After years of baring its backside to the rest of the brew industry, the Beer Store is suddenly anxious to cover its ass.
The Beer Store has an image problem. And it’s not improving, despite a massive PR campaign and last week’s offer to open up Beer Store ownership – and access to its shelves – to small brewers. The response from many craft brewers to Beer Store claims that they would stand to benefit was incredulity mixed with indignation.
Matt Swan, co-owner of Silversmith Brewing Company, calls the whole thing disingenuous. “This offer is a distraction, a red herring, an opportunity for the Beer Store to say ‘See? We aren’t so bad.’ This is an announcement designed to capture consumer positive support and nothing else.”
Indeed. In the last year the media have taken a greater interest in the Beer Store’s unique government-enforced stranglehold on the industry – not to mention its heavy-handed lobbying efforts – which has called the integrity of politicians of all stripes into question.
Just how bad has it become? At the same time as a $1.4-billion class-action by small brewers was given the go-ahead by the courts, the province was put on notice this week that the Beer Store’s monopoly will be challenged in court in a separate legal action.
The Beer Store has hired Bill Walker, the guy who wrote Crisis Communications In The 24/7 Social Media World. According to the book’s abstract, “The key to surviving a crisis lies in preparing for the inevitable by building relationships with media allies and strengthening your corporate or brand image ahead of time – not after the crisis hits.” Walker did not return my email requests for comment. Nor did Beer Store president Ted Moroz. It may be too late to get out ahead of this situation.
Just how did we get here? First a little brew history. Born in 1927 as Prohibition expired, the Beer Store began life as a government-mandated consortium of Ontario breweries. In the decades that followed, membership decreased through a series of mergers and acquisitions. Today, it’s owned by foreign mega-brewers MolsonCoors of Colorado, AB-InBev of Belgium and Japan’s Sapporo, meaning that 100 per cent of private beer retailing in Ontario (except transactions at individual brewery bottle shops) is controlled by companies headquartered elsewhere.
Now the Beer Store is offering each of the fewer than 100 Ontario small brewers that would qualify a single share in the company for a nominal fee, which would allow new members to vote for representation on the board of directors. It’s also pledging more space on its shelves.
Small brewers can sell through the Beer Store now, but the $8,000 fee to list two beers in five stores is too much for most. The retailer says it will now allow Ontario craft brewers to sell two of their products without paying the listing fee in the five Beer Stores closest to their brewery.
But the PR effort is already looking like a huge miscalculation.
I surveyed 21 of the province’s craft brewers. “Smoke and mirrors,” “damage control,” “a crock” and “a thinly veiled play” is what I heard from them. Not one said they were consulted about the proposal beforehand, which is interesting because the Beer Store made quite a big deal of what it says it heard from small brewers.
None of the 21 was keen to be part of Beer Store ownership either. Only four hadn’t completely ruled out joining under the proposed structure. That’s not to say no one will be signing up, but what does it say about the Beer Store that no craft brewers are excited to become owners? It says things are likely going to get worse.
Jason Fisher definitely won’t be joining. Indie Ale House’s owner is a loud critic of Ontario’s liquor laws. He too dismisses the Beer Store’s offer as self-serving PR. “They are still majority foreign-owned and still a monopoly for distribution, so all the old problems remain.”
Despite being sold in the Beer Store, Mill Street is also unlikely to buy in. Co-owner Steve Abrams finds the new proposal strange. “It’s more of an olive branch. It doesn’t really suit us. Clearly, they’re under pressure.”
The owner of Sleeping Giant Brewing Company in Thunder Bay is one of the few publicly ‘fessing up to exploring ownership. “Why wouldn’t we?” asks Matt Pearson, who points out that plenty of craft brewers are currently selling in the Beer Store.
At this point, Pearson is planning on signing a non-disclosure agreement giving him access to details that won’t be made public. But like many I spoke with, he sees the Beer Store proposal as an attempt to divide the industry and advises that “all craft breweries should proceed cautiously.”
Two free listings at five nearby Beer Store locations could be a very good thing for some brewers, especially in rural and remote areas, where distribution to a small customer base can eat into the bottom line. The new model could also introduce neighbours to a new local brew.
But it raises an obvious question: why would the Beer Store’s ownership waive $8,000 in fees – admittedly for a minority of brewers and a tiny slice of the Beer Store’s vast distribution apparatus – while creating more competition for its own brands? Because the government has changed its tune.
Previously, the messaging was all about working with the Beer Store to make it more equitable for small brewers. In the past few months, however, Ed Clark, head of the province’s advisory council on government assets, has spoken out strongly against protecting a monopoly that sends its profits overseas.
When the Beer Store balked at his suggestion of a franchise fee, he suggested it might be time to introduce competition, since the Beer Store apparently saw no value in its monopoly position.
The Beer Store needs to show off more breweries – lots of them – using its services so it can claim to be more inclusive. But even that won’t be enough to silence the calls for change.
Unless there’s a golden egg in the non-disclosure agreement the Beer Store is insisting they sign, don’t expect craft brewers you’re most familiar with to buy in. They’re confident meaningful regulatory change is right around the corner, and buying a piece of the Beer Store has never been less appealing.
BREWOPOLY FOR DUMMIES
100% How much of the Beer Store is foreign-controlled: 49 per cent by MolsonCoors of Colorado (although half the company is Canadian-owned), 49 per cent by AB-InBev of Belgium, 2 per cent by Sapporo of Japan.
Fewer than 100 Ontario small brewers that would each be allowed to buy a single share in the Beer Store for a nominal fee. These new member brewers could then vote for representation on the board of directors and gain access to some financial statements.
20% Proportion of the board that would be drawn from small brewers under the Beer Store’s proposal. The board is currently made up of representatives from Labatt and Molson.
Roughly $8,000 Fee now paid by small brewers to list two labels in five Beer Store locations. Under the new rules, Ontario craft brewers would be allowed to sell in the five Beer Store locations closest to their brewery without paying a listing fee.
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