From Ontario Prohibition to the Rise of the “Big Three”
Prohibition in Canada
The Canada Temperance Act of 1878 granted local governments the option to ban the sale of alcohol. Temperance advocates found the catalyst they needed in the First World War, with prohibition discourse centered around Canadians fulling their patriotic duty through alcoholic abstinence. By 1917, most provinces had banned the sale of alcohol, except for Quebec, the sole Canadian holdout against the temperance movement.
Canada was in a unique position with regard to prohibition, as the production and sale of alcohol was shared by two levels of government. The federal government was in control of regulating production and trade, while provinces were responsible for sales and consumption. Prohibition in Canada was relatively short-lived, opponents arguing that enacting an alcohol ban through plebiscite was an unfair and undemocratic parliamentary practice that violated individual liberties.
Founding Brewers Warehousing Company
Ontario prohibition ended in 1927 with the repeal of the Ontario Temperance Act and the introduction of the Liquor Control Act. Striking a compromise between temperance demands and the unregulated sale of alcohol, the recently re-elected Ontario Conservatives passed The Liquor License Act, regulating the sale, transportation and distribution within the province. As a concession to temperance advocates, public consumption of alcohol was still not permitted, and it was to be sold solely for home consumption. The sale of wine and spirits were controlled exclusively by the newly founded Liquor Control Board, beer, with its lower alcohol content, could be sold by local breweries.
The Ontario Government mandated that beer be sold through a single network of stores, though they opted out of governing this network, as many other provinces had chosen to do. Ontario brewers came together to form the Brewers Warehousing Company, a cooperative enterprise for the shared and efficient wholesale distribution of beer to private retailers. The brewing collective obtained warehouse space and acquired a transport company, and by year’s end, Brewers Warehousing Company Limited had 86 outlets in the province.
E.P. Taylor & Brewing Corporation of Ontario
The Ontario beer industry, and eventually the Canadian beer landscape, was significantly impacted by a young entrepreneur and soon-to-become business tycoon E.P. Taylor. His family owned Ottawa-based Brading Brewery, among one of the breweries to survive prohibition by selling beer to Quebec where sale and consumption of alcohol were still permitted.
Taylor studied the brewing industry and learned that Quebec was dominated by three breweries that had successfully consolidated a number of smaller breweries. Seeing a similar opportunity in Ontario, Taylor, now director of Brading Brewery, decided to seize the moment. He joined forces with British investors, forming Brewing Corporation of Ontario (BCO) in 1930, and started buying up small, local breweries. In its first year, Taylor’s Brewing Corporation acquired 10 breweries accounting for 20% of beer sales in Ontario. By 1937, BCO was renamed Canadian Breweries Ltd. (CBL), and Taylor’s deals extended beyond Ontario to the rest of Canada.
Brewers Retail
In September 1939, Taylor spoke to a meeting of the Brewers Warehousing Company. War had just been declared, which afforded Taylor the perfect opportunity to argue for eliminating unnecessary selling expenses to achieve lower beer prices. Taylor proposed that brewers buy out retailers, leaving all sales and distribution in the hands of the brewers, significantly increasing their profit margins. As a brewers-owned collective, members would see an increase in sales volume and also more taxes to support the war effort. The brewers agreed and in 1940, they bought out the retailers, taking over sales and distribution, changing their name to Brewers Retail Inc.
A Monopoly on Beer
Taylor changed the brewing industry focusing on large-scale brewing, consolidating production and shutting down breweries for greater efficiency. By the 1950s, the company had reduced the number of beer brands from about one hundred to six. Canadian Breweries Limited grew to be the world’s largest brewing company, resulting from the merger of more than 20 other small breweries.
With the overwhelming financial success of Taylor’s business model, Labatt and Molson decided to get into the consolidation game too. By 1965, the “Big Three” – Canadian Breweries, Labatt and Molson – produced nearly 95% of all the beer sold in Canada, with the notable exceptions of the Maritimes and Northern Ontario, as regions that continued to support local breweries. These postwar acquisitions resulted in an oligopoly that completely transformed the market structure of the Canadian brewing industry. The Big Three streamlined operations, producing a small number of national brands with mass appeal, virtually eliminating local and unique craft brews.
Of course, this is not the end of the story. It’s barely the beginning. Stay thirsty and stay tuned for part two on The Beer Store.
(Leah is a Toronto based freelance writer as well as the Beer Boss and a server at C’est What)