BEER WINE

WHY C O V E R STO RY NOT by Tracey Arial ? 32 YCM ONTARIO July/August 2007 n nienc i e nv sto co res in R& E E B WINeE ROK STEVE VI www.conveniencecentral.ca July/August 2007 YCM 33 L OHOsales in ALC ONTARIO by Suzanne Boles In its submission to the Ontario Beverage Alcohol Review Panel in March 2005, the Ontario Convenience Stores Association (OCSA) says, “The time is right for the Ontario government to broaden the marketplace for the sale of beverage alcohol.” Yongsun Park, Mansfield General Store, Mansfield, ON, benefits from being licensed as an offical LCBO agency store. My father voted for Bob Rae as Premier of So, imagine my surprise to discover that a small general store in Mansfield, Ontario sells beer because Rae promised and wine just like dépanneurs in Quebec. And this one sells spirits too, something that isn’t beer in convenience possible in la belle province. The Mansfield General Store has been stores. It didn’t happen. licensed as an official Liquor Control Board of A minority Liberal Ontario (LCBO) agency store for over three government tried too, years now. Its appointment follows a tradition first established in 1962. The numbers of but the other three agency stores have significantly increased over the last few years, however. Only 63 agency parties voted against stores were said to be open in a June 2003 press the bill. My dad’s release, but there are now close to 200 such retailers throughout Ontario. still complaining. Together, these agency stores accounted for $68 million or 1.9% of the more than $3.7 billion total LCBO sales in the 2004-2005 year. In the same year, wineries sold $176 million of product, while breweries sold $2.5 billion worth of beer. Current agency stores were approved through a bidding process after the LCBO pre-selected their regions for potential development. Selected regions are usually areas with small local populations that don’t support enough annual continual sales for an official LCBO store. (Managers approve the opening or relocation of a new retail store only when projected annual returns are expected to surpass 12% of the cost of the project.) Often these agency stores exist in areas that attract an increased seasonal tourism trade that generates significant sales and makes continual presence desirable. Liquor board managers take pains to keep locals in these communities loyal. Before approving a location, they first confirm that the municipality approves of liquor sales within their jurisdiction. After local government approval, the LCBO opens a competition by advertising in local newspapers. To bid, retailers must have operated for at least two years and have a store manager living within the selected community. The local operator with a winning bid usually signs a five-year contract so he or she has time to build up inventory and generate an appreciative local customer base along with the seasonal tourist sales. Ontario decades ago “Ontario consumers have become more sophisticated consumers of alcohol and are demanding wider convenience and competitive pricing,” says OCSA president Dave Bryans. Bryans says that, as the marketplace has matured, the Ontario government has moved to modernize its sales system, expanded the hours for licensed establishments like bars and pubs, and are adding more LCBO, beer, agency and grocery stores that sell wine throughout the province. The Ontario government has also expanded its product selection at LCBO and Beer Store outlets. “Even Wal-Mart is getting into wine kiosks in their stores,” says Bryans, who just saw one in Windsor, Ontario. “Beverage alcohol is widely available in retail outlets in other parts of Canada and in many jurisdictions and nations around the world. This availability has improved consumer convenience, choice and pricing without resulting in any of the negative impacts so often cited by the opponents to this concept. What has been done successfully around the world can be done responsibly here in Ontario,” he adds. Changes being made in how we consume and purchase alcohol in Ontario also show that the time is right to change how and where alcohol can be sold in the province. More leniency in regulations related to distribution and consumption of alcohol beverages has been implemented. For example, the Ontario government recently legalized the re-corkage of wine following its introduction of bring-your-own wine to licensed foodservice establishments in the province. “Allowing the sale of beverage alcohol in other environments, such as the c-store sector, is merely the next logical step in the evolution of the system,” says Bryans. Easing the restrictions on the sale of beverage alcohol in other retail environments also supports several of the Ontario government’s current stated objectives, including supporting the growth and prosperity of small- and medium-sized enterprises, the largest job creators in the Ontario economy. continued on page 36 KEVIN LAMB 34 YCM July/August 2007 OCSA says that providing new opportunities for the domestic sale of Ontario products will help Ontario industries compete against imported products. Increasing economic activity that is based on domestic production, services and sales helps Ontario retain the wealth it has created and encourages environmentally-responsible practices by all Ontario residents and businesses. This will also improve Ontario’s reputation as a sophisticated, welcome destination for tourism and job creation investment. Public opinion polls show that the rationale used in the past for not allowing alcoholic beverage sales in c-stores is no longer legitimate. Consumers have rejected the idea that they need to be “protected” from themselves and say it is an outdated concept. C-RETAILERS MONITOR RESPONSIBLE SALE OF AGE-RESTRICTED PRODUCTS “Brewers Retail (The Beer Store), the marketing and distribution setup for the convenience of domestic brewers, is now totally controlled by offshore foreign countries,” says Bryans. The retail industry, including Ontario c-retailers, has demonstrated a strong commitment to the responsible sale of age-restricted products under the recently rolled out We Expect ID campaign, showing that the industry has, and will, continue to have an excellent track record in meeting that responsibility. Says Bryans, “With judicious regulation and careful implementation, there is no good reason to prevent the sale of beverage alcohol in Ontario retail stores.” Dave Bryans, president of the Ontario Convenience Stores Association, shows how successfully convenience retailers, like this Avondale Store in Wainfleet, ON, can sell alcoholic beverages to the public. “With judicious regulation and careful implementation, NO GOOD REASON TO PREVENT THE SALE of beverage alcohol there is in Ontario retail stores.” RAINER LEIPSCHER 36 YCM July/August 2007 Mansfield General Store, Mansfield, ON, is one of some 200 agency stores in Ontario, operating as official Beer Store outlets. The model works so well in the agency stores that the Ontario Convenience Stores Association argues all convenience retailers in the province should have the opportunity to sell beer, wine and spirits. AGENCY STORES’ RESPONSIBILITIES In exchange for obtaining the right to sell liquor for five years, store owners take on six responsibilities: they must pay for renovations to accommodate a core inventory of products in an area that’s physically-separated from other merchandise; purchase products at a 10% discount from an LCBO outlet, Beer Stores operated by Brewers Retail Inc., or domestic beer suppliers; sell products at LCBO/Beer Store prices; and collect empties for return. All store employees must complete the LCBO’s Strategies for Managing Age and Alcohol-Related Troubles (SMAART) training program so they know to ask for ID before selling to anyone younger than 25. Owners are not required to keep all the LCBO staff holidays, but they do have to get sales schedules approved. Sunday sales in particular must both be approved by municipalities and authorized in writing by the LCBO. Many stores, particularly those in popular cottage areas, operate only during the summer months. Despite holding contracts that turn independent retailers into official government agents, they are not fully integrated into the LCBO system. Agency stores do not appear in the LCBO website search program that enables consumers to find the nearest retail outlet. That privilege remains solely with the almost 600 LCBOowned stores. That may change in the future, however, if an ambitious member of Ontario’s provincial parliament gets his way. www.conveniencecentral.ca July/August 2007 YCM 37 Retailers, especially those hard hit by tobacco regulations prohibiting displays of tobacco products, are looking to new profit centres, such as dedicated areas for selling beer, wine and spirits, to help compensate for the loss of income. For retailers in Quebec, like Jean-François Joannette, this model has worked well for years. PRIVATE BILL TO RAPIDLY EXPAND THE SYSTEM Kim Craitor, the MPP for Niagara Falls, wants the LCBO agency store program expanded to include every convenience and grocery store in the province. This plan would avert government union complaints like those that prevented Rae from keeping his promise years ago. He recognizes that other complainants exist, but thinks that the government can come up with ways to satisfy their concerns. Quebec and Newfoundland both have legislation allowing convenience and grocery stores to sell beer and wine under some conditions, as do the states of Arizona, California, Connecticut, Florida, Georgia, Hawaii, Indiana, Nebraska, Nevada, New Hampshire, New York, Vermont, Virginia and Washington. Why not Ontario? As the representative of a region containing 75% of Ontario’s wine growers, Craitor has one obvious caveat: he says product selection for corner store sales should be limited to Ontario wines with the Vintners Quality Assurance (VQA) label and Ontario-produced beer. Craitor has been thinking about allowing corner stores to sell beer and wine for several years now. When he was elected four years ago, he spent a lot of time promoting a smoke-free Ontario. This led to multiple talks with representatives from the Ontario R BEE price wars in QUEBEC Convenience stores and grocers in Quebec have sold locally-bottled wine and beer for years, but many of them are wondering whether they can afford to keep selling beer. They say they lose money with every case they sell. The issue came to a head last fall, when a hundred retailers in the Saguenay-Lac-StJean area set up a local campaign to sell Labatt Breweries’ products at a profit, while Molson products remained at the minimum price. The result of this campaign is still to be determined, but the Quebec government is unlikely to return to pre38 YCM July/August 2007 1994 regulations stipulating that retailers must sell beer at prices lower than cost. Costs cannot be universally defined. Instead, Quebec retailers have been selling beer at a price that must be higher than a table of minimum prices published by the government every April 1 since 1995. The published minimum price has been significantly lower than the cost since 2003, however, especially for small retailers who don’t qualify for volume sales rebates. Those who sell beer at the minimum price oblige smaller retailers to sell products at a loss or give up potential sales. “Costs have risen by 32% over the last several years, while the minimum price has only increased by 25%,” says Florent Gravel, president and general manager of the Quebec Food Retailers Association, which represents members across the province. “Retailers are very unsatisfied with the minimum price of beer right now.” One Quebec retailer has found a differ- ent solution. Jean-François Joannette runs a Metro store in Verdun that carries more than 200 brands of beer from microbreweries around the province. He says he’s been relatively isolated from the beer price wars. “It’s Labatt and Molson, and it really affects the cases of 24s,” he says. “That’s our loss leader. I used to sell 60 cases of 12 of Molson Dry a week, and now I’m lucky if I sell one.” It’s taken several years for Joannette to build solid relationships with the smaller breweries, however, and many don’t produce in volumes sufficient to meet a higher demand. He has to plan carefully to avoid going out of stock, since some only deliver products once a month. The rewards of serving customers who really appreciate beer are worth the effort, he says. “There are two types of customers. There are lots of people who drink the big brewery products, but others are more discerning. They try something else, and after that they can’t go back.” STEVE VIROK Korean Businessmen’s Association and the Ontario Convenience Stores Association (OCSA), two organizations with members who are concerned about making up lost tobacco revenue. Craitor always expressed interest in helping, but last summer he decided to get serious about writing a private members’ bill to promote the idea. The two associations responded to his efforts by setting up a petition in favour of the idea and asking their customers to sign. “We ran our petition from August 2 until almost the end of October,” said Ken Kim, general manager of the Ontario Korean Businessmen’s Association. “We collected 26,230 signatures for him to present along with his private members’ bill.” Craitor anticipated the first reading of his bill to take place in October, but that had to be delayed after he suffered a medical emergency. He’s lowered his expectations accordingly. “While it may be difficult to get this legislation passed before this session ends,” he said, “it may be helpful in getting a positive discussion started that may lead to the government supporting such a program in the future.” Craitor’s hopes are bolstered by the last experience he had with a private member’s bill. Bill 66 requested that Highway 405 be renamed General Brock Parkway to honour Major General Sir Isaac Brock. Craitor read his bill in the Ontario legislature on February 20, 2006. A mere eight months later, the government officially rechristened “General Brock Parkway” on October 13, the anniversary of the hero’s death in 1812. My father, for one, hopes the government adopts Craitor’s current idea equally fast. YCM Jean-François Joannette, Metro Joannette, Verdun, Quebec, helps a customer choose a bottle of wine as part of a system that many feel would work in c-stores in other provinces in Canada. www.conveniencecentral.ca July/August 2007 YCM 39