LCBO bureaucracy forces craft brewers into Beer Store

When Flying Monkeys Craft Brewery and Kensington Brewing Company both announced new beer releases last week, the news from both companies was somewhat surprising: Both would be releasing their new beers in The Beer Store. Yes, Flying Monkeys' El Toro Bravo Dark Rye Ale and KBCo's Fruit Stand Watermelon Wheat will soon be available to Ontario's beer drinkers, but in order to get them, we'll need to patronize our province's increasingly contentious, mostly foreign-owned, private, beer monopoly.

But why?

The short answer, unfortunately, is because both companies feel they didn't have any other choice. The long answer is slightly more complicated. As you may or may not already know, brewers in this province are currently limited for places they can sell their beer. Current liquor legislation states that brewers can sell their beer at their own brewery's onsite retail store, through the LCBO, or by paying to get into The Beer Store, which is privately owned by three of the biggest breweries in the world.

Both Flying Monkeys and KBCo have released other products in the LCBO previously, however, owing to the fact that the LCBO only offers each brewing company a limited number of products they are allowed to sell (commonly referred to as SKUs) these brewers, and many others, have been told they simply can't sell these beers at the LCBO.

"Our decision came to us simply by the LCBO not wanting it," says Brock Shepherd, Founder of Kensington Brewing Company. "We tried twice," he says. "The general public wants it at retail, and the only other choice is The Beer Store."

Likening his new partnership with The Beer Store to a "necessary evil" Shepherd contends he's doing what he has to do to run a business. "We are testing it out to see if our beer works in that environment."

So too, do the folks at Flying Monkeys see the Beer Store as a test of sorts, but they're interested in seeing if the Beer Store will live up to its own hype. According to the brewery's press release, "The Flying Monkeys are making a conscious investment in The Beer Store releasing a real specialty beer to embrace the cartel's claim that they support Ontario craft beer."

"TBS boasts about vendor neutrality and equal access in all of their media rhetoric. However, "vendor neutrality" gets everyone who pays the listing fees access to the system, it does not mean non-owner brewers are treated fairly and equally in terms of access to retail shelf space."

And so, as Andrea Chiodo, Creative director for Flying Monkeys explains, they are going to put the Beer Store through their paces. "We are definitely testing TBS with this release," she says, "and we hope it pays off. We already export to other provinces, the US, Mexico, Brazil, Scandinavia, and Taiwan, so we've had a glimpse of the challenges and advantages that come with the territory of a three-tiered system. However, until the politicians stop kowtowing to the lobbyists and propaganda of the Big Brewers, we have to play the field as it lies."

She reiterates that this doesn't mean they've accepted The Beer Store's monopoly. "We will never join the Dark Side," she says. "Someone is not your friend if you have to pay him to be your friend."

And while it's all well and good that Chiodo and Flying Monkeys and Shepherd and KBCo are using the system to call attention to its deficiencies, the unfortunate fact remains that they're doing so because they have to. Two Ontario craft brewers who are willing to work within the government-run retail environment that is provided by the province (and have done so before) are now literally being driven away and forced to do business with the only other option they have: a privately-owned company with owners based in Belgium, Brazil, Japan, and the United States.

And doing business with those guys isn't cheap.

"It costs us approximately $30,000 to put this beer in 100 stores," Andrea Chiodo tells me of El Toro Bravo. "There is an initial $3000 TBS listing fee plus an additional $250 per store (so 100 stores would cost $25,000). In addition, there is an addition $1 per bottle service fee charged upon sale for processing and shelving the beer." With this test case, she tells me, Flying Monkeys will consider it a success if they break even.

Accordingly, without a rule change, the current system not only costs Ontario businesses like Flying Monkeys who have to pay to play, but it is taking money out of provincial LCBO coffers and putting it into the pockets of AB-InBev, Molson-Coors, and Sapporo, three companies that really don't need any help from Ontario, financially.

AB InBev posted $1.37 billion in profits for the first quarter of 2014, Molson-Coors "handily beat expectations" this past quarter, earning $163.4 million (US), and Sapporo Holdings Ltd. net profits surged 5.2 percent to ¥9.45 billion last year (roughly 1.6 billion Canadian).

So what's the solution? Well, it's not the Beer Store or the Ontario Convenience Stores Association (OCSA), as Shepherd will tell you. "I don't like the tactics of either of them," he says. "The OCSA does not represent mom and pop corner stores, just the corporate convenience stores that pay to be members (sound familiar?)."

Peter Chiodo, owner of Flying Monkeys, hopes that by raising awareness, a new retail model might emerge. "Hopefully, growing public awareness and social pressure fostered by Ontario's beer writers and craft beer culture will influence small brewers' infiltration of the system."

He hopes that one day brewers will have designated shelf space somewhere so they're not competing with one another in an already crowded marketplace like the LCBO. "Craft Brewers could pay for a slot or a space in a store," he says, "but they could rotate different brands through that space without having to continually pay for new listings."

Until then, both companies--and the rest of Ontario's brewers--have little choice but to try to work within the system as it is. As Peter Chiodo says, "We're still crying for change, but we cannot go out of business during the revolution."

El Toro Bravo Dark Rye Ale is the second Spanish cedar aged beer in the Flying Monkeys' The Matador Series and is available now at select Beer Store locations for $10.95 per 750 ml bottle.

Kensington Brewing Company's Fruit Stand Watermelon Wheat will be available in 473ml cans for $2.95 beginning in June at self-serve locations of The Beer Store.

Ben Johnson also writes about beer over on Ben's Beer Blog. Follow him on twitter @Ben_T_Johnson.

by Ben Johnson via blogTO