Yesterday afternoon, Ontario Minister of Finance, Charles Sousa, said contrary to a Toronto Star report, Ontario grocery stores won’t face “significant restrictions” on the amount of beer they can sell. But it appears Queen’s Park is considering other ways to control Ontarian’s access to beer.

Those measures could include charging a $100,000 annual licensing fee to grocery stores for the privilege of selling beer, and mandating the percentages and possibly brands, of craft and commercial beer that each store can sell.

That’s according to Christy McMullen who sits on the Board of Directors for the Canadian Federation of Independent Grocers (CFIG).  Christy spoke to me after Minister Sousa refuted yesterday’s Toronto Star  report, which claims the government planned to limit grocery store sales to 300 six-packs a day per store. Yesterday afternoon, she received an email from a CFIG executive saying the government would take things a step further and that there will be no sales quotas for the stores. The email may have been referring to the Star’s follow-up story published last night that grocers can pay a 1% penalty on the cost of beer sold over the cap.

I asked the CFIG’s Vice President, Gary Sands, for confirmation but he wrote in an email that he “signed a non-disclosure agreement,” and “could not disclose details of the negotiations until the announcement is made.”

But red tape and restrictions have turned Christy and her brother Brad, who manage their family-owned Summerhill Market, two independent grocery stores in Toronto, off the idea of selling suds.

“Initially we were hot to trot on the idea of selling high-end beer at our store,” says Brad. “But we cooled our jets when we looked behind the curtain and saw a lot of legislation, a lot of rules and probably not a lot of profit.”

“Early on in the talks, we were told that the LCBO might limit what products grocery stores could list,” says Christy. “They proposed that each store has to carry a certain product mix —— a certain percentage of name

[commercial] brands, and a certain percentage of craft beer brands. So if you wanted to carry all commercial beers, you couldn’t do that or if you wanted to have all craft, you couldn’t do that.”

“There was also talk about having to pay for the license every year, and at one point it was around $100,000,” says Christy. “ It doesn’t make sense to have to pay to sell a product at a low margin.”

Brad McMullen says they decided against selling beer at Summerhill Market stores because they didn’t want to give away valuable square footage to a product that’s legislated so heavily by the government.

“Our experience with lottery tickets is that the government doesn’t allow you to make any money on them —— it’s all push and no give,” says Brad. “It’s no surprise they’re going to charge an exorbitant fee and get suckers to pay and do all the work for fear of missing out —— and they’re like, “Congrats! You have beer!”

Beer Grocery Stores

Lottery a no-win situation for small grocers

But the choice to carry beer, isn’t something Summerhill market can completely control; the only way one of the province’s 1500 grocery stores can win the right to sell beer is by winning one of 450 spots in a government-run lottery. 

Christy thinks that system is “ridiculous.” “If you’re going to let people sell beer, let the proprietor choose if they are going to sell or not.” Brad also wondered how the lottery would work in practice. “Is it going to be a true lottery? What happens if one town wins all the lottery spaces and another gets none? How are they going to deal with that?” 

The McMullens also foresaw a host of other challenges that could keep small, independent grocers from stocking beer. Retailers might be forced to rope off sections of the store outside of allowable liquor-sale hours. They might have to fire younger staff and student workers to comply with the 18-year-old age minimum to sell alcohol in Ontario. 

But by opting out, or failing to secure one of the 450 licenses, grocery stores are opening themselves up to new vulnerabilities.

“Carrying beer in your store is a huge competitive advantage,” says Christy. “We serve a niche market, so things are a bit different for us. But for small grocers who are trying to compete with the bigger guys on price, if a chain store has beer and an independent store doesn’t —— then the chain store will have them beat on price, and then they’ll have beer on top of it.”

Another question grocers are pondering is how will the government define a grocery store. “Does WalMart qualify?” asks Christy. “Or what about convenience stores like Rabba (a CFIG member) or Mac’s Milk?

Queen’s Park, which unveiled the LCBO’s new “craft beer zones” this week, has indicated an announcement about a “revised beer framework agreement,” is just weeks away. But exactly which grocery stores will end up selling your suds will depend on what Queen’s Park has to offer.