Boom or bust? Beer and wine in convenience stores
Updated: Aug 12, 2019
Doug Ford’s Ontario Government has made selling beer and wine in convenience stores a policy priority. A recent twitter blitz has highlighted that we can expect changes soon. While I am generally in favour, I am puzzled as to why it is being prioritized and touted as a significant policy initiative. Perhaps I underestimate the value that Ontarions put on access to beer and wine - it may be a significant vote getter. However, I do not think there has been enough discussion as to what the implications are.
Beer and wine in convenience stores will improve access. “Choice” is touted as an important reason for expanding access. Convenience stores are likely to provide consumers with more choice as to where to buy beer, but not more choice of beers. This is likely bad news for smaller craft breweries in Ontario. Convenience stores generally have a small footprint where shelf and fridge space is at a premium. There simply won’t be the space to have the range of choice available at the LCBO or the Beer Store. Managers will focus on a smaller selection of high volume brands, which clearly favours the major brewers. The large brewers will also have the ability to provide promotional support such as fridges, which could block out smaller brewers. While the Ontario Convenience Stores Association (OSCA) does pledge to dedicate 30% of beer retail space to craft beer, the reality of sales will drive space allocation.
Distribution will also be a challenge. Smaller brewers will face higher costs associated with bringing small volumes to many different small retailers - it will be hard to drop off a case or two at a single store. There may be one or two choices at an individual store, but certainly not the range of choices available currently in the beer store or the LCBO. I would expect that this improved access will hurt the craft market. Ontario’s small local craft breweries have amongst the highest share of the provincial beer market in Canada and have been supported by previous provincial policy. The government touts the support of small independent business owners in convenience stores but is silent on the microbreweries. The same issues will arise for the smaller Ontario wineries.
The next question might be “If this means more share for big breweries, why is the Beer Store (which is owned by the big brewers) fighting this?”. Beer sold in convenience and grocery stores will ultimately generate less margin for the big brewers. They currently share the profits from the Beer Store, but would lose the retail margins through this other channel. If volume at the Beer Store goes down as convenience store and grocery chains gain market share, profitability will be hurt as overhead will be spread over a smaller volume of product. I expect large grocery stores will also want to use their own distribution for beer and wine, which will take volume out of the Beer Store distribution network which increases the cost per case. The Beer Stores are no great friend of the craft industry, they had to be forced to carry these products in the early days, but they do sell them. The LCBO has made craft brews a priority and offer a wide range of choices.
There are some other considerations in this change. We may end up seeing more beer bottles and cans in the blue box rather than being returned to the Beer Store. We currently have a high return rate but this is likely supported by use of Beer Stores for purchases. If Beer Store purchases go down, the convenience of return goes down. That means that even if glass is recycled, the bottles are not always reused. This increases the environmental impact and also the cost of beer production as more bottles need to be purchased.
There are also questions about access. A larger range of choice means a greater possibility for an underaged or inebriated consumer to buy alcohol. That is not to disparage convenience stores, but more outlets means more options for finding a willing seller. The OCSA did a study that suggested that it was easier for an underage consumer to buy beer or wine at the LCBO or the Beer Store than it was to buy cigarettes at a convenience store. Although the details of that study are not readily available, inspections by Public Health Ontario suggest that convenience stores deny sales of tobacco products to those under 19 96.2% of the time.
The sale of beer and wine in Ontario convenience stores and the expansion of sales in grocery stores is coming. While it means a greater choice of retail locations for consumers, its less clear that the new locations will offer the same range of choice that the current locations do.
Recommended citation format: von Massow, M. “Boom or Bust? Beer and wine in convenience stores”. Food Focus Guelph (33), Department of Food, Agricultural and Resource Economics, University of Guelph, June 10th, 2019.