When the Ontario government unveiled legislation to tear up a liquor retail deal two and a half years ago, the major breweries reacted with fury, threatening to sue for a billion dollars.
After an initial flurry of negotiations, there has been little progress and minimal conversation between the government and Labatt and Molson-Coors on the future of the Master Framework Agreement, which gives The Beer Store an effective duopoly on beer sales in the province. The law, the People’s Choice and Fairness Act, was passed by the legislature but has yet to be proclaimed into law.
Could next year’s provincial elections and the impending expiry of the AMF in 2025, and COVID-induced changes – including door-to-door delivery and bottle stores – finally restart talks?
Both parties are urged to reach a deal as soon as possible, says Trevor Farrow, a professor at Osgoode Hall Law School at York University. On the one hand, there’s the price and the time, said Farrow, who was a corporate litigator before becoming a professor.
“Costly litigation and disputes are really expensive,” Farrow said.
Hear Josh Rubin discuss The Beer Store
The breweries, which together control 98% of The Beer Store, probably also know they have less influence as we approach 2025, Farrow said. The government, in turn, might want to use big changes to the alcohol retail system as a way to corner the votes.
“I think it would really be in the government’s best interest to get a deal, or part of a deal, before the next election,” Farrow said. “They could always point out the fact that they passed the law, but it is not in force.”
The Bringing Choice and Fairness to the People Act would have ended the AMF, allowing the government to expand beer and wine sales to convenience stores and any other retail outlet it wanted. The law has been passed, but has yet to be signed by the Lieutenant Governor. Elizabeth Dowdeswell, which effectively means it’s still not the law of the land.
Jordan St. John, editor-in-chief of The Growler, a magazine devoted to Ontario’s brewing scene, suspects Dowdeswell of not signing the law anytime soon. The entry into force of the legislation would give brewers a legal excuse to finally file their complaint.
“It will remain on the Lieutenant Governor’s desk until the end of time,” said St. John.
The government, St. John said, would have the upper hand if talks resumed with the brewers. He is not impressed with the dollar numbers thrown by the brewery’s sources in 2019 and the suggestions the government could give The Beer Store a guaranteed distribution deal in return for damage to their retail branch. .
“I don’t see Brewers having any leverage at all. I wouldn’t care if I was the government, ”said St. John. “After 2025, there could be beer and wine in every store in the province. “
The master framework agreement, which took effect in 2015, does exactly what the former government of Kathleen Wynne had hoped for, St. John said: serve as a thin spot to kill The Beer Store.
“Make no mistake, it was the end of the MFA game. And their retail operations are on a death spiral, ”said St. John. The Beer Store saw its share of the Ontario beer market fall by over 90 percent at its peak, to just 60 percent. It has also seen an increase in operating losses and a decline in the number of stores, a trend that has accelerated since the signing of the AMF.
In a joint statement, Molson-Coors and Labatt acknowledged that negotiations have stalled during the global COVID-19 pandemic.
“We have nothing new to share at the moment regarding the AMF’s negotiations with the government, which naturally came to a halt during the pandemic. We have been in contact with government officials in recent months to discuss issues related to COVID-19, ”the statement said.
A spokesperson for Ontario Finance Minister Peter Bethlenfalvy said the province has not had substantive discussions with breweries over the AMF since 2019, in part because of COVID. Still, spokeswoman Emily Hogeveen said the government has not stood idly by.
“In response to the pandemic, we have made changes to take-out and alcohol delivery for bars and restaurants, and last month we announced changes to allow local beer to be sold in markets. growers across the province, ”Hogeveen said.
If there is no deal and the AMF simply lapses, St. John suspects the brewers are trying to keep their distribution arm going. But even that will be an uphill battle.
“Sure, they could keep the distribution arm, but there would be competition. There are already, and by 2025 there will be more. There is no reason why the government should grant them any exclusivity. Brewers have no leverage, ”said St. John.
It could also mean, according to seasoned marketer Alan Middleton, that brewers might be inclined to drop the threat of a lawsuit and push the government to fully open the market.
“I think what they’re saying is, ‘Look, if we’re going to lose this duopoly, which has been a cash cow for us over the years, let’s at least buy our product from as many places as possible. . ‘”