The Decibel - Breaking up the ‘quasi-monopoly’ of beer in Ontario

Episode Date: June 3, 2024

Ontario Premier Doug Ford recently announced that beer and wine will soon be available for purchase in convenience stores and big-box stores across the province, fulfilling an election promise from 20...18. The controversy? This deal means that people will have greater access to alcohol — for better or worse — and it will cost taxpayers $225-million.Jeff Gray, one of The Globe’s Ontario politics reporter, outlines the policy, explains the cost, and what federal politics might have to do with it.Questions? Comments? Ideas? Email us at thedecibel@globeandmail.com

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Starting point is 00:00:00 After the May 2-4 long weekend, Ontario Premier Doug Ford walked up to a podium in front of shelves of brightly coloured cans of beer and bottles of wine. He announced that people will soon be able to buy alcohol in convenience stores in Ontario. It was just a few months ago that we were together talking about our plan to give people more choice and more convenience. When it comes to buying beer, cider, wine and other alcoholic beverages in Ontario. People are excited they're going to enjoy the same choice and convenience as other Canadians and other people right across the world. They're excited to hear that they're finally being treated as adults. This is a policy that was a long time coming. Premier Ford promised it back in 2018, when he was first running for office. However, this move is costing Ontario taxpayers $225 million.
Starting point is 00:01:04 So we're talking to Jeff Gray, one of the Globe's Ontario politics reporters. He'll explain this policy, the price tag, and what federal politics might have to do with it. I'm Mainika Ramanwelms, and this is The Decibel from the Globe and Mail. Jeff, great to have you here. Thanks for having me. To start, let's just break down the basics of this program. So what exactly is going to change? At the moment, if you want to buy beer in Ontario, your options are limited to the beer store, which a lot of people think it's a government entity, but in fact, it's owned by the big brewers, which used to be domestic companies, Molson's and Labatt's,
Starting point is 00:01:49 and now are two big foreign multinational companies control the beer store. You can also buy some beer from the province's LCBO stores. That's government owned. Government owned, Crown Corporation. And you can buy it in a limited number of grocery stores, 450 grocery stores. That came about because of a deal made by the previous liberal government of Kathleen Wynne in 2015. So once this change is in effect, then where will we be able to buy beer, cider, mixed drinks in Ontario? Pretty much anywhere. Convenience stores, including convenience stores that are at gas stations, big box stores, and an unlimited number of grocery stores. Okay. At least on paper. And when is this supposed to take effect then?
Starting point is 00:02:33 By September 5th, it's possible that there will be beer on the shelves of some convenience stores. Let's just put this in a wider context for a sec here, Jeff. Where does this place Ontario in terms of alcohol availability when we compare it to elsewhere in Canada? So like, be the third province in Canada to allow beer in corner stores. So you've got Newfoundland, you have Quebec, of course, Depp and Err, everybody loves the points of sale, and now we'll have more. We'll be among the top places where you can buy booze. So to do all of this, though, the Ontario government has to pay the beer store $225 million. I think this is one of the things that's really catching people's attention, right, Jeff? So why does the government have to pay this? So they're in a contract, and the current contract is what allowed them to expand into grocery stores. But it maintained the beer store's monopoly.
Starting point is 00:03:51 I kind of call it a quasi-monopoly because it's a monopoly on 12 and 24 packs of beer. And it was to expire in December 31st, 2025. The government came into office in 2018 promising to allow beer in corner stores and to do it like right now, like they were not talking about waiting for any contract to end or anything. And they, in fact, dispatched cabinet ministers to random corner stores on social media to say, where's the beer here and stuff like that. Hey, it's MPP Steve Clark. I'm here at Kittley Grocery and Service Centre in Toledo.
Starting point is 00:04:29 Wouldn't it be great on Friday afternoon if I could pick up a six-pack of beer, maybe some cold Ontario cider, maybe a cold bottle of wine for the weekend? Hi, I'm Lisa McLeod, the MPP for Nippian. I'm here today in Bell's Corners at our local variety store, and I'm telling you, we need to level the playing field. It's a beautiful Friday afternoon in Kitchener. Wouldn't it be great if I could just pop into the convenience store and grab some beers for the weekend or a couple of bottles of wine?
Starting point is 00:04:53 I mean, it was a campaign. It was a big part of their initial election campaign and afterward. But they clearly hadn't really gone over the fine print because this contract with the beer store was pretty ironclad. And if you wanted to break it and get out of it and put beer in corner stores, you would have to pay the beer store a ton of money. Sources told us we were talking about a billion dollars back then.
Starting point is 00:05:20 Wow. Because you'd be paying for all of the expenses that the beer store would then incur, all the lost revenue, all the severances for workers that were being let go. So then the Ford government passed legislation, but didn't enact it, that said retroactively, the beer store contract doesn't exist and we owe you nothing. Can they do that? Well, it's surprising people. They can do that on paper, but they did not enact that legislation. They kept that in a drawer and it eventually was dropped into the memory hole because the U.S. Chamber of Commerce and others came out publicly and said, that is not a great thing to do for business confidence
Starting point is 00:06:05 to break a giant contract with two of the largest alcohol companies in the world. And they basically put that idea away after talks with the beer store to do it some other way, basically broke down. Okay. Okay. So they decided not to do that back in 2018. Yes. Yeah.
Starting point is 00:06:22 Going to cost them a lot of money. So they didn't end up doing it then. Yeah. So, so how did, I guess, how do we get to where we are now? So they stopped talking about it for a while.
Starting point is 00:06:30 And then the contract is structured in a way that by last year, you had to say what you were going to do. You had to say, are we going to continue this contract or are we killing it? Because it would come up for renewing next December. Right. Because it's going to be done in December, 2020.
Starting point is 00:06:44 So they signaled their intention to the surprise of no one, It would come up for renewing next December. Right, because it's going to be done in December 2025. So they signaled their intention, to the surprise of no one, that they were going to kill the contract when it ends. Okay, so let me just kind of, I guess, go over the numbers here. So, okay, so back in 2018, it was going to cost them a billion dollars to break this contract. They decided maybe not a good idea this time. Now it is six years later. It's costing the government $225 million still to break this contract. They decided maybe not a good idea this time. Now it is six years later, it's costing the government 225 million still to break this contract. We know this money, I guess, is going to the beer store,
Starting point is 00:07:12 but what is it actually going towards, Jeff? So it's going to keep a minimum number of beer stores open during this kind of interim period before the contract expires. The government needs these beer stores to stay open for a couple of reasons. One is the beer store is a central component of the recycling system for all alcoholic beverage containers, including everything you buy not at the beer store from the LCBO.
Starting point is 00:07:39 So they need a transition period for that. And speaking of recycling, the grocery industry, the grocery stores are not happy that they're going to have to take empties back and refund, you know, just like you would at the beer store. Now, decades ago, they actually did take empties for soft drinks and they will be making more money supposedly on alcohol. So that's the trade off there. But they actually came out publicly against having to accept recycling. And there's been a number of years now where some grocery
Starting point is 00:08:08 stores, you mentioned 450 right across the province, have been able to sell beer and wine. How has that gone for them? Has that proved beneficial? There have been complaints about the structure of that whole system. Some of them have said it's not worth it. It comes with headaches. And so there definitely been rumblings about how they were not happy with the way the system was set up either. So the recycling factor is one reason that they felt they had to write this check. The other issue is the government
Starting point is 00:08:34 is obviously uncomfortable with the idea of many unionized beer store workers losing their jobs. And the contract stipulates that they need to keep 386 of their 400 and something stores open till July of next year. And 300 have to be open by the end of 2025. One can presume that there'll be more stores to close after the beer store's role is reduced. And so those were the two main reasons. But the money will be able to cover a whole range of expenses that the beer store will incur as a result of these changes.
Starting point is 00:09:14 So the worker pay benefits and so on for keeping stores open, lost revenue, basically anything except for the legal fees for drafting this new agreement, are eligible expenses for the beer store. The premier made a point of saying it's going to the workers, sort of, it's going to the beer store. There's no question about that. What would have happened if the government had waited until this contract was up, the contract between the beer store and the government is supposed to run out December 2025? What would have happened if they just waited until that point to make these changes? So the critics of the government say that they could have gotten away with not spending
Starting point is 00:09:52 this money. So they would not have had to spend $225 million. This is money for sure that is a result of breaking the contract. But they could have targeted the date for when the beer store deal ends and certainly gotten away with not having to write them this kind of a check. So what has Ford said about why it was worth the cost, why it was worth it to break that contract early and pay all of this money? In typical fashion, the answer is usually we're fulfilling our commitment. The finance minister made some
Starting point is 00:10:19 comments along the lines of this is to provide for an orderly transition to the new system. Critics say it's just a basically a bribe to an entity controlled by two of the largest alcohol beverage companies in the world who have enjoyed a hundred years of a monopoly in Ontario. So that obviously is a sticking point for a lot of people. We'll be right back. So I guess I'm still trying to understand, though, Jeff, why not just wait? Like what was so urgent to the government that they decided to break this contract, pay this money instead of just waiting and paying nothing? Well, one one theory is that they're looking at an early election. So Ontario has a law, apparently it doesn't mean anything, but it's a law that sets the date of the
Starting point is 00:11:11 election, which would be June 2026. Still two years away. Right. But there's a bunch of factors that might make the Ford government look at an early election. One is the problem of the federal election. Whenever that happens happens there's this strange almost perfect uh alternation of governments so with ontario ontarians tend to vote for the other party you know if there's a federal conservative government they tend to vote for somebody else if there's a federal liberal government we have a conservative if you look back through elections there's maybe only one think, where this pattern doesn't fit. So Ontario tends to balance out like that.
Starting point is 00:11:48 Right. So plus, if the federal conservatives win, Ford has been quite friendly with the Trudeau government, has benefited from money for health care and other things. Looking at the next guy, those checks might not be coming. And that makes governing Ontario more difficult. Also, right now, there's a new Ontario Liberal leader, Bonnie Crombie, the mayor of Mississauga.
Starting point is 00:12:13 She's still kind of getting, finding her feet, and the opposition otherwise is divided. The NDP is actually the official opposition. Their support seems to have stalled too. So there's some advantages there. Go now, and you've got a weak opposition of course david peterson who was premier and called an early election in 1990 would maybe advise against this because he ended up uh the voters were said why are you doing this
Starting point is 00:12:38 elections cost all this money and we don't need to have one now forget it and ontario ended up with an ndp premier Ray, in 1990. So this is a really important point, it sounds like, Jeff. So the idea is, of course, we have to have a federal election, we know, by fall 2025. So it sounds like Doug Ford thinks he has a better shot of being reelected if he goes before that federal election. That's the theory. That's the sort of speculation. Yeah. I mean, he's not said that out loud. He's just pointedly not committed on several occasions now in the last few days to having that election as scheduled in June 2026. You actually asked him about that at the press conference, did you not about
Starting point is 00:13:17 possibility of having an early election? Yes, well, he had been asked a couple different times at that same press conference, at least, and declined to confirm that he was going to go with the set date. And so then I asked him something along the lines of, well, you're clearly keeping morning. You've twice declined to rule out calling an early election. Can you talk a bit about why you're keeping your options open? Do you see an opportunity? The new Liberal leader is not established yet. You've had some attack ads that have been a success against her. Is this a timing thing? You want to keep your options open when they're weak? Well, again, I just want to get our agenda through. I want to continue building Ontario, creating more jobs that we never saw. Of course, this isn't the only alcohol-related policy that Doug Ford's government has championed, right?
Starting point is 00:14:16 Jeff, I think everyone in Ontario remembers that buck a beer promise during the campaign, which didn't really work out. And he's also allowed restaurants to sell alcoholic beverages on the go now. That happened during the campaign, which didn't really work out. And he's also allowed restaurants to sell alcoholic beverages on the go now that happened during the pandemic. I guess why so many big alcohol related policies? That is something the opposition always says, you know, this is a province where we have 2.5 million people without a family doctor. There's rural emergency rooms that are having to close or have limited hours because they don't have enough staff. And the government is focusing on this policy and has in the past faced a lot of
Starting point is 00:14:53 criticism for that. And in fact, when they brought in the current finance minister, Peter Bethlenfalvy, a lot of the talk about alcohol kind of went into the back cupboard. And I mean, some people point out that the premier actually doesn't drink. And I think, too, there's been a long push for Ontario to drop some of these post-prohibition era attitudes towards things like alcohol. I mean, we have legal cannabis stores in this province, right? The government must think this is a strategy that is going to, I guess, win them support or give something to their supporters. And they certainly promised it to the corner store business
Starting point is 00:15:33 who have been pushing for this for a long time. And they funded pro-Ford ads in 2018. Let's dig a little bit deeper into the money here, Jeff. We said the government said this is going to cost Ontario about $225 million. But I've also heard that the Ontario Liberals are saying the true cost is much higher. So what costs are the Liberals talking about? Okay, so this is like the crazy numbers problem. So the Liberals have come out and said this is a billion dollar booze boondoggle, booze doggle, really, they should have called it. Now, there is a another check that's going to be
Starting point is 00:16:14 written for the brewers that didn't get a lot of attention on the day this was announced and wasn't really explained. As part of the deal, the government is going to rebate these things called cost of service fees. Cost of service fees are, it's kind of a charge that the LCBO charges you to have your product on its shelves. As they transition to a new system, the LCBO is going to become the wholesaler for all alcoholic beverages. In the year and a half before the contract, the 10-year contract ends, before everything is wide open, they're going to write a check for all of these cost of service fees that they charge for this beer to be on retail shelves in other places, whatever places those are, the grocery stores that exist, more grocery stores that come online, and more corner stores. And they're going to rebate those fees back to the brewers.
Starting point is 00:17:08 So the amount, we're not quite sure. The liberals say it's going to be $375 million. We know it's $45 million a year now for 450 stores, but we don't actually know how many more stores are going to open and how much beer is going to be sold through that channel in the next year and a half. So the 225 is a base and it sounds like it's at least 45 more on top of that, maybe more. And probably more. That's for 450 stores.
Starting point is 00:17:39 So the question is how much beer sales migrate to other places, how many corner stores get their act together and get their licenses and how fast this thing rolls out and all the other logistical questions. The pricing regime is going to change, too. There'll be a variety of prices. This is interesting because that could actually affect consumers then and what you're getting your alcohol for. There'll be price competition. There'll still be a floor below which you can't go for public policy public health reasons okay so it sounds like bottom line because there's a lot of different factors here we could
Starting point is 00:18:09 add on some some money in different places but it's going to be more than the 225 million that the government is saying it might not be as high as the liberals are saying it might be closer to a billion might not be up there but it's going to be somewhere in the middle then right but of course the liberals also don't mention the LCBO under this whole system now is going to become the wholesaler. So even beer that's bought in some little corner store, there'll be revenue to the LCBO. This is interesting because I was going to ask you about kind of the fiscal responsibility of this policy, because if the LCBO kind of has the market right now, that's $2 billion a year in revenue for the provincial government from the LCBO.
Starting point is 00:18:48 Yeah, will they lose sales because of this move? Or is this actually going to be fiscally okay for the province? So the premier let slip this number that's an internal number. He said it was about a billion dollars that they're going to gain in revenue from being the sole wholesaler of alcohol. But that doesn't count what they're going to lose in sales in their stores. So everybody agrees there will be some sort of impact on sales in LCBO stores.
Starting point is 00:19:12 And the LCBO will still have a monopoly on hard liquor. Yes, yeah. That's not gonna change. Yeah, yeah, that stays. So Jeff, we've been talking about the accessibility of alcohol, right? This whole conversation has really been about that. But I guess I'm wondering about the impact that this could have on the medical or the mental health side of things, right?
Starting point is 00:19:31 Like we've done an episode about the new reduced alcohol recommendations. We talk more these days, right, about the negative effects of drinking alcohol. So where does this new policy stand in relation to that? Yeah, I mean, the medical people are pretty clear that if you make alcohol more accessible in more places, there'll be more alcohol purchased, more alcohol consumed, and more of the harmful effects from alcohol. We'll see more of that. Drunk driving, violence, health, all sorts of health problems. And so the Center for Addictions and Mental Health came out and said this will cause more alcohol-related deaths, a significant increase. KMH had numbers that there's 6,000 annual deaths in Ontario caused by drinking. So they'll say
Starting point is 00:20:15 that number is going to go up. Go up, yeah, for sure. That's what they say. Public health experts I talked to in the Association of Public Health said, health said yeah there's many many studies that show that if you make alcohol more convenient more easier to get your hands on that you'll have more people with drinking problems and emergency room visits health care system costs and the government when it announced this plan did say it was putting some more money into that kind of thing treatment and so on. But there's been lots of discussion about how the whole system for addiction and mental health, the wait times for treatment, the number of beds, all that stuff is not up to snuff now. Jeff, just to finish here, you've been covering Queen's Park since Doug Ford got into office.
Starting point is 00:21:02 I guess just big picture, what is this policy announcement and the fact he's making sure to deliver on this original campaign promise, what does this tell you about the state of the government here? Well, I think there's sort of a stereotype about beer and pickup trucks and all that kind of thing that's the kind of person, the kind of voter that people imagine that Doug Ford appeals to. I think there's some truth to to. I think there's some truth to that. I think there's also this problem that he has, which is that this was a promise they made loudly. It's a very concrete thing. It's not something to do with the economy or,
Starting point is 00:21:38 you know, job numbers. It's, you know, it's something that goes across the entire province and that everybody can see, right? It easily understandable he promised it six years ago i went to the corner store yesterday and guess what there's only uh iced tea i can't find any beer what is going on here right so that that is a problem and they obviously thought that the hit they would take from having to spend this money to get this thing going early with all the other considerations was worth it. I mean, it's populism in its purest form, isn't it? Yeah. Jeff, thank you so much for being here. Thanks for having me. That's it for today. I'm Maina Karaman-Wilms. Our intern is Aja Sauter. Our producers are
Starting point is 00:22:22 Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Adrian Cheung is our senior producer, and Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you tomorrow.

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