Ontario to end Beer Store deal to allow beer in corner stores

TORONTO — Ontario plans to rip up an agreement with The Beer Store and the three brewers that own it to allow the sale of beer and wine in corner stores, but the retailer has already signalled it will fight the move in the courts.

The Progressive Conservatives tabled legislation May 27 that would terminate a 10-year contract with The Beer Store that was signed by the previous Liberal government. The deal permitted an expansion of beer and wine sales to hundreds of grocery stores.

Premier Doug Ford has repeatedly indicated he plans to broaden the sale of beer and wine to corner stores, but he has to break that agreement signed with Beer Store co-owners Molson, Labatt and Sleeman to do so. In explaining the move, Finance Minister Vic Fedeli said the current system is a monopoly that is a bad deal for consumers and businesses.

“The province’s current beer distribution system is owned by three global giants who were handed a sweetheart deal by the previous government, and who are more interested in protecting profits than providing convenience or choice for average people,” Fedeli said.

Scrapping the deal could trigger steep financial penalties, but the legislation contains provisions to nullify any such costs.

The Beer Store, however, suggested it was not willing to accept voiding any financial claims, saying it will fight the legislation through the courts.

“The government cannot extinguish our right to damages as outlined in the Master Framework Agreement,” president Ted Moroz said in a statement.

“It is critical to understand that The Beer Store has, in good faith, based on a legally negotiated 10-year operating agreement with the province of Ontario, invested more than $100 million to modernize its stores and to continue to upgrade the consumer experience.”

The Beer Store’s lawyers sent a letter to the attorney general, saying they reserve the right to start litigation challenging the bill and seek compensation.

“The bill is unconstitutional and constitutes misfeasance in public office by certain ministers and officials involved,” they write.

When the brewers signed the deal in 2015 they also agreed to spend approximately $100 million on capital investments in Beer Store locations, to freeze prices on most Labatt and Molson products for a year and were required to give more shelf space to small brewers.

The deal also allowed the Beer Store to keep the exclusive right to sell 24-packs and most 12-packs in the province, while grocery stores would only carry six-packs. The agreement also opened up ownership of The Beer Store to smaller breweries.

NDP finance critic Sandy Shaw said ripping up the deal sends a signal to businesses that government agreements are not worth the paper they’re written on.

The Beer Store and its union have been embarking on a public relations campaign to push back against having beer in corner stores, with the brewers taking out an ad saying they keep prices down with their distribution system, and the union taking out ads warning that cancelling the Beer Store’s deal could hit taxpayers hard.

The United Food and Commercial Workers local representing Beer Store employees said that the government’s decision could cost thousands of jobs.

“We will fight this government and this premier to keep our jobs and to save the taxpayers the billions Ford is willing to pay to put beer in corner stores,” president John Nock said in a statement.

On May 24, the province’s special adviser on alcohol delivered a report to Fedeli on ways to improve consumer choice and convenience.

Asked about the short turnaround time between the report being completed and the legislation being tabled, Fedeli said he had always been working on all options.

The Tories have also announced a number of loosened alcohol restrictions, including allowing alcohol to be served at 9 a.m., seven days a week, letting people consume booze in parks, and legalizing tailgating parties near sports events.

Interim Liberal Leader John Fraser said the government has an obsession with alcohol.

“There’s six more years left on this deal,” he said. “What’s the hurry? Why not negotiate a transition to get to where you want to? There’s a whole bunch of things that are way more important in Ontario right now than beer and wine in corner stores.”

The Canadian Federation of Independent Business and Retail Council of Canada applauded the legislation.

– with files from Shawn Jeffords.