It’s enough to make you weep in your suds. Ontario’s profit-churning Beer Store is better-insulated from competition than a cold Bud cradled in a koozie in a cooler, thanks to a sweetheart deal imposed by former premier Mike Harris’ government.
As reported by the Toronto Star’s Martin Regg Cohn, successive Progressive Conservative and Liberal governments have given the privately owned Brewers Retail Inc. the mother of all deals to fatten its bottom line. According to an agreement that all parties were keen to keep under wraps but the Star has just revealed, Queen’s Park has kept the provincially owned Liquor Control Board of Ontario (LCBO) on a tight leash, requiring it to honour a 14-year-old deal with Brewers Retail that sharply restricts the LCBO’s beer sales.
That’s good for the Beer Store’s owners’ bottom line, and a credit to their well-oiled political lobbying. But it pushes up the price for LCBO customers, restricts what they can buy and hobbles the cash-strapped government’s revenue stream. As deals go, this one is as skunky as a beer that’s long past its sell-by date.
It limits the LCBO to selling only six-packs of beer, not the more affordable and popular 12- or 24-packs that comprise the bulk of sales. Nor can the LCBO promote beer at “price points” greater than a six-pack, ruling out discounts.
The LCBO is also prohibited from selling to restaurants and bars any of the major brands not carried in its regular stores, allowing the Beer Store to squeeze higher prices out of the industry. And if the Beer Store moves into an area any existing LCBO store that now sells 12- or 24-packs has to revert to selling six-packs.
This web of restrictions deprives the LCBO of a potential revenue stream of $1 billion or more, according to Restaurants Canada, which represents the food and beverage industry. That revenue now feeds the profitable, private bottom line of the American, Belgian and Japanese parent companies that own the Beer Store.
Things are changing, albeit slowly. Recently Ed Clark and the Advisory Council on Government Assets recommended that Premier Kathleen Wynne’s government let the LCBO sell 12-packs, though not 24s. It also advised Queen’s Park to levy a franchise fee on the Beer Store.
As the Star has urged, Queen’s Park would do better to end the Beer Store quasi-monopoly. The LCBO should be free to sell more beer, and corner stores should be allowed to sell beer as well. But if the government isn’t prepared to go that far it should at least hold out for a hefty franchise fee. Let’s can this bitter deal and pull the tab on a new era.