Spirits suppliers forced to seek court review of LCBO's contradictory pricing policies
Following suppliers' fruitless attempts to negotiate, LCBO responds with retaliatory measures
TORONTO, July 24, 2024 /CNW/ - The Liquor Control Board of Ontario's (LCBO) sudden decision in 2023 to penalize suppliers for non-compliance with contradictory pricing policies has led to an unavoidable legal challenge from the makers of familiar brands such as Crown Royal, Canadian Club, JP Wiser's, Forty Creek, Bacardi rum and El Jimador Tequila.
The collective of spirits suppliers, which together represent almost 70% of the spirits products sold in Ontario, have filed a court application with the Ontario Superior Court of Justice to declare a controversial LCBO pricing term invalid and unenforceable. Simultaneously, the suppliers have alerted the Competition Bureau of Canada that the LCBO's enforcement of this pricing term, in their view, is an abuse of dominance with major anti-competitive implications for pricing and product choice impacting all Canadian consumers.
"As spirits suppliers, we have always appreciated our longstanding strategic partnership with the LCBO," said Cal Bricker, President & CEO of Spirits Canada. "We are disappointed that we have had to refer the LCBO's contradictory policies to the courts, but at this time, and amid retaliatory measures by the LCBO, we have been left with no other options."
For months, suppliers have been trying to resolve the issue of the LCBO suddenly levying tens of millions of dollars in penalties for products sold more than a year earlier. Suppliers have proposed solutions; the LCBO has failed to do so. Instead, it has continued to apply new retroactive penalties. When suppliers previously sounded the alarm about this significant threat to the entire sector, the LCBO, as the sole purchaser of spirits in Ontario, doubled-down by imposing retaliatory measures on those specific suppliers.
Key Points:
The LCBO has taken an unreasonable, contradictory position: suppliers must meet the LCBO's dictated minimum pricing requirements, but now are issued penalties if Ontario prices exceed prices elsewhere in Canada.
The enforcement of a most favoured customer clause in conjunction with the LCBO's fixed standard mark-up regime and minimum retail pricing requirement means, effectively, that suppliers cannot lower prices to the LCBO; instead, they must raise prices in other provinces.
Indeed, the LCBO goes further and dictates shelf space and merchandising programs based on price bands, like standard, premium, super premium, and benefitting from consumers' interest in trading up to more premium quality products while encouraging suppliers to offer products at a range of price points. This is all in total contradiction of the purported lowest price requirement.
The LCBO itself has previously noted that its policies are at odds with each other; specifically, it has said that, while other Canadian jurisdictions may purchase products at a lower cost, the LCBO would be unable to purchase those same products at the same wholesale price if the application of its fixed-pricing structure resulted in a retail price lower than what minimum pricing allows.
Spirits suppliers of all sizes have no choice but to comply with the LCBO's demands or face reprisal. The companies that supply the majority of spirit products the LCBO sells are pursuing this court application for the benefit and viability of the entire sector.
As the largest purchaser of beverage alcohol in Canada, the LCBO does not seek competitive pricing for its consumers, instead it takes as much profit as possible from both consumers and suppliers.
About the companies impacted:
We are Bacardi Canada Inc., Beam Canada Inc., Brown-Forman Corporation, Corby Spirit and Wine Limited, Diageo Canada Inc., Forty Creek Distillery Ltd. (operating as Campari Canada), and Rémy Cointreau USA, Inc. Together we represent almost 70% of the spirits products sold by the LCBO and almost 35% of all products sold by the LCBO. Here are just a few of the brands we supply to Ontarians:
Bacardi Canada Inc.
Bacardi Rum
Grey Goose
Martini
Dewar's
Bombay Sapphire
Beam Canada Inc.
Canadian Club
Alberta Pure
Alberta Premium
Sauza Tequila
Jim Beam
Maker's Mark
Brown-Forman Corporation
Ben Riach
Chambord
El Jimador
Ford's Gin
Gentleman Jack
GlenDronach
Herradura
Jack Daniel's
Old Forester
Woodford Reserve
Corby Spirit and Wine Limited
J.P. Wiser's
Polar Ice
Lamb's
Lot No. 40
Jameson
Absolut
Beefeater
The Glenlivet
Chivas Regal
Kahlua
Malibu
Altos
Diageo Canada Inc.
Crown Royal
Smirnoff
Guinness
Johnnie Walker
Captain Morgan
Tanqueray
Baileys
Ketel One
Talisker
Lagavulin
Bulleit
Gordon's
Forty Creek Distillery Ltd. (operating as Campari Canada)
Campari
Skyy Vodka
Wild Turkey
Appleton Estate
Aperol
Grand Marnier
Espolon
Courvoisier
Wray & Nephew
Forty Creek
Frangelico
Cinzano
Rémy Cointreau USA, Inc.
Remy Martin
Louis XIII
Cointreau
Metaxa
Mount Gay
St-Remy
Bruichladdich
The Botanist
The Hautes Glaces
Westland Distillery
Telmont
Belle de Brillet
#onpoli #foodandbeverage #lcbo #qcpoli
SOURCE Spirits Canada
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