Time to take ownership of the Beer Store: Cohn

Don’t blame the Beer Store.

Don’t fault its foreign owners for monopolizing retail sales in our domestic beer market — and funnelling handsome profits to their shareholders abroad. They do it because they can.

As the debate over the Beer Store comes to a head, remember this: It’s a monopoly of our own making.

For decades, Ontario politicians have nurtured it, protected it, and benefited from its campaign contributions — including free beer at their fundraising dinners.

Why demonize foreigners for our own follies? Multinationals own the Beer Store, but Ontarians should take ownership of the issue.

Don’t be distracted by the big brewers’ latest damage control tactics. All those desperate press releases and full-page ads promising a newer, better Beer Store have fallen flat — but they were always a diversionary publicity stunt.

The provincial government will make a final decision on the Beer Store’s fate within weeks, in time for the March budget. That means the real action is taking place behind closed doors as the big brewers try to negotiate their way out of a corner.

The governing Liberals, whose cozy relationship with the big brewers was always unseemly, have delegated the discussion to former TD Bank CEO Ed Clark. Mandated to extract more cash out of government-owned assets, Clark soon discovered that the LCBO’s revenue growth was limited by the privately owned Beer Store.

Thanks to a secret sweetheart deal signed in mid-2000, revealed by the Star last month, we now know that the Beer Store’s sales were protected — and the LCBO’s cash flow constrained — for 15 years. Until recently, Ontarians seemed oblivious to the reality that the Beer Store was owned by foreign-controlled brewers (Labatt, Molson-Coors and Sleeman), its retail operations frozen in time.

Now, amid rising public expectations, the politicians are changing their tune. But all along, the Beer Store’s strategy has seemed as stale as its stores.

Suddenly this month, without consulting the small craft brewers that it has long left out in the cold, the Beer Store offered them a minority voice on its board (while acknowledging the big foreign brewers would still run the show). Within hours of the announcement, it commissioned a poll of 500 people about “the new Beer Store” and bought full-page ads claiming four out of five Ontarians were supportive.

When you have a quasi-monopoly on beer, it’s tempting to think you have a monopoly on new ideas. But buying a quickie poll to prove your point does a disservice to any serious public debate about the Beer Store’s sub-par service.

Disingenuous claims from the Beer Store that it yields no profit for its owners are also an insult to the intelligence of Ontarians. Clark’s panel concluded that the foreign owners “benefit from their ownership of the network,” and recommended that “taxpayers receive their fair share of the profits from the Beer Store.”

But it’s not just about money.

While Clark has focused primarily on cash flow — a proposed “franchise fee” would reflect those profits — he has said little about the Beer Store’s stunted retail operations that crowd out craft brewers and treat customers as an afterthought. He has suggested removing the ban on LCBO sales of 12-packs (codified in that secret 2000 deal), but would let the Beer Store keep exclusive rights to sell high-volume cases of 24.

It’s a half-measure. Will the Beer Store merely be milked for money, while beer drinkers are left high and dry?

Government sources insist the discussion is as much about accessibility and service as it is about excess profits. But it’s hard to see how an outdated, ossified, stultified quasi-monopoly can be reformed when it has fallen so far behind the rest of the retail world.

The only cure for a monopoly mentality is to liberate Ontario’s beer from the Beer Store. There’s no need to privatize the Beer Store, because it’s already private. There’s no need to kill it off — just breathe new life into its privately owned stores by exposing them to competition from other private retailers.

But this debate isn’t just about granting better access to local craft brewers, or giving licenses to convenience stores, or letting supermarkets get a share of sales — any more than it should be about appeasing the Beer Store’s generous campaign donors. Rather than being blinded by special interests, our government needs to see the big picture and focus on an improved retail experience in a changing world.

If that doesn’t happen, if the reforms are merely half-measures, don’t demonize the foreign-owned Beer Store. Blame your own provincial government for being its ennablers.

If nothing changes, no longer will we be able to disparage the Beer Store as a multinational interloper. We will have to acknowledge it as our own homegrown, half-baked monopoly.

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If you’ve not seen our new beer video on thestar.com, click here for a reality check on the Beer Store’s latest ad campaign: Fact or fiction?

And if you’ve ever wondered why the Beer Store never seems to change, click on its 85th anniversary video, released in 2012, that showcases its retail outlets then — and now.