Beer Store profits $700M yearly from near monopoly, study finds

The Beer Store is reaping $700 million annually in "incremental profits" when compared to Quebec stores because of higher prices and the near-monopoly the foreign-owned retailer has in Ontario, a new economic study has concluded.

University of Waterloo economics professor Anindya Sen found the prices for a 24-bottle pack of beer at The Beer Store was $9.50 more or 27 per cent higher when compared to two major grocery stores in Quebec.

The average for a 24-pack of Molson Canadian, Coors Light, or Budweiser before tax was $25.95 in Quebec, and in The Beer Store it was $35.56.

"These findings aren't necessarily an argument to reduce beer prices, as there are arguments that higher prices play an important social policy role," said Sen, whose study was financially supported by the Ontario Convenience Stores Association.

The Beer Store is owned by the U.S.-based Molson Coors Brewing Company, Sapporo of Japan and Anheuser-Busch InBev of Belgium.

"[The study] raises the important question of whether through modernizing retailing the Ontario government could be benefiting more — and capturing more revenue — particularly in a period of large government deficits," said Sen.

Ontario Convenience Stores Association CEO Dave Bryans said the findings are a reminder of the much-needed discussion about Ontario's "outdated alcohol retailing system."

"We know that Ontario can expand alcohol retailing to more private retailers and still earn the revenue it now receives from the LCBO — and more," Bryans said.

"Adding private retailers, like convenience stores, who can work with the LCBO wholesale system would benefit the provincial government, and Ontarians would benefit from improved choice and convenience."

Canada's National Brewers president Jeff Newton disputed the study's conclusions and said "on a typical 24-pack, Quebec taxes are 35 per cent less than Ontario beer taxes," referencing an Ipsos Reid study published in June that compared Ontario beer prices to 90 locations in Quebec, Alberta, and British Columbia.

The Ipsos study found that Quebec beer prices would be 11 to 38 per cent more expensive than Ontario's if Quebec beer drinkers paid the same in taxes.

Newton said Quebec beer prices also do not include retail sales taxes while The Beer Store does calculate in those taxes.

"This error underestimates the price of Quebec beer by $3.90 per 24-pack," Newton said.

Ontario has been debating for some time whether to allow grocers and corner stores to sell alcohol.

In June, Mac's Convenience Stores said it would create 1,600 full-time jobs if its Ontario stores were allowed to sell beer, wine and spirits.

Over 200 rural convenience stores and grocers in the province currently sell beer, wine and spirits through the LCBO's agency store program.

In response to Mac's interests in selling alcohol, Ontario Finance Minister Charles Sousa would only say the government will "look at what's going to be in the best interests to the people of Ontario and to the province.

"It's prudent for us to always view opportunities should they be of net benefit to the province," Sousa said in June.