Consumers frustrated by the Ontario government's handling of alcohol sales might not realize that the monopolies held by The Beer Store and the Liquor Control Board of Ontario differ in one crucial respect. With the LCBO, Ontarians know precisely how much the government is making from its stranglehold on the market. With The Beer Store, we have no idea what they're getting – or not, as the case may be.
The battle being fought by convenience stores over whether they should be allowed to compete with The Beer Store, also known as Brewers Retail Ltd., the co-op owned by three giant foreign-owned breweries – Molson Coors Brewing Co, Anheuser-Busch InBev SA and Sleeman Breweries Ltd. (Sapporo Breweries Ltd.) – has been raging for years. The Competition Bureau needn't bother investigating The Beer Store. When three of the largest brewers in the world operate the principal retail outlets for beer in Canada's most populous province, it's unlikely that competitive market forces have much to do with the prices consumers pay at the checkout counter.
Are the co-owners of The Beer Store making out like bandits, however? Based on The Beer Store's annual operations report, you might conclude that the company itself isn't generating windfall profits. In 2012, the privately held firm reported an $86.6-million deficit, and an $88.6-million deficit the year before that. By comparison, the LCBO's annual report noted margins on net sales of beer of 39 cents for every $1. The Crown corporation is a profit machine – in 2012, it handed $1.6-billion over to the Ontario government. Not too shabby.
The Beer Store is ostensibly being operated on a break-even basis. Being a co-owner doesn't give a big brewery a pricing advantage directly – breweries other than the monopoly's co-owners actually set their own retail prices in the stores. However, non-owners pay a number of fees that the co-owners don't. And not only do the co-owners gain a pricing advantage by avoiding said fees, they also get to control where and how their products are displayed in the store, as well as in ads and marketing materials.
In theory, waiving certain fees for The Beer Store's co-owners could be meant to compensate for the risk of the company going bankrupt. But that's ridiculous, for three reasons: one, the three brewers themselves are almost certainly the company's largest creditors; two, there's no ceiling on the fees The Beer Store can charge brewers, legal or competitive – frustrated brewers have little alternative, since other than the LCBO (with its 39 per cent margin on beer), The Beer Store has a monopoly on selling beer in Ontario; and three, did I mention that other than the LCBO, The Beer Store has a monopoly on selling beer in Ontario?
We don't know whether the co-owners are overcharging The Beer Store for their products – the annual report doesn't break out what percentage of the retail price is the cost of inventory for co-owners' products versus the rest. We also don't know how the co-owners determine the fees non-owners pay, and whether they carry a disproportionate share of the operating costs of the company – the annual report doesn't break those figures out, either.
It doesn't seem too much to ask that, since we've given The Beer Store the semi-exclusive right to sell beer in Ontario, we ought to be able to know how much of an advantage the co-owners have over their competitors. If the government of Ontario won't reopen the debate over whether we ought to have a government-mandated monopoly on alcohol sales, they could at least demand that the public have better information on whether or not consumers are getting hosed.