listing fees have been criticized as restricting competition in the huge Ontario beer market, especially from smaller brewers who often cannot afford the fees, especially for multiple brands.

Some Canadian provinces have since allowed privately owned stores to compete for sales of beer and wine while retaining tighter controls over the sale of spirits, while Alberta has privatized all retail liquor stores. In Ontario no changes have been made, and The Beer Store continues to sell over 80% of the beer sold in the province, and is the only entity legally allowed to sell 12-packs, 24-packs, and other large cases. The Beer Store has only limited competition for retail sales of 6-packs and singles with the government-owned LCBO, select supermarkets, and individual brewer retailers, located on-site at most Ontario breweries. Many critics say this constitutes a foreign-owned monopoly

With regards to distribution, TBS operates its own fleet and provides service to over 16,000 licensed establishments in Ontario. TBS also delivers beer to Beer Stores on behalf of brewers who may choose to avoid the high cost of self-distributing. Critics have stated that TBS does not provide any credit terms for licensed clients, forcing them to pay cash on delivery, causing friction between TBS and the hospitality industry. However, TBS does provide credit terms and flexible payment options for customers. Customers may receive up to seven days of credit terms.[26]

Consumer prices[edit]

Critics say TBS constitutes a foreign-owned monopoly over retail beer sales in Ontario, costing the consumer more in the long run in terms of convenience and price. Critics[who?] also state that if retail beer sales were opened up, then the average price to the consumer would drop due to competition within the marketplace. TBS has argued that the price of beer will increase if privatization occurs and points to the situations of BC and Alberta as prime examples. In an independent report titled “Alcohol Retailing Deregulation: Implications for Ontario” by economist Greg Flanagan, it was demonstrated that the general consequence of deregulating the sale of alcohol is an increase in average sale price. Since Alberta’s deregulation of alcohol in 1993, their retail alcohol prices have since tripled Ontario’s (28.2% vs 9.2%).[27] By accounting for tax differentials and comparing the average (non-sale) 24 pack cost of beer between BC, Alberta, Quebec and Ontario, the report concludes stating that Ontarians are well served under the current regulated model.

Political controversy[edit]

The Beer Store has been subject to criticism following the Molson-Coors merger, whose 49% stake in TBS was the last 100% Canadian-owned share of the venture under the pre-merger Molson Breweries. In 2005, Ontario's alcohol laws were reviewed and proposals to allow the sale of beer in grocery and convenience stores were put forth. A report called the Beverage Alcohol System Review was released on March 24, 2005 by the Ontario Government. However, the report’s findings dealt centrally with the LCBO and the economic and social impact of its privatization.

An online petition was started by a private citizen, Derek Forward, to ask the provincial government to end the monopoly enjoyed by the Beer Store. The petition has received coverage in the Toronto Star, and has generated enough support to allow it to be formally presented to the provincial legislature in the fall of 2008 for consideration (petition No. P–146: "Practice and arrangement of retailing beer"). However, on December 9, 2008, the Ontario government dismissed the petition citing the effectiveness of the TBS system.[28]

At the start of the 2007 provincial election campaign, The Brick Brewing Company of Waterloo made headlines when it claimed The Beer Store engaged in a number of discriminatory practices and policies, such as restrictions on price advertising, for causing a decline in company sales. TBS representatives denied that their policies are hurting small brewers and implicitly questioned the timing of the Brick Brewing Company's statement, suggesting that in their view it is unethical for a brewery to use an electoral campaign to forward self-interests.[29] Additionally, Brick claimed that TBS allegedly used monopolistic tactics to force what is now Ontario's largest independent brewer to stop offering beer in "Stubbies" by withholding supplies of industry standard "long-necked" bottles. The Beer Store claimed that Brick signed an agreement in 1992 to use the industry standard bottle and Brick said it never signed such an agreement. This dispute was settled out of court with the terms of the settlement undisclosed.[30] Brick has since stopped selling beer in "stubbies" because the cost was too high.

A July 2008 Toronto Star article estimated the three foreign entities that owned TBS earned $1 billion in profit per year in Ontario.[31]

Ontario Craft Brewers is the main lobby group for Ontario's smaller brewers, and has been increasingly critical of BRI/TBS. The 29 OCB members currently employ several thousand Ontarians. OCB wants to either acquire shares in TBS or be permitted to set up their own competing chain. Premier McGuinty responded by saying that his government would not consider any application to form a competing chain, and that his government would not consider compelling TBS shareholders to sell any shares, although some Liberal and Conservative backbenchers have said they would expect BRI to at least negotiate in good faith with craft brewers who made a serious offer. BRI responded by saying that it was not considering and would not consider selling shares at any price, and that they do more than enough to accommodate non-shareholding brewers already. Canada's National Brewers (the lobby group that represents the BRI shareholders) further said that in the event OCB did get to set up a competing chain, they would refuse to stock their products there.[32]

In February 2012, the website Canadian Beer News reported that The Beer Store has made thousands of dollars worth of political donations to the BC Liberal Party and BC NDP. The report noted that it was odd for an Ontario-based company to be making such large donations to political parties in another province, and suggested that the co-owning breweries were funneling this money through The Beer Store in an attempt to put pressure on the BC government to give their brands favourable placements in BC Liquor stores.[33]

Non-competitive business practices[edit]

On December 9, 2014, Toronto Star investigative journalist Martin Regg Cohn exposed an agreement between The Beer Store and the LCBO to limit competition and the products offered to Ontario beer drinkers.[34][35] The document of June 1, 2000, provided to him by a whistleblower, entitled “Serving Ontario Beer Consumers — Framework for Improved Co-operation and Planning Between the LCBO and BRI", was signed by then head of the LCBO Andy Brandt and head of BRI Daver Perkins, of which a copy was sent to Ministry of Consumer & Commercial Relations Deputy Minister Sandra Lang.[35]

The agreement ensured that the LCBO would not offer beer products in large format sizes, being cases of 12 or 24 beers, it would not sell major brands to restaurants or bars, and would inform the Beer Store of any store it was planning to open in a new community.[36] [37]

Regg Cohn says both retail consumers and the food and beverage industry are being gouged by this non-competitive business agreement. Former TD Bank CEO Ed Clark, in a 2014 report to the government on maximizing assets, says that the LCBO (and the Government of Ontario) forgoes $515 million of revenue by not allowing sales of larger format beer packages and forgoes $500 million of revenue by not selling major brands to restaurants.[34]

Andy Brandt, former highly successful head of the LCBO, is very critical of the agreement, and says it was forced upon him by the then Mike Harris Progressive Conservative government.[36] When Regg Cohn questioned the Beer Store representatives about the agreement, suggesting it is collusion, the reply from the BRI lawyer Michael A. Eizenga of Bennett Jones LLP stated the "use of the term 'collusion' which has significant legal meaning," and "This is an inaccurate and inappropriate characterization, to which my client objects."[38]

Liberal Finance Minister Charles Sousa, in response to these revelations, says he has "got the investigation underway" and that "I'm trying to ensure that what you’re suggesting doesn’t happen any further ... You're right, there's a monopoly, a duopoly, oligopoly — call it what you will."[38]

On December 10, 2014, Restaurants Canada filed an official complaint with the Competition Bureau. "'We did not know the depth of the complicity,' it said, pointing to 'new and disturbing information' in the Star that detailed price gouging of restaurants and bars forced to buy from The Beer Store ... A Competition Bureau spokesperson said it is 'reviewing it to determine whether the conduct in question could raise concerns under the criminal or civil provisions in the Competition Act.'"[38]

On April 15, 2015, Premier of Ontario Kathleen Wynne announced changes to provincial liquor laws that would, among other changes, allow up to 450 supermarkets in "urban population centres" (roughly equating the number of Beer Store locations) to be authorized to sell beer subject to conditions, require The Beer Store to improve the placement and marketing of Ontario craft brews, and allow LCBO locations to trial carrying 12-packs. Wynne stated that The Beer Store had become a "de-facto monopoly controlled by a small number of companies".[39] The new regulations took effect on December 15, 2015 with 58 designated supermarkets, and additional locations to be added in the future; all products must be below 7.1% alcohol by volume, and at least 20% of a store's stock must be Ontario craft brews. Loblaw Companies elected to go beyond the minimum quota and committed to stock 50% Ontario craft brews at its participating stores, in an effort to provide a wider array of options.[40]

As map publisher[edit]

In the 1980s, Brewers Retail published a directory of its retail locations in a booklet with a small map to each location. It had a picture of an animal, (a penguin, for example) on the covers. The booklet when closed was approximately 4 by 3 inches (10.2 cm × 7.6 cm). The 1972 version issued by Brewers Retail had cartography by Rand McNally.[41]

In popular culture[edit]

In the film Strange Brew the McKenzie Brothers visit a Brewers Retail store demanding a refund after they attempt to return a bottle of beer that contained a mouse (the mouse was however placed in the bottle by the brothers). Due to the nature of the scene, Brewers Retail refused to allow the use of one of their actual stores for the filming, and also refused to allow the use of the name "Brewers Retail". In response, the filmmakers built their own replica store, and called it "The Beer Store". Coincidentally, several years later, Brewers Retail changed the name of its stores to "The Beer Store", and they continue to operate under this name.

The Beer Store was also showcased in episodes of Late Night with Conan O'Brien during O'Brien's week-long tenure in Toronto during the week of February 10, 2004.

Related companies[edit]

Brewers' Distributor Ltd. (BDL) operates in Western Canada and is owned by Anheuser-Busch InBev and Molson-Coors (Sleeman has its own distribution operation in the West). Unlike BRI, BDL only warehouses and distributes beer and is not in the retail business.

Footnotes[edit]

References[edit]

  1. ^ Benzie, Robert (November 13, 2014). "Beer Store should pay more to province, says privatization czar". Toronto Star. Retrieved 2015-11-11. 
  2. ^ http://www.thebeerstore.ca/about-us "The Beer Store"
  3. ^ "Master Framework Agreement" Ontario Ministry of Finance
  4. ^ Flanagan, Greg (February 10, 2014) [www.thebeerstore.ca/.../default/files/pdfs/TBS_AlcoholDeregulation.pdf "TBS Alcohol Deregulation"], retrieved May 02, 2017
  5. ^ "Liquor Control Act (R.S.O. 1990, c. L.18)". ServiceOntario (Government of Ontario). Retrieved 2013-05-08. 
  6. ^ a b Flanagan, Greg. (2014) [1] Alcohol Retailing Deregulation: Implications for Ontario.
  7. ^ Regg Cohn, Martin (January 9, 2014). "Beer Store has us over a barrel on wine bottles: Cohn". Toronto Star. Retrieved 2014-01-09. Angus Reid poll shows a mere 13 per cent of Ontarians — that’s barely one in eight people — realize The Beer Store monopoly is not a government-owned enterprise 
  8. ^ Regg Cohn, Martin (December 21, 2013). "Time to liberate our beer from The Beer Store: Cohn]". Toronto Star. Retrieved 2015-11-11. 
  9. ^ Master Framework Agreement (September 22, 2015)
  10. ^ Liquor Control Act, RSO 1990, c.L.18
  11. ^ The Beer Store (August 16, 2017)
  12. ^ a b "A proud history in Ontario". The Beer Store. 
  13. ^ Shareholders Agreement: Brewers Retail Inc. (January 1st, 2016)
  14. ^ TBS Financial Statements
  15. ^ "Archived copy". Archived from the original on 2013-12-09. Retrieved 2013-08-12. 
  16. ^ Anindya Sen, The Beer Store, Monopoly Profits and the Potential for Government Revenue: An Economic Analysis.[2]
  17. ^ "An Environmental Leader". The Beer Store. 
  18. ^ a b "Investing in Ontario’s Common Future: Beer Store Responsible Stewardship 2013 - 2014" (PDF). Brewers Retail, Inc. August 2014. Retrieved 2015-11-11. 
  19. ^ http://www.epa.gov/cleanenergy/energyresources/ calculator.html#results
  20. ^ a b "What Others are Saying". The Beer Store. 
  21. ^ a b c d "2008 Operational Report" (PDF). The Beer Store. 
  22. ^ Teotonio, Isabel (Jun 28, 2013). "The average beer bottle is refilled 15 times in its environmentally-friendly life cycle". Toronto Star. Retrieved 2015-11-11. 
  23. ^ "Social Responsibility". The Beer Store. 
  24. ^ 2014 Annual Report (PDF) (Report). Leukemia & Lymphoma Society. p. 17. Retrieved 2015-11-11. 
  25. ^ Hughey, Robert. "Beer distribution in Canada". Real Beer Media, Inc. 
  26. ^ "Payment Options". The Beer Store. 
  27. ^ Flanagan, Greg. (2014) "Alcohol Retailing Deregulation: Implications for Ontario."[3]
  28. ^ "Official Records for 9 December 2008". Hansard. Legislative Assembly of Ontario. 
  29. ^ Flavelle, Dana (2007-09-12). "Brick seeks province's help as earnings go flat". The Toronto Star. 
  30. ^ Flavelle, Dana (2009-09-04). "Brick Brewing wins by a neck". The Toronto Star. 
  31. ^ Flavelle, Dana (2008-07-05). "Why your beer costs more". The Star. Toronto. 
  32. ^ Flavelle, Dana (2007-09-27). "Craft brewers demand Beer Store shake up". The Toronto Star. 
  33. ^ Clow, Greg (2012-02-14). "Are Canada’s Big Brewers Funnelling BC Political Donations Through Ontario’s Beer Store?". Canadian Beer News. 
  34. ^ a b Regg Cohn, Martin (9 December 2014). "The Beer Store’s secret sweetheart deal with LCBO revealed". Toronto Star. Retrieved 12 December 2014. 
  35. ^ a b "LCBO, Beer Store deal limits competition in beer sales: report". Retrieved 26 June 2016. 
  36. ^ a b "The Beer Store’s secret sweetheart deal with LCBO revealed: Cohn - Toronto Star". Retrieved 26 June 2016. 
  37. ^ "How the secret deal between the LCBO and Beer Store affects the booze you buy - Toronto Star". Retrieved 26 June 2016. 
  38. ^ a b c Regg Cohn, Martin (10 December 2014). "Bitter fallout from The Beer Store’s sweetheart deal". Toronto Star. Retrieved 12 December 2014. 
  39. ^ "Ontario to sell off 60% of Hydro One, allow beer in grocery stores". CBC News. Retrieved 16 December 2015. 
  40. ^ "Beer finally arrives in Ontario grocery stores". Toronto Star. Retrieved 16 December 2015. 
  41. ^ Roma, Jon (2006-05-26). "Road maps not from oil companies". 

External links[edit]