Ontario's booze bosses have dropped a rule that would have forced independent grocers and chains selling beer in the province to get a costly $150,000 letter of credit with their bank.
In addition, a requirement calling upon independents who win a beer licence to pay an annual fee of $7,000 to the Alcohol and the Gaming Commission of Ontario has been reduced to $3,000. That fee remains $7,000 for chain stores.
The decision by the LCBO and AGCO to drop the requirements came after a vigorous protest by the Canadian Federation of Independent Grocers (CFIG).
“It’s a reasonable compromise,” Gary Sands, vice-president of public policy at the CFIG told Canadian Grocer.
“Obviously, I’d be less than honest if I didn’t say, ‘yeah, we’d like to have even lower fees,’ but the fact the government has now recognized the validity of what we were saying is encouraging.”
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“To us, it’s a recognition that there’s a different fiscal reality for an independent as opposed to a chain. We’re satisfied now.”
The Ontario government announced in September that it would begin accepting bids from grocers interested in selling beer, putting an end to the Beer Store and LCBO monopoly. Sixty licences are expected to be granted this year, 12 to independents.
Sands said the letter of credit requirement would have forced independents to take $150,000 of their capital and park it at the bank for 10 years. As well, they would have had to pay additional fees of about $3,500 annually year for the line of credit.
The CFIG said the fees, which were announced by the LCBO and AGCO at a webinar on Sept. 30, had not been discussed when it was holding confidential negotiations with the government about the beer framework.
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Independents retailers who gain beer licenses but do not make payment arrangements with the LCBO can still obtain a $50,000 letter of credit, if they wish.
But independents have “very loudly and clearly” indicated to CFIG that they would prefer to make their own payment arrangements, Sands said.
The $3,000 annual fee is acceptable, given that AGCO inspection fees have not increased since 1992, he said. “Our objection was ‘don’t play catch-up on the back of the independents.’ ”
Meanwhile, CFIG is preparing members for the sale of beer in their stores. A pavilion of craft brewers was set up at last month’s CFIG trade show, Grocery Innovations Canada in Toronto.
Sands said the idea was to raise the profile of independent craft brewers with independent grocers.
He noted Ontario is requiring that winning bidders for beer licenses must have 20% of their product from local craft brewers. That’s fine with independents, many of whom will go well above that requirement, he said.
“Buying local is not a slogan for independents. They do it because they need to do it. They have to differentiate themselves from the chains. They’re not going to beat Walmart or Loblaws on price points.”