Canadian Manufacturing

Ontario’s craft brewers skeptical of Beer Store ownership offer

Skepticism comes after foreign-owner Beer Store offered ownership stakes in consortium to province's small brewers



TORONTO—Ontario brewers reacted with skepticism after the foreign-owned Beer Store offered them ownership stakes in the consortium that controls 80 per cent of beer sales in the province.

“Ownership is a red herring issue The Beer Store is using to distract the media and the public,” said Andrea Woods Chiodo of Flying Monkeys Craft Brewery. “We have always been concerned with shelf space, accessibility, transparency and how store formats affect the retail experience.”

Jeff Fisher, owner of Indie Ale House in Toronto, said he wouldn’t be a real owner under The Beer Store’s offer, which he called a public relations exercise.

“The craft brewers can’t get together and say ‘let’s paint all the stores or let’s sell them,'” said Fisher. “You have no real say, so you’re an owner that gets to choose nothing. It does nothing for me.”

Under The Beer Store’s offer, Ontario brewers that sell more than five million litres a year would pay $1,000, and smaller brewers $100, to become owners and get one Class E or Class F share.

They are also being offered a total of three seats on the 15-member board of directors of The Beer Store.

Molson Coors Brewing Co. and Labatt Brewing Co. Ltd. would each have five seats on the board and Sleeman Brewery Ltd. two seats.

“With those three seats they get a say in decision-making and governance of the business on all the operational and financial policy decisions, so there’s a voice that they now get at the table,” said Beer Store spokesperson Jeff Newton. “And when they come in as owners, they’ll be treated financially the exact same way as the large brewers are treated.”

The Beer Store’s offer is meant to “take the heat off” the big brewers in the face of a government review panel’s recommendations to overhaul Ontario’s beverage alcohol system and charge a fee to the consortium, said Fisher.

“It’s a smoke screen to give the premier some cover to duck and do nothing,” he said. “And it really takes away from the only question that never gets answered: Why can’t there be competition?”

The industry association Ontario Craft Brewers said The Beer Store announcement about opening ownership “came as a complete surprise,” and does not address the key issue of improving access for consumers.

“Our goal continues to be fundamental change to Ontario’s beer distribution channels,” said Cam Heaps, chair of Ontario Craft Brewers.

Matt Johnson of Collective Arts Brewery, which is teaming up with Nickel Brook Brewing to open a new facility in Hamilton, Ont., said The Beer Store is reacting to demands for change from craft beer drinkers.

Craft beer is limited to just four per cent of the Ontario market, versus 14 per cent in British Columbia, because of The Beer Store’s outdated retail model that “doesn’t provide much of a shopping experience,” added Johnson.

“The problem everyone has with The Beer Store is it’s designed to support the large brands of its multi-national owners,” said Johnson. “For The Beer Store to truly have change that is beneficial to craft brewers you need to have all of the stores with a self-serve so consumers can see the products on shelves.”

The LCBO does a much better job of retailing craft beer, but should add more Ontario products to its shelves in place of international beers, added Johnson.

The Beer Store said small Ontario brewers that sell fewer than one million litres a year would be exempt from capital costs for opening new stores and from pension obligations.

The small brewers would also pay no listing fee for stocking two of their products at the five Beer Stores closest to their brewery.

The Beer Store denied it was trying to head off being charged a fee for its virtual monopoly on beer sales by offering to open up ownership.

“This is not related to that at all,” said Newton.

A panel chaired by former TD Bank CEO Ed Clark recommended the province charge The Beer Store a fee for its virtual monopoly, saying there was a clear value that could be auctioned off if the brewers won’t pay up.

Finance Minister Charles Sousa’s office said Clark’s panel would consider The Beer Store’s ownership offer as it completes its work before the spring budget.

“In the fall economic statement, we expressed support for Ed Clark’s initial recommendations to improve transparency at The Beer Store, provide Ontarians with a fair share of profits and extend the sale of 12-packs of beer into LCBO stores,” said Sousa’s press secretary, Susie Heath.

Premier Kathleen Wynne said in a year-end interview with The Canadian Press that the relationship between The Beer Store consortium and the LCBO looked unfair and would “absolutely” be changed.

The Beer Store, the commercial name for Brewers Retail, was owned by a consortium of Ontario-based brewers when it was set up in 1927, but is now owned by Molson-Coors of the United States, Anheuser-Busch InBev N.V. of Belgium and Sleeman owner Sapporo Breweries Ltd. of Japan.

It operates 448 retail stores across Ontario.

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