beer-fullannefs-smallBy Anne Finlay-Stewart

A full two-page newspaper spread purporting to tell you "the facts" only confirms one. Someone has a lot of money and it is at risk.

Starting there, The Hub went for a look behind The Beer Store's latest campaign and its implications for our most local brewer.

Kathleen Wynne promised changes to the alcohol regulatory system when she ran for the leadership of the provincial Liberals, and as Premier she has appointed an advisory panel on the subject which has yet to produce its final recommendations. But the revelation of a controversial agreement between the LCBO and The Beer Store caused the latter to take some pre-emotive action, including a few small concessions and an extravagant ad buy to make them look huge.

Spencer Wareham, brewmaster and owner of local Kilannan Brewing Company since 2012, was as surprised as anyone at the Beer Store's latest announcement. He sells his traditional Altbier and four or more unique and seasonal offerings at his Rockford brewery store and truth be told, when you buy at the brewery both you and the brewer get the best value. A recent expansion of brewing capacity at Kilannan brought a need for more outlets selling higher volumes at inevitably lower profit margins.

Wareham's beers are now enjoyed at dozens of eating and drinking establishments, increasingly competing with emerging and established brands beyond Grey-Bruce. Kilannan six-packs (the only size the LCBO is allowed to sell according to their Beer Store agreement) are sold at ten LCBO stores. Wareham controls the selling price, but the LCBO tells him what they are willing to pay for the beer wholesale - essentially a take it or leave it proposition.

The Beer Store, on the other hand, charges an upfront fee of over $2800 - the ante just to get into the game. Then the brewer pays by the SKU - a great crossword-puzzle acronym for "stock keeping unit" - each product in each size having its own unique SKU. If Wareham were to enter that market today with the usual six-packs, dozens and cases of 24 for each of his five beers, that would be $3375. Not such a scary number until you realize that is the cost per store and there are 448 Beer Stores in Ontario, for a total investment of $1.5 million.

Wareham will likely accept The Beer Store's offer to waive the "ante" for brewers selling less than a million litres per year through their stores, and even remove the fee for two SKUs at the five Beer Stores closest to his Rockford brewery.
But the Ontario Craft Brewers, a group to which Wareham and 45 other independent brewers belong, has real doubts about the value of the rest of The Beer Store's offer. Touted as "ownership," the $100 Class F shares offered to Wareham and his small-volume colleagues would give them, collectively, one seat at the decision-making table that a dozen representatives of the "Big Three" already control.

The goals of the Ontario Craft Brewers (OCB) are improving consumer choice and access and doubling or tripling the 1000 direct jobs small brewers have created in the province.

They are looking for a real voice in potential innovation in the distribution system, not a faint echo in the giant warehouse that currently exists. One possible option is licensed craft beer stores, operated under "beverage alcohol" legislation by the people with the greatest interest and stake in their industry.

Announcements from Queen's Park are reportedly imminent. Expect a flurry of ads from The Beer Store. And stay with The Hub for the real story on the implications for you and your neighbours.

Anne Finlay-Stewart is Community Editor of www.owensoundhub.org.

Also see http://owensoundhub.org/news/919-owen-sound-the-in-and-outs-of-ontario-beer.html


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