The Regulation Debate

For those who don’t know, a hot topic within the Ontario beer community has been the deregulation of alcohol sales. Recently, the Brewer’s Retail, Ontario’s privately owned centralized retail system, came out with a statement claiming the price of beer would skyrocket were alcohol sales deregulated. The report they cite can be found here:

http://www.thebeerstore.ca/about-us/alcohol-retailing-deregulation

Several have criticized this finding including Prof. Anindya Sen of Waterloo university who claims the study uses the wrong type of analysis and that the proper comparison should be between Ontario and Quebec (Quebec having privatized beer sales and lower prices):

http://business.financialpost.com/2014/02/10/beer-store-study-ontario-prices/

However, even Prof. Sen’s work has been criticized by some in this area such as this Earnscliffe report regarding Prof. Sen’s findings about profit differences between the Brewer’s Retail and Quebec private stores:

http://business.financialpost.com/2014/02/10/beer-store-study-ontario-prices/

Anecdotally, having lived near the Ontario-Quebec border I can say that corner stores in Quebec tended to carry a mix of large brand and local beers at a much lower price. However, what was missing was the international / interprovincial representation seen in some of the better stocked LCBO stores.

Another issue at play in this debate is the organization of the Brewer’s Retail. It is owned by three large brewing conglomerates: 49% Labatt (Part of AB InBev), 49% Molson (Part of Molson-Coors) and 2% Sleeman (Part of Sapporo). Critics have argued that this organization is tantamount to a foreign-owned monopoly on beer sales. Currently “The Beer Store” sells roughly 80% of the beer in Ontario. It does compete directly with LCBO stores and brewery-direct sales. Critics have argued that the system favours large brewers, particularly those who own majority in the Brewer’s Retail:

http://www.financialpost.com/news/features/Brewer+slams+legalized+retail+monopoly/3919920/story.html

While the Beer Store maintains that it enforces a policy of brewer neutrality, it is hard to see past the fact that the companies running it have a direct stake in nature of the sales. Again, anecdotally, I tend to shop for beer at the LCBO for several reasons:

1) The Beer Store tends to only stock more mild beers

2) The Beer Store tends to only stock multi-packs

3) The Beer Store is more likely to be out of the craft products they stock

To me, this would seem to more adversely affect the small brewer who is more likely to produce more idiosyncratic singles. While these might be available to urban buyers in the LCBO, many rural communities only have access to beer stores. By focusing on multi-packs, the cost of experimenting is higher to the rural consumer and thus they may be less likely to venture beyond the big brands which represent the core of the Brewer’s Retail’s sales.

The final issue at play is public policy in relation to beer sales. The argument from the Brewer’s Retail is that a large body such as themselves are in a better position to ensure the sale of beer is done in accordance with a unified public policy (i.e. avoiding serving minors and persons who are intoxicated). The research on this seems mixed. Some argue that privatized sales from small business inherently risks over-serving and less scrutinizing of customers. Others claim that by limiting sales to specific hours and places, such organizations actually encourage over-buying (i.e. stocking up) and thus indirectly support excessive consumption (see Pete Brown’s Man Walks Into a Pub: A Sociable History of Beer )

As a consumer, I obviously would like to see beer more freely available but I understand the trepidation some might have in totally deregulating its sale. At face, it appears to me that the system in Ontario favours large brewers who are headquartered outside of Canada. Even if the third-party sale system goes unchanged, it would be a positive thing, in my opinion to support the opening of more small, local breweries for Ontarians to buy directly from.

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