This post originally appeared on Torontoist on January 2, 2013.
Beer industry insiders say big breweries spend hundreds of thousands of dollars each year trying to influence what your bartender decides to put in the fridge.
You may think, when you go to a bar, that your choice of beer is entirely yours. But that decision may have been made well before you even put on your drinking pants—and not by the bar owners. According to industry insiders, it’s often the brewers who dictate what’s on tap.
In fact, insiders say, sometimes it’s brewers, not bar owners, who cover the expense of putting in those very tap lines. Because in Toronto, and across Ontario, keg-fridge space is expensive real estate.
According to multiple bar owners and industry workers, breweries entice bars into promising them a spot on the lineup by providing anything from customized coasters to branded patio umbrellas, or by financing the installation of equipment and making cash payments. Sometimes, breweries even ask that rival brewers get denied a spot on tap. Since Toronto’s craft brewers aren’t typically the beer sellers with the most money to spend on “marketing,” this would amount to yet another advantage for the province’s big brewers, who already have a virtual monopoly on Ontario’s beer business.
Craig, an east-end bartender who has worked in the industry for years, admits that virtually all brewers provide some sort of incentive to improve relationships with the bars—but especially the big brewers. (Craig is not his real name: like many others interviewed for this article, he fears reprisal for talking critically about industry marketing tactics.)
“The big guys have cash to do it on another level,” he said. “The craft guys will throw a free keg to a bar, but with them, it doesn’t feel like tied selling. They’ll give you something free for an event or festival but there’s no implicit demand to sell their products.”
But even that, it seems, is changing.
Jason Fisher, owner and operator of the newly-opened Indie Alehouse in the Junction, said the practice is catching on among larger craft brewers. “We’re not talking about a few coasters and some keychains for prizes, or a keg of beer for a once-a-year festival in exchange for marketing space, but tens of thousands of dollars in fridges, glasses, umbrellas, patio furniture, chalk boards, signage, advertising space, et cetera. Things bar owners would otherwise have to spend real money on.”
“It’s understood,” Fisher explained, “that, in exchange for these items, the brewery wants dedicated lines or, in the case of big breweries, all the taps and bottle selections at that location excluding any competition.”
Even a cursory look at the province’s liquor legislation would suggest this practice is problematic. From the Liquor License Act:
A manufacturer of liquor or an agent or employee of a manufacturer shall not directly or indirectly offer or give a financial or material inducement to a person who holds a licence or permit under the Act or to an agent or employee of the person for the purpose of increasing the sale or distribution of a brand of liquor.
The Alcohol and Gaming Commission of Ontario (AGCO) is responsible for regulating beer and liquor distribution in the province, and so they would be the ones to find and pursue violations of the Act. But they largely only investigate violations they learn about through complaints, police investigations, or spot checks. When they do find a breach, there are no hard and fast rules for punishment.
Penalties (ranging from a fine to a flat-out revocation of a bar owner’s ability to sell alcohol) are decided on a case-by-case basis. The agency takes into account the licensee’s past behaviour, the likelihood that they will commit another breach, the severity of the breach, and so on.
The AGCO was hesitant even to confirm whether or not the practice of gifting alcohol or providing discounts in exchange for keg-fridge space is, in fact, illegal. A spokesperson said only that she couldn’t interpret the Liquor License Act for me.
According to some of those working in the industry, this approach to enforcement doesn’t always ensure that breweries play fair.
“Guys find loopholes with the AGCO,” says David (someone who—disclosure—is a personal acquaintance of mine, and whose name has been changed). He’s a former sales rep who worked for almost a decade with one of the big brewers. According to him, reps from big brewers find creative ways of “gifting” their accounts, sometimes simply paying off bar owners to keep their business. “[Beer reps] will just walk into a bar and tell them to swipe their corporate credit card for like 16 pitchers.” he said. “It’s like, ‘Tell them I had a party here.’” Other sales reps and business owners told me similar stories about bar owners drawing up phony catering receipts for lunches and events that never actually happened.
The practice, David and others say, has become so widespread that freebies, incentives, and kickbacks are now simply expected. New breweries and the city’s smaller craft brewers don’t have the budgets to compete.
“I have never purchased a line,” said Tim (not his real name), a sales rep for a local craft brewer. “But I’ve been asked a lot. I was recently told by a bar that we could get our beer on their taps if we paid them $1200 cash and did a seven and one keg deal with them [that is, allow them to buy seven kegs and get one free]. I couldn’t do it.”
“It’s a struggle,” Tim said, “when you go into a bar and before you can even talk about the merits of your beer the owner or GM is asking about kickbacks like rebates on kegs sold. I honestly think some bar owners are only in the business to get free shit.”
This is a sentiment that David, the big-brewery rep—who worked with a much greater ability to provide freebies—echoed. “Half the shit I gave to bars for giveaways just ended up in the basements and rec rooms of bar managers. I literally once had a guy tell me, ‘There’s a used pick-up truck for sale down the street from me for $4000. Buy it for me and I’ll give you all my business.’ Another guy said, ‘I want to see Billy Joel at Madison Square Garden, or I’m going with the other guys.’ I didn’t get him tickets, his bar went with the other guys, and I’d be willing to bet he got to see that concert.”
And while Billy Joel tickets and cars are outside of the realm of incentives that Toronto’s craft brewers can provide, it’s clear they feel the pressure to pay up, or risk getting squeezed out of the market.
“You have to start playing the game or you lose out,” said Daren (not his real name), a representative from one of Toronto’s newer craft breweries. “Even smaller places that claim to support craft beer these days want one or two free kegs up front when they buy the first keg.”
He has given out cash incentives to bar owners. “I mean, everyone does it, so you’re kind of forced to if you want to compete,” he said. “I recently paid a bar $500 in exchange for carrying my beer. Then, six months later they stopped selling my beer, and there’s nothing I can do about it.”
Brewery reps say that because nothing is ever put in writing, the promise that a bar will actually continue selling the brewer’s beer in exchange for a pay-off comes with no real guarantee. Often, bars will accept a brewer’s money and free merchandise, then renege on the deal.
David recalls a time when he pushed to get his beer on tap at a busy downtown bar. “I did a huge Super Bowl party. I brought in promo girls, I did a giveaway of a leather couch, we raffled off a big-screen TV during the game, I outfitted the entire staff with shirts—all told I probably spent over $8000 on merchandise, then I spent over $1000 at the bar with my company credit card buying beer during the game. It was close to a $10,000 day and, after the game, the bar bought two kegs and that’s it.”
Luckily for David and other big beer reps, that’s not as devastating a loss as it seems, and it’s atypical of the usual returns they see on their investment. In fact, David tells me, while some of the reps worked with budgets of over $100,000 a year just to keep bar owners happy (with everything from tap handles and coasters to neon signs and hockey tickets), it’s not unusual for those reps to leverage that money to the tune of a million cases of beer in their respective regions, which translates to roughly $35,000,000 in sales—although most of that would consist of Beer Store sales.
When I reached them for comment, Molson Coors maintained that their sales practices are entirely above board. I spoke with Gavin Thompson, senior director of corporate affairs for Molson Coors Canada, who was unequivocal about their policy on the practice of buying tap lines or providing cash incentives. “We don’t do that,” he said. “And it’s unfortunate that that perception is out there.”
In fact, Thompson notes that Molson Coors has practices in place to ensure that those payments don’t occur. “I can assure you that our guys are 100 per cent compliant,” he says. “We have routine audits in place and a scorecard system to make sure our sales reps are compliant. We’ve actually received accolades within the industry for having some of the best practices in place related to this.”
As for promotional materials, Thompson said that the company’s intention is not to sway bar owners. “Our end goal with promotional material,” he told me when I asked about giveaways and swag, “is to ensure that the consumer has the best possible experience and that they enjoy drinking our product.”
Charlie Angelakos, vice president of corporate affairs for Labatt Breweries of Canada, offered a similar sentiment in a short, emailed statement: “Sales practices between alcohol manufacturers and licensees (bars and restaurants) are governed by regulations and guidelines established by the Alcohol and Gaming Commission of Ontario (AGCO). Labatt has a strict code of conduct and regularly educates its employees on these guidelines.”
The argument can of course be made that this is all just business. Naturally, the salesperson who can do the most for his or her client usually wins the account in any industry—be it beer, copy paper, or real estate.
But with beer, what is the cost to the consumer?
When bar owners are willing to auction off their fridge space to the highest bidder, or the guy with the most freebies, it means fewer bar owners are choosing to stock products because you want them. And wouldn’t you like to know you’re the one deciding what’s in your pint glass?