CFIG, RCC react to Doug Ford's beer plan

Two industry groups favour opening up beer sales in the province to include corner stores and more grocery stores
Ontario Premier Doug Ford, left, and Ontario Finance Minister Vic Fedeli, stack cases of beer during a photo opportunity at a brewery in Etobicoke, Ont. on Monday, Aug. 27, 2018. The Progressive Conservative government has tabled legislation that would...

The Ontario government is pushing forward with legislation to end the near monopoly on beer and alcohol sales in the province and allow more sales in grocery stores.

The proposed legislation was introduced Monday along with the release of a report on alcohol sales in Ontario by Ken Hughes, Ontario’s special advisor for the beverage alcohol review.

If the legislation is passed it will expand alcohol sales to “corner, big-box, and more grocery stores,” across the province. (Read the full report here.)

Minister of Finance Vic Fedeli said he expected the legislation to be passed before the Legislature breaks for the summer, however it would require tearing up a 10-year agreement with The Beer Store—controlled by Molson Coors, Labatt and Sleeman—to sell most of the beer in the province.

“The province's current beer distribution system is owned by three global giants who were handed a sweetheart deal by the previous government, and who are more interested in protecting profits than providing convenience or choice for average people,” said Fedeli. Scrapping the deal could trigger steep financial penalties, but the legislation contains provisions to nullify any such costs.

The Beer Store, however, suggested it was not willing to accept voiding any financial claims, saying it will fight the legislation through the courts.

“The government cannot extinguish our right to damages as outlined in the Master Framework Agreement,” president Ted Moroz said in a statement.

“It is critical to understand that The Beer Store has, in good faith, based on a legally negotiated 10-year operating agreement with the province of Ontario, invested more than $100 million to modernize its stores and to continue to upgrade the consumer experience.”

The Beer Store's lawyers sent a letter to the attorney general, saying they reserve the right to start litigation challenging the bill and seeking compensation.

Meanwhile, two leading retail and grocery groups have expressed clear support for the government.

The Retail Council of Canada said it “couldn’t agree more” with the recommendations from the report the government is using to back its legislation. “RCC applauds the recommendations, it highlights that Ontario should end the anti-competitive practice of having a fixed, uniform retail price,” reads a RCC statement. “We support today’s report by Ken Hughes, which, if implemented, would see the market deregulated. Any decision that offers further deregulation on alcohol is a win for consumers and a win for Ontario’s economy,” said Karl Littler, RCC’s senior vice-president of government relations.

The previous provincial government made some steps to expand grocery and beer sales in grocery stores. But that system favoured big chains who could outbid smaller and independent grocers, according to the Canadian Federation of Independent Grocers. “We didn’t support the previous government system because it resulted in winners and losers,” said Gary Sands, CFIG's senior vice-president, public policy and advocacy. “If you are an independent in a market close to one or two chains and they get a licence and you don’t that puts you at a disadvantage.”

Some independent grocers were bidding for selling rights but at “unsustainable margins,” he said.

However while the CFIG supports the direction of the government, it has one important caveat: “We strongly argued there has to be minimum pricing in effect,” said Sands. The CFIG is worried that if there is no pricing floor, the big chains will once again have a significant advantage. “The chains will blow the independents out of the water in terms of pricing,” said Sands.

While the specifics of the new rules are still to be determined, the report called for pricing minimums though the recommendation was made to “ensure that beverage alcohol is sold in a socially responsible manner.”

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