Monday, January 14, 2013

Ontario and Beer... A sad affair...

Those who visit me in Toronto from time to time from faraway places often get a bit perplexed by the beer scene around here.  In short, here's the condensed version of affairs:

* In the 1920's Ontario was in the grips of prohibition, and this ended with the creation of a place in 1927 where you can buy beer - this is now called "The Beer Store".
* The Beer Store isn't really Canadian owned, but it's a monopoly here just the same - it's owned by a smattering of USA/Belgian/Japanese big name breweries and they love to sell their own beers through it.
* If you're wondering where wines and spirits are sold, this is the "LCBO" (Liquor Control Board of Ontario) - they're "the competition"… they're also the Government and beer sales is a really small percentage of their sales... so they're not actually "true" competition.

Now, here's where the bad situation gets worse:
The Beer Store, as you would guess being owned by foreign brewery conglomerates, has limitless supply of the carbonated junk beers put out by the big names, so where do the foreign beers come from?  The LCBO purchases the foreign beers and then resells these to The Beer Store.  

The Beer Store has a listing fee for smaller breweries that it regularly spins thus:  We want smaller brewers to gain a foothold in our stores.  If you are a small brewery, you get a discount in the listing fee.  If you're really small, you get even more discounts.

This policy can be rephrased as such:  "We will stock you if you're insignificant, but the minute you make a dent on any of our own brand sales, we'll hike the fees accordingly".

As you can guess, a monopoly like this has brought about two things:
1. A lack of choice.
2. Sustained high prices.

In The Beer Store's 2008 Operational report, they stated "between 2004 and 2008, the consumer price for beer actually fell in Ontario between these years from $3.60 per hectoliter to $3.57 per hectoliter" like this was a big deal.

Let's examine that statement for a second:
One hectolitre is approximately 211 pints… and we've saved a whopping 3 cents on that amount?  That's 0.0001 cents per pint.  You would have to drink 70 pints of beer to see a single cent.

As you can see, when you pull back the layers of this onion, it's not a pretty picture - but that's what monopolies are all about.   

So what of craft beers?  Surely they do well in a monopoly that bulk sells carbonated junk?  For that, I leave you with this.