Ontario’s decision to expand beer, wine sales levels playing field for grocers
The Ontario government’s recent announcement to end the Master Framework Agreement (MFA) with The Beer Store levels the playing field for all grocers in the province to begin carrying wine, beer, cider and ready-to-drink cocktails in-store.
The MFA has long been a bone of contention for Ontario retailers unable to get licenses to carry alcohol products. When the agreement expires December 31, 2025, retailers will be able to house a wide range of alcohol options in a variety of formats – including 12-, 24- and 30-packs – with the option to introduce private label products. (The Beer Store will continue to operate the province-wide recycling program for alcoholic beverage containers until at least 2031.)
“We never supported the current agreement in place because it picked winners and losers and that’s not the role of government,” says Gary Sands, vice-president government relations at the Canadian Federation of Independent Grocers (CFIG). Under the MFA, only a fraction of grocers in Ontario were allotted licenses to carry alcohol and of that number, he says only 20% were independents who made the cut. “Now retailers can finally be the ones to decide if they want to sell these products or not.”
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The Retail Council of Canada’s National Spokeswoman Michelle Wasylyshen says it only makes sense for government to remove the cap on the number of grocery stores with retail licenses given an already proven record by Ontario grocers in successfully bringing craft beers and VQA wines to the market.
“Ontario’s retail system for alcohol has lagged behind other jurisdictions for far too long and so we were pleased to see a number of changes that will bring us closer in line with the greater convenience that we know our customers are looking for,” she says. “There are, however, some things noticeably missing from Ontario’s announcement, such as greater flexibility on retail pricing, and we look forward to addressing these with decision-makers in short order."
RCC has been pushing for a more open system that would drive down alcohol product prices for consumers as is the case in Quebec where direct negotiations between grocers and brewers is already allowed. Once the MFA expires, grocers will be able to set their own prices for alcohol products, as long as they’re not below minimum price points set by government to preserve standards around responsible consumption.
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The CFIG was pleased with the government’s announcement, says Sands, because it addresses what members have been asking for, namely minimum price points, flexibility on margins and maintaining the LCBO as the main distributor. “Market competition will keep prices in check but at least it gives grocers the ability to ensure this is not a loss leader,” he says.
Brad Fletcher, president of the Village Grocer in Markham, Ont., agrees completely. As an independent grocer with 140 employees, his was one of the lucky few to get licensed under the current agreement but has yet to see it translate into any real profit. “The reality is, it’s an investment and costs us money to run this category, but we only get 3% on a bottle, and that gets cut in half when a customer uses a credit card,” he says, referring to the additional fees that go to the credit card companies. His cites the example of an elderly customer who accidently dropped a pricey bottle of Italian wine. “At my margins, I realized I would have had to sell 28 bottles to recoup that loss,” he says. “Even getting another .50 cents a bottle is a huge margin.”
What motivates Fletcher to keep at it is the prospect of upcoming changes improving his situation – and the fact consumers are now expecting these products at the store. He says he welcomes the opportunity to work with local wineries to provide private label products in the future. “Having an independent store with the ability to augment its product selection with fine wines caters to those customers looking to have that fine dining experience at home – and it gives us an advantage as we’re more specialized than the big chains,” he says.
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Going forward Sands say CFIG is looking to help its members prepare for the changes ahead by holding workshops and providing resources at upcoming trade shows. “We’ve also reached out to other associations who represent the beer and wine groups to start talking about how we can work together,” he says. “We need to share experiences from grocers who have been doing this for the last few years already.”
In the months ahead, the Ontario government has also committed to continue to consult with industry partners and other stakeholders on further details around licensing, wholesale pricing and taxes, markups and fees.
“Outside of Quebec, I hope this will be a model that other provinces will look at because it has more flexibility for grocer,” says Sands. “It’s one thing to open things up to our industry, but when it’s not sustainable then it doesn’t really mean much.”
