With buzz about The Beer Store’s monopoly possibly coming to a close, local craft brewers say the cost and hassle of getting shelf space might not be worth the low profit resulting from sales through the large retailer.
Limitations on quantity and not enough retail space at The Beer Store prevent smaller brewers from selling their suds in high volumes, said Mike Smith, owner of Toboggan Brewing Company in downtown London.
“You sell very little because people generally go to buy 12- or 24-packs whereas we’re only allowed to sell it by the can,” said Smith, who has products at six Beer Stores across the city.
“There’s so much selection and people buy it at a larger volume because it’s cheaper, so it’s hard to have a competitive price when you’re selling it by the individual can.”
The Beer Store has a monopoly on sales of 12- and 24-cases of beer, thanks to the Master Framework Agreement (MFA), signed in 2015 by the then-provincial government and three companies that own The Beer Store, making it the only retailer allowed to do so.
The agreement binding the province, Labatt Brewing Company, Molson Canada, and Sleeman Breweries Limited, expires in 2025. The current Doug Ford government has less than a month to decide if they’ll renew it or not, but the Toronto Star reported last week that a renewal may not be likely.
MFA model flawed, says beer analyst
The MFA ensures that beer prices remain below the Canadian average, and aims to improve the beer retailing system for all brewers in Ontario, but Jordan St. John, a longtime beer writer and analyst, said the model is significantly flawed.
“If you’re a craft brewer in this province and you wanted to be in The Beer Store, you’d have to pay for shelf space outside your first seven locations, and that means it’s very difficult for small breweries to expand beyond a certain point in terms of volume,” he told CBC’s Afternoon Drive.
“When you look at the quality of the space that The Beer Store represents to a small brewery, the people who own [the store] are going to put their products front and centre. If you have a tiny space in the back of the store, it’ll help you very little.”
Limited shelf space at The Beer Store is why Justin Belanger of London’s Storm Stayed Brewing Company decided to sell his products at Liquor Control Board of Ontario (LCBO) stores instead.
“We weren’t convinced that the model would’ve benefited our business,” he said. “The Beer Store has a much smaller fridge space that’s visible to clients and a lot of it is hidden behind the customer service representative, whereas at the LCBO all of our products are customer facing.”
Although logistics around warehousing is one of his biggest daily frustrations, Belanger believes that if MFA gets scrapped, it’s larger breweries that will be more impacted compared to his small business, he said.
A bigger concern for both Smith and Belanger is the competition that grocery stores carrying beer bring. Toboggan has seen the volume of beer sales decline as a result, said Smith.
“Our hours at the brewery were greater than what The Beer Store did, but now a lot of grocery stores are open later and there are more options to buy beer than there were before,” he said. “It’s more competitive so there’s no need to come to us to get the product.”
The province is expected to announce its decision within the next month, as it’s required to give The Beer Store’s owners a two-year notice before MFA’s expiry date.
Afternoon Drive8:00The Beer Store’s monopoly may be ending
Featured VideoThere are reports the Ford government may end an agreement that gives The Beer Store a monopoly on selling beer by the case. Host Colin Butler is joined by longtime beer writer and analyst, Jordan St. John, to hear more.