In case you missed it, the Ontario Convenience Stores Association gave a petition to the McGuinty government a couple of weeks ago that showed how many Ontarians want beer, wine and other alcohol to be sold in convenience stores. The idea was getting a lot of coverage from media outlets and there was some talk about the idea on Twitter and Facebook, but then McGuinty said no to the idea and that seemed like the end of the debate. Of course, that’s just when things got interesting.
The first I saw of a craft brewery wondering about what a change would mean for them came from the Kensington Brewing Company on Twitter. Then Mike from KBC put up a blog post with his thoughts and wondering if beer in convenience stores would hurt instead of help them. Then a week later came a Torontoist article about a wider skepticism from the craft brewing industry over convenience store sales. And suddenly what seemed like a dead issue is now getting lots of debate.
I also have serious concerns over what it would mean to our craft brewers to have some deregulation over beer sales, not that I expect any changes to happen soon. Part of the problem is that we have no idea what this new model would look like. Would the LCBO still control the sale of spirits, specialty imports and high end wines (and maybe imported beer, like the SAQ in Quebec)? Would the Beer Store still be operational? These are really important questions that would change the retail landscape in any number of ways. The Beer Store currently holds a roughly 80% market share of retail beer sales in Ontario, with the LCBO picking up the other 20% (according to Josh Rubin in The Oxford Companion to Beer). That is obviously for all beer sales, not just craft beer. My assumption is a more even split if we were to only talk about craft beer sales, especially because some craft breweries sell only through the LCBO or have more brands available through the LCBO. If you close or alter one of those outlets, there are suddenly lots of sales up for grabs.
What beers would end up on store shelves with deregulation? The argument could be made that there is a specialty market for craft beer and that people seeking quality beer would be more likely to travel out of their way to get good beer. (See: all the beer geeks who go to Buffalo on a regular basis.) Basically, people wanting craft beer won’t start drinking Budweiser or Coors Light simply because it is conveniently sold at corner stores. Alcohol would become a specialty product, with stores focusing on excellent beer and wine the same way we have a renaissance of butchers, bakeries, cheese mongers and other such stores. There would be independent beer and wine stores that are focused on premium products, which would help balance out the convenience stores full of macro beers and “Ontario” wines made from concentrate. My only concern is that the likelihood of these stores would be fewer in number than the LCBOs currently offering a decent selection of beer. Toronto is littered with LCBOs with excellent craft beer selections and it would be unlikely that a similar number of stores would suddenly pop up with as much craft beer selection.
People in the brewing industry have widely different opinions on the LCBO, but it is at least considered better than the Beer Store, which charges for retail space if you’re not an owner [ie. InBev, Molson-Coors, Sapporo (via Sleeman's)]. It can take a while to get an LCBO listing, but once you’re in that beer is suddenly being sold across the province for a distribution fee. You can either send reps to try and get a listing in stores or hire a company like North American Craft to do it for you. Either way, the beer is now widely available and it skips the $50,000 to get in the Beer Store. Over time breweries develop relationships with the LCBO that gives them more opportunities to get seasonal products in stores (think Muskoka and Great Lakes, both breweries with regular seasonal products guaranteed to be in the LCBO). It is a system that takes time, but can end up working out for craft breweries.
My main concern about convenience store sales is the loss of LCBO sales for craft breweries. The current system has allowed for a lot of new and small breweries (KBC, Hops & Robbers and Spearhead, to take three recent examples) to get their product out to a mass audience. How could these breweries compete if they had to go around selling their beers to individual stores? Sales of craft beer in the LCBO have annually grown roughly 50% for at least the past three years, which shows that consumers are increasingly becoming aware of craft beer and where it is available for purchase. The recent gains have made craft beer more of a priority for the LCBO, which in turns is great for the industry. Yes, it is an ancient bureaucratic nightmare, but working within the system can be a big plus for Ontario craft breweries.
While the petition for new alcohol laws was put forth by a convenience store lobby group, it is reasonable to expect that grocery stores would be allowed in on the action too. It is possible that Loblaws, Metro and other chains would become the new distributors for craft breweries – get into one and the beer goes across the province. Whole Foods has a history of excellent beer selection in their American stores and would hopefully realize the potential in Ontario if the laws changed. (Adding another product to grocery stores would be a problem for them, though a problem they would likely be happy to have.) Clearly many American craft breweries have thrived in states where beer is sold in convenience and grocery stores, so maybe there is some beneficial aspect that I’m missing. Once again, this is another big unknown that would have a big impact on the craft breweries.
Another looming question I have around deregulation would be the AGCO (Alcohol and Gaming Commission of Ontario) would lose some of its authoritarian control. There are currently some weird rules regarding everything from labels to packaging that can add significant costs to any imports to Ontario. Any liquor sold in Ontario also gets tested to make sure it is safe for Ontarians to drink, adding a lot of time before a new beer can be on store shelves or brought in as a private order. The LCBO prides itself on their testing and I have a hard time seeing all that regulatory testing suddenly going away. Would deregulation make it any easier for craft breweries to get their seasonal products into stores or would it still require months of testing and meetings? Hopefully these restrictions would be eased, but there would be no guarantee. Simply allowing for convenience stores to sell beer would not solve all of the regulatory issues that plague the Ontario beer industry. In fact, I would argue that the current testing rules are a greater disadvantage to the craft breweries than where beer is sold. Craft breweries make more seasonals, which means more testing and waiting for your next beer to hit the market while the macro brewers keep churning out the same brands. Easing up these restrictions would be better for craft breweries than allowing convenience store sales.
In summation, I am skeptical about whether any changes to Ontario’s liquor laws would be beneficial to our craft brewers. The multinational brewing corporations would have the money, staff and resources to quickly adapt to new regulations, while the craft breweries might get stuck trying to make the transition. But this is all theorizing on changes that will likely not happen in the near future. (When change does happen, you can bet it will be based more on lobbying power or an attempt to win an election than any real desire to improve the system.) Perhaps it is my own fear of change that drives my viewpoint, but I think the system you know is better than one you don’t.