A Sweet Secret Deal – 2000 Framework Agreement
(The third and final instalment of the history of The Beer Store – to date)
In 2014, Martin Regg Cohn, a political columnist for the Toronto Star, revealed the secret sweetheart deal reached between privately-owned The Beer Store (TBS) and the crown-operated LCBO. The once-clandestine deal signed June 1, 2000, reveals an agreement of non-competition, to protect The Beer Store’s retail monopoly. As part of the agreement, the LCBO was prohibited from selling beer to bars and restaurants if the same product was available through TBS.
With virtually no competition on licensee beer sales, The Beer Store’s big brewers were given license to flex their market muscle, often setting prices higher than prices charged at their retail stores. The LCBO was only permitted to sell beer in singles or 6-packs, denying consumers the cost saving on bulk purchases of 12 and 24-packs that account for significant portion of retail beer sales.
Why would the LCBO enter an agreement that so clearly benefitted a privately-owned business over a publicly-funded one? According to former CEO and LCBO chair Andy Brandt, the Ontario Conservatives led by Mike Harris, were under intense pressure from the Beer Store, who had made generous political contributions as well as donating a few complimentary kegs.
Master Framework Agreement
In 2015, the Ontario Liberals, led by Kathleen Wynne, entered into a 10-year agreement with the Beer Store to address the unfair monopoly and lack of competition in the alcohol marketplace. Ontario Beer sales were expanded to include 450 grocery stores across the province, with the LCBO as its exclusive wholesaler. Under this new contract, The Beer Store agreed to spend $100 million to update their stores, widely criticized for being outdated.
Prior to 2015, customers had no options for browsing, making their selections from a posted list of beer labels, where big brewers could easily market their own brands, highlighting their preferred choices through top 10 lists, ice cold summer faves, etc. As part of the new agreement, The Beer Store was required to enhance the overall customer experience by offering open concept/self-serve at its new locations, giving visibility to all available beer brands.
In spite of the new agreement, The Beer Store retained its exclusive wholesaling rights on beer sales to bars and restaurants. The sale of 12 and 24 packs of beer, accounting for vast majority of retail beer sales, largely remained in The Beer’s Store’s control, with 60 LCBOs, roughly 9% of stores, now permitted to sell 12 packs.
End of the MFA & Early Implementation Agreement
In May 2024, Doug Ford announced the end of the MFA contract, originally set to expire January 1, 2026, hastily fast tracking the expansion of alcohol sales to grocery stores and corner stores across Ontario.
Although many Ontarians support the move to a more open marketplace, the penalty for premature termination is projected to cost Ontario taxpayers an additional $612 million, of which $225 million to be paid to the Beer Store.
The massive TBS payout is, in part, intended to provide industry support for its retail outlets to remain open through 2025. As part of an interim agreement, The Beer Store will keep 386 outlets open until July 1, 2025 and 300 through the end of the year. Beyond 2025, there’s no mandate to keep stores open.
Expansion of Alcohol Marketplace in Ontario
From October 31, 2024, big box, grocery and convenience stores across the province are allowed to sell beer, cider, wine and ready-to-drink alcoholic beverages. During the transition period through 2025, The Beer Store will continue its role as exclusive wholesaler of beer to bars, restaurants and southern LCBO convenience outlets, while the LCBO will be the wholesaler to all new retailers. Beginning in 2026, the LCBO will become the exclusive wholesaler for alcoholic beverages to all retailers, bars and restaurants across Ontario.
Provincial government estimates suggest that there could be over 8,500 retail outlets selling alcohol within the new open market system. According a 2024 report from Ontario’s Ministry of Finance, the Beer Store’s share in Ontario’s alcohol market is expected to plunge from 41.1% in 2024, to 15% by 2026-27, while LCBO share is forecasted to grow to 77.1% from 51.2%, largely as a result of its growing role as a wholesaler to retail outlets.
While The Beer Store’s retail presence is rapidly declining, there are a couple of key areas where the company may continue to thrive. Until at least 2031, TBS will remain as the primary distributor of beer to all retailers, restaurants and bars – a well-established system run through a vast network of distribution centers. In addition to their distribution agreement, TBS has also renewed a 5-year contract with Ontario Deposit Return Program (ODRP) to manage the collection and recycling of all alcohol containers. ODRP is a significant source of TBS revenue and is a key initiative for waste reduction in Ontario.
The story of The Beer Store is still unfolding. Will the future of The Beer Store lie in its retail distribution and recycling initiatives? Only time will tell.
(Leah is a Toronto based freelance writer as well as the Beer Boss and a server at C’est What)