My comment in a Torontoist article
A Tale of Two Options: Selling Craft Beer in Ontario. Beyond here lies facts, culminating in the greatest truth of all: math.
Small Ontario brewers listing at TBS do far better than you think.
It's obviously a lot harder for brewers in other provinces, because they
have to go through the LCBO due to other provinces being viewed as
"imported" due to highly varying commodity taxes on production across
the country. "Imported" beer is domain of the LCBO and whatever markup
they choose to apply. Setting up shop in Ontario, sometimes by acquiring
an existing Ontario brewer (like Moosehead did to Niagara) is an easier
way in.
The Beer Store listing fee isn't designed to be a
barrier, it is isn't punitive, it isn't designed to squash the little
guy. TBS is operated on a cost-recovery basis. The TBS take of sales,
and all fees charged are supposed to cover overhead and operations. The
fee is for gaining access to a system that the owner brewers pay for.
All brewers pay in the system. Molson pays the most. That's because they
are tied for biggest owner, and paid for the best two spots in the
planogram for Canadian and Coors Light. The initial fee is seen as a
commitment from the brewer, and also for adding your beer to their
computer system and commitment to return your non-standard empty bottles
to you. The per store listing is for shelf space, warehouse space (for
full goods and empties), and taking advantage of all the things TBS
worries about so you don't have to. They pay the staff, for the lights,
for the security, for the refrigeration, etc. Also, they will take care
of wholesale distribution for you if you choose (or you may choose to do
it yourself to do store visits/have direct contact.) Just ship it to a
DC/Cross Dock and TBS will take care of all the stores you paid to get
into getting your product.
IN RETURN you get up to a 70% margin.
That's crazy, right? As I said before, TBS operates on a cost-recovery
basis. The "handling fee" for volume is TBS' ENTIRE TAKE from the
sticker price. You, the brewer, sets the sticker price (subject to LCBO
approval) and it breaks off into various pies. Deposit, HST, CDN excise
tax, ONT commodity tax, TBS handling fee, and your take.
Take, for example, a little brewer just starting out listing their 6 pack of 341 mL bottles at a sticker price of $13.25.
-Deposit comes out right away: $0.60 (leaving $12.65)
-Take out $1.46 for the 13% HST ($11.19)
-The
$0.15 per 341 mL refillable container Ontario commodity tax which works
out to $0.90 - NOTE: major brewers pay $0.32 for the same container
($10.29)
-The $0.03122 per L federal excise tax works out to $0.06 -
NOTE: excise tax ramps up by degrees of production. The big guys pay
TEN TIMES the rate of the smallest brewer. ($10.23)
-Then there's
that nasty TBS handling fee for, you know, actually, SELLING your beer
and providing the means by which it is able to be sold. That's an
outrageous $0.91 at the low end (which you are at since you are just
starting out)
That leaves us with $9.32 from that counter sale of
$13.25 going DIRECTLY back to the brewer. Actually, it was already
there, as TBS was billed the full retail price upon receipt of the beer,
but whatever. 70% margin goes right back to the brewer. That is
INSANELY high for any retail product. That is the basic deal you have in
store for you by listing at TBS. Choose your locations to list wisely,
and produce a desirable product. That ONE TIME ONLY listing fee is a dot
on the horizon as you expand, open newer and fancier locations, and buy
yourself all gold underpants.
You're welcome, craft brewers!
SUBSTANTIAL EDIT: A fellow commenter on the article pointed out that I missed the Ontario Beer Tax. I had never heard of it before in any of the discussion on the issue, but I verified its existence online. It's $0.2543/L for micros and $0.7542/L for macros. In this example, it works out to $0.52, leading to the small brewer now pocketing $8.80 from the sale (66% of the sticker price).
It also throws out of whack (and makes worse) the "Beer in Ontario is 44% tax" point. That's ANOTHER $6.17 of tax on a case of, say, 24 Bud Light bottles. That lowers the post tax proceeds to $11.50 on a case costing $31.55 ($33.95 after deposit). That is INSANE, if this Beer Tax thing is legit.
FINAL EDIT: It turns out that the Beer Tax was already included as part of the Commodity Tax (along with the Volume Tax and the Environmental Levy if it's applicable.) This is what I get for giving the benefit of the doubt to other people.
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