How hard would it be for Ontario to start allowing beer sales in convenience stores?

How hard would it be for Ontario to start allowing beer sales in convenience stores?

Doug Ford wants to be the beer premier. He promised to bring back buck-a-beer, to the delight of swill-drinking lawnmower dads everywhere. But he also made another beer-related commitment that’s potentially a lot more consequential: a pledge to allow the province’s private convenience stores to sell beer, a policy goal that has been a part of Progressive Conservative election platforms for at least two decades.

It sounds so simple. Other provinces allow beer to be sold in convenience stores, and the practice is common in other countries. Everyone knows that putting beer fridges in 7-Elevens won’t cause society to crumble. And yet, somehow, this very sensible, very popular idea has never come to fruition in Ontario. Here are a few reasons why it may not be so easy this time around, either.

The LCBO makes a ton of money

One reason the Ontario government may have been reluctant to open up the beer market in the past is that doing so would create competition for the province’s own chain of liquor stores. The LCBO paid a $2 billion dividend to Queen’s Park in 2017. Beer accounted for 22.3 per cent of the LCBO’s sales that year, or about $1.3 billion in revenue. If that beer-sales business were to collapse because of an influx of new beer retailers, the province almost definitely wouldn’t be able to recover the lost revenues from the existing sales tax alone (unless Ontarians started drinking a worryingly large amount of beer as a result of the increased convenience). If the premier wants to democratize beer retail, he’ll likely need to make some hard decisions about taxing alcohol sales.

The Beer Store has a contract

In September, 2015 the Beer Store—which is majority-owned by a consortium of three large, multinational brewers—signed a contract with the Ontario government. The so-called “Master Framework Agreement” essentially cements the Beer Store’s near-monopoly on beer sales in Ontario, while forcing the beer retail giant to accept a minuscule amount of competition. The agreement explicitly restricts the number of new non-Beer Store, non-LCBO and non-brewery beer retailers to a maximum of 450 stores throughout the province. And these new retailers aren’t equal players: they can’t sell to bars and restaurants. So far, this limited amount of leeway hasn’t had much of an impact on the way beer is sold in the province. About 350 grocery stores now have beer aisles, but they’re required to stock their shelves entirely from the LCBO’s beer supply, and the Beer Store and the LCBO still dominate the beer retail business.

This agreement between the Beer Store and the province isn’t everlasting: it comes up for renewal in 2025. But if Ford wants to make changes to beer retail before the next provincial election, he’s going to have to scrap or amend the contract long before 2025. How he’ll go about convincing (or forcing) the Beer Store to relinquish a deal that’s weighted so heavily in its favour is one of the biggest unknowns in this whole process. It may be possible, but it won’t be simple.

Smaller brewers might need help

The big brewers aren’t the only ones who have adapted to the existing system of beer sales in Ontario. Craft brewers, many of whom are so small that they don’t (or can’t) sell their products at the Beer Store or the LCBO, wouldn’t necessarily benefit from convenience store beer sales. Jason Fisher, owner of the Indie Alehouse Brewing Company, has built a business by selling his beer from a bottle shop inside his brewpub in the Junction. He worries that a sudden proliferation of beer retail options would be a drag on his sales, because of the increased competition. Under current provincial law, breweries are only allowed to sell beer that they brew themselves. “If the corner store across the street from me is allowed to sell 50 different breweries’ beer, but I’m not allowed to do that, that’s crazy,” Fisher said. “You’re taking what was a major source of income and revenue for a business and effectively making it useless.”

One way indie brewers could benefit from a new beer retail arrangement would be if convenience stores had an easy way of stocking craft brews—but whether that came to pass would depend on how the province decided to handle beer distribution. “If I have to sell my beer to the LCBO to get it to a corner store, it’s not going to work,” Fisher said. “They’re complicated to do business with, and it’s arbitrary. If they say no to you, you’re done.”

Scott Simmons, an ex-Beer Store executive who now heads Ontario Craft Brewers, an industry association for independent brewers, sees reason for optimism. “The move to convenience would increase accessibility and selection,” he said.

But he’s also wary of what might happen if the province’s chosen method of beer distribution isn’t balanced. “It’s something that we’re just digging into now,” he said. “And this is why our initial conversations with the government are critical.”