December 20, 2013 4:58 pm

Federal watchdog probing Ontario’s Beer Store monopoly

A selection of beers on sale at a mix'n'match cooler at a Beer Store location in Ontario. Most of the brands in view are owned by The Beer Store's brewer owners.

Canadian Press

Federal regulators at the Competition Bureau have opened up a review of The Beer Store, Ontario’s government-backed retailer of beer that’s privately owned by three multinational and foreign brewers.

The investigation has been ongoing for several weeks, sources familiar with the matter say, and could bode well for the province’s convenience store owners who are actively lobbying Ontario’s Liberal government to allow beer and wine sales at corner stores and gas stations.

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“This is an industry study, the first under the new commissioner [John Pecman] trying to understand the dynamics of the market and what’s going on,” a person directly involved in the investigation said Friday.

“The bureau is trying to get a sense of whether there are any competitive issues.”

Critics of Ontario’s model, which sells beer, wine and spirits exclusively through The Beer Store and LCBO, have long complained it has led to higher prices for Ontarians compared to other regions like Quebec, where alcohol sales have been opened up to convenience and grocery stores.

A spokesperson for the Competition Bureau confirmed Friday that it’s “currently examining the differences between the beer industries in Ontario and Quebec and exploring the effect that these differences have on competition in each province.”

READ MORE: Ontario convenience store owners push to break Beer Store’s hold

A study commissioned by the Ontario Convenience Stores Association published in August by University of Waterloo economics professor Anindya Sen found the average price difference in a 24-bottle case of beer in Ontario compared to Quebec is about $9.50, or 27 per cent cheaper in Quebec.

According to the study, that price differential amounts to at least a $700 million in additional revenue for The Beer Store’s owners, Belgium-based Anheuser-Busch InBev, which owns Labatt Brewing in Canada and Molson Coors. Japan’s Sapporo also has a stake in The Beer Store through its Sleeman Breweries.

The Beer Store has rejected the claim, saying the study included taxes in Ontario but excluded them for its Quebec comparison. Mark Nicholson, a lawyer representing The Beer Store, declined to comment.

“The bureau chose to focus on the beer industry as there have been a number of conflicting reports as to why the price of beer varies between Ontario and Quebec,” Phil Norris, a spokesperson for the Competiton Bureau, said via email.

Sources told Global News Beer Store officials and others have been interviewed by the bureau. Regulators were “collecting information from industry participants,” Norris said.

The Ontario Convenience Stores Association has been lobbying Queen’s Park for more than a year to let its members sell beer across all or part of its province-wide network of 7,500 stores, including in 7-Elevens, Mac’s and Petro-Canada gas station shops.

At stake for the Beer Store’s owners is billions of dollars in revenue and profits for its parent owners annually. The Beer Store generated $2.7 billion in sales in 2012, according to its public report. It paid $1.1 billion to the province in taxes.

“If you opened up the retail market, you’d have a model like we see in Quebec, Newfoundland, the United States and many other jurisdictions. Instead we have this mark up [market],” Dave Bryan, chief executive of the province’s convenience store association, said.

“In Quebec, the foreign multinationals are our best friend because grocery and convenience stores sell 100 per cent of all beer. In Ontario, they don’t want to talk to us because they don’t want to lose the monopoly,” Bryan said.

One proposal the association has tabled is to sell only craft beer made by the province’s independent brewers. That would open up a less costly sales window for the brewers, who have to pay fees to The Beer Store now to get distribution, and according to critics, are often marginalized by the big-name brands owned by the parent brewers (labels like Canadian and Budweiser).

“If they gave us just craft beer, I think we’d do a hell of job developing business for the craft brewers,” Bryan said. “Because guess where everybody would go to buy beer?

“Our local retailers would be helping our local brewers,” Bryan said.

Ontario’s convenience store operators have kept up the pressure on the province this year, working to win attention for their cause by putting special emphasis on the fact that The Beer Store is owned by big foreign brewers, not the provincial government – something only 13 per cent of Ontarians are aware of according to poll results published this week from the group.

“It’s becoming a high visibility thing,” a legal source working directly on the file said. “So [the bureau] is saying, let’s see if there’s something to it.”

© Shaw Media, 2013

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