Beer Wars brewing in Ontario over threat of private alcohol sales

Ontarians should stop complaining about their Beer Store retailing monopoly since it actually provides them with cheaper brews as compared with other large Canadian provinces, a new report suggests.

The beer price market survey by Ipsos Reid says beer is cheaper in Ontario than in provinces with alternative private retailing models, including Quebec, British Columbia and Alberta.

The report, commissioned by Canada's National Brewers (CNB), the national trade association representing Labatt Brewing Company Ltd., Molson Coors Canada and Sleeman Breweries Ltd., warns Ontarians would see “significant price increases” if it adopted a similar system.

The survey comes just days after an economic study by the Ontario Convenience Stores Association (OCSA) says an expansion of Ontario’s current retailing system would beyond the Beer Store and Liquor Control Board of Ontario (LCBO) would bring in more money to the provincial government. The OCSA is calling on Ontario to “modernize” its alcohol retailing system, which has been the same since 1927.

Both studies come amid an ongoing debate in Ontario about bringing beer, wine and hard liquor into the province’s convenient stores. The OCSA is clearly lobbying in favour of expanding the system, while the CNB - whose backers are behind The Beer Store – are looking to keep their monopoly in tact.

The Ipsos Reid survey results may come as a surprise to many people in the province, given that monopolies are usually associated with higher prices. A recent CD Howe Institute report said restricted competition for products –including beer in Ontario – might be costing consumers more.

"It's clear many Ontarians have a misconception about the potential price impacts associated with alternate alcohol retail models," said John Wright, senior vice president at Ipsos.

The Ipsos survey looked at hundreds of prices on 14 different beer brands from 90 different privately operated retail locations in Quebec, B.C. and Alberta and compared them to the average price at Ontario’s Beer Store.

The results showed beer prices in B.C. were 45-to-51 per cent higher than Ontario, while Alberta prices were 30-to-36 per cent higher. Ontario prices were competitive with those found in Quebec private stores. However, the study points out that provincial taxes on beer in Quebec are 35 per cent less than Ontario for a typical 24 pack.

The OCSA study suggests an expansion of Ontario’s current retailing system beyond the Beer Store and Liquor Control Board of Ontario (LCBO) “would not only preserve the $1.6 billion profit that the LCBO returns to the government, but would quite possibly increase it.”

“Contrary to common belief, expanding alcohol retailing beyond the LCBO and Beer Store would preserve the LCBO's profit and also provide the framework for even greater profits for the government,” the OCSA report states. It also says the “vast majority” of revenue Ontario receives from alcohol sales comes from LCBO's wholesale mark-up of alcohol.

"In releasing this study, our goal was to ensure that when the time comes for a real discussion about modernizing Ontario's alcohol retailing system, people and politicians have all the facts," said Dave Bryans, CEO of the Ontario Convenience Stores Association.

The privately held Ontario company Brewers Retail Inc., which is co-owned by three of Canada’s largest brewers, Molson, Labatt’s, and Sleeman own the Beer Store. The retailer sells about two-thirds of beer in the province.

"This Ipsos market survey demonstrates that the efficiency of Ontario's current beverage alcohol retail system benefits Ontario beer drinkers with low, competitive prices," said Jeff Newton, president of Canada's National Brewers.

"When compared to Quebec, British Columbia and Alberta where alternative private retailing models exist - models with higher distribution costs and less overall system efficiency - the data in this survey provides evidence that a shift to a corner store model of alcohol sales would mean more expensive beer for Ontarians."

Ipsos also did a public opinion survey that showed 80 per cent of Ontarians are satisfied with the current retailing system. The survey also shows that two thirds of Ontarians believe that beer prices would stay the same or fall if private retailers could sell beer.