This post originally appeared on Toronto Life’s website on February 18, 2014.
Coors Light, Budweiser and Molson Canadian aren’t particularly pricey brands of beer—unless you own a bar or restaurant in Ontario. For the province’s tens of thousands of liquor licensees, these premium beer brands come at huge markup.
Take a case of Canadian. For a restaurant or bar, a two-four costs a staggering $44.75, about 30 per cent more than its retail price of $34.95. Labatt Blue, inexplicably, costs almost 50 per cent more than the retail price. This would be strange, but not necessarily fishy, if the markups were consistent across beer brands, but they’re not. With few exceptions, the markups apply exclusively to brands produced byMolson-Coors, AB InBev and Sapporo. Those are the three foreign-owned mega-breweries who ownThe Beer Store and have a virtual monopoly on beer sales in Ontario.
The issue came to light last month, when the Canadian Restaurants and Foodservices Associationraised the price discrepancy to members of Ontario’s Standing Committee on Finance and Economic Affairs. The CFRA is determined to keep raising the issue until they get a satisfactory answer. So far, there’s been no answer at all. “CRFA has never been offered an explanation for why the owners of The Beer Store decided to charge Ontario licensees more than the general public for their products,” says Jamie Rilett, vice president of CFRA Ontario.
For its part, The Beer Store pleads ignorance. “We have absolutely nothing to do with prices,” says president Ted Moroz. Rather, individual brewers set their prices through the LCBO, and The Beer Store is notified of price changes on a week-to-week basis. In fact, Moroz claims that he first realized the discrepancy was so large when the issue was raised by the writer of this article. “I was surprised,” he says. “I didn’t realize the prices were so much different for home consumers.”
LCBO communications consultant Lisa Murray confirms that brewers can set basically any prices they want. “Beyond confirming that the price change requested is above the minimum price,” she says, “LCBO plays no role in setting these prices.”
It’s possible there are valid reasons for the price discrepancy. One independent brewer—Toronto’s own Steam Whistle Brewing—also charges a markup to licensees, albeit a more conservative one. Steam Whistle’s pilsner costs about $50 a case for licensees, whereas it retails for $46. According to reps for the brewery, the extra four dollars covers certain services provided to bar and restaurant owners, like beer delivery or draught line cleaning, as well as branded glassware, signage and other promotional materials.
Steam Whistle is the exception, though. “By and large,” Rilett says, “Ontario’s craft and independent brewers price their products the same for both retail and licensees.” Some Ontario craft brewers even give licensees a deal. That’s the case with Guelph’s Wellington Brewery, which offers its brew at a discount to bars and restaurants—an intentional strategy employed by the brewery to build its brand. “We offer our beer to licensees at a reasonable cost in order to ensure that our products are widely available at bars and restaurants,” explains general manager Sarah Dawkins. That, the CRFA maintains, is the natural relationship between retail and wholesale pricing. “[The current system] runs counter to every other business input, where wholesale prices are significantly lower than retail,” Rilett says.
As of publication time, Labatt’s had not responded to multiple requests for comment and Gavin Thompson, head of corporate affairs for Molson Coors Canada, would only say that “Given the competitive nature of our business we do not comment on our pricing strategies.” We were unable, then, to obtain a response from The Beer Store’s foreign owners about why they are charging Ontario licensees such a dramatic markup on beer.
At least one Ontario restaurateur, Rino’s Kitchen owner Rino Bortolin, has begun boycotting The Beer Store in light of the seemingly shady pricing tactics. It remains to be seen if other licensees will follow his lead.
In the meantime, Rilett says the CFRA will continue to make noise. “We’re not asking for the moon here,” he says. “We don’t expect the owners of The Beer Store to actually provide wholesale pricing, but it’s ridiculous that they are charging licensees up to 50 per cent more for a case of beer than they charge the public.”