This morning, The Beer Store released a proposal to “open up ownership” of the beer retail chain (owned by Molson Coors, Labatt’s and Sleeman’s, each of whom is in turn owned by a foreign entity) to all microbreweries in the province, offering them “preferred shares” and lowering some of the fees that breweries have to pay to get their beers sold in The Beer Store outlets.
But Gary McMullen, president and founder of Muskoka Brewery—one of the largest microbreweries in Ontario—says craft brewers were not informed or consulted on this process.
The new proposal is nothing more than “a Hail Mary plan to try to hold onto something that The Beer Store owners are losing their grip on," says McMullen.
One major complaint of small breweries about the Beer Store system is the high cost of listing a product with the chain. Under the current operation, brewers must pay a “Base Fee” of $2880 for each product they’d like to sell, and then pay another fee to every store that they want to carry that product—$230 to the first 233 stores, and $54. to any remaining in the Beer Store’s 456-store chain.
The Beer Store’s new proposal offers to waive the base fee on two products, and give each brewery free listing fees in the five stores nearest to their brewery.
“Throwing out five free listings is completely tokenist,” says McMullen. “By doing so, The Beer Store is trying to split up small brewers.”
Indeed, offering a lower listing fee and a preferred share—which gives every brewery a right to vote in Board elections—might just be the carrot-and-stick approach needed to win over some upstart breweries who are desperate to get their flagship products in front of more consumers.
The other big offering in the Beer Store proposal is to give each brewery a piece of the pie through “Preferred Shares,” either “Class E”, for $1000 or “Class F” for $100 each, depending on the brewery’s size. The share grants the owner the right to vote at the Board of Directors elections, access to financial reporting, and in the case of the Class E share, a portion of capital gains.
While the new “owners” can vote for who sits on the Board, the new structure will remain dominated by the Beer Store’s majority owners, Labatt, Molson Coors and Sleeman’s. Together the three owners will have 14 seats compared to three reserved for all other breweries.
“One preferred share won’t even get you a muffin at the table at the Annual Meeting,” says McMullen, shrugging off the offering.
McMullen says The Beer Store has invited all breweries to a conference call at 8 p.m. tonight, so they can “listen in on what the opportunity is.”
The proposal comes on the heels of weeks of sustained media pressure and Premier Kathleen Wynne’s promise to reform The Beer Store by this spring, after a report by The Toronto Star releasing a secret agreement between the LCBO and The Beer Store that outlines a promise by the LCBO not to sell anything larger than a six-pack, making The Beer Store the only outlet for 12 and 24-packs.
“This proposal is a move by the Beer Store and its owners to try to take the agenda back,” says McMullen.
“We’re not going to engage with them on this consultation. From Muskoka’s perspective it’s nefarious and more of the same. How could you possibly contemplate working together with people in good faith when they sideswipe you with something as large as this?” he asks.
As for an official reaction from the Ontario Craft Brewers Association—their official comment so far, is "no comment," (see below). But hopefully we'll here more in the next couple of days after the conference call that Beer Store President, Ted Moroz, invited craft brewers to come in on last night.
Official OCB response:
"The announcement today by The Beer Store regarding opening ownership to Ontario's small brewers came as a complete surprise to our members," said Cam Heaps, Chairman of Ontario Craft Brewers.
“It certainly does not address our major issue of improving access for consumers. Before we can comment, we need more information; we have a lot of questions."
Heaps pointed out that there is a Government process in place regarding beer distribution in Ontario and the OCB wants to continue to work within that process.
"Our goal continues to be fundamental change to Ontario's beer distribution channels that will result in a doubling or tripling of the jobs currently created by the craft brewers as well as the ability to reach our full share of market potential," said Heaps.
"We were not consulted on any of this and as such, we just do not have enough information to comment right now. It is as simple as that."