The look at the LCBO as it was formed coming out of prohibition was VERY interesting. I had no idea that the process of buying alcohol from 1929 to 1961 looked about as fun as going to a Ministry of Transportation office. I had no idea you had to own a permit to buy alcohol. I had no idea the clerk checked your previous purchases and could refuse you on the basis of a judgement call about your history. I had no idea they had an Interdiction List or "drunkard list" that a clerk or even a tipster could have you put on, that would see you blackballed from alcohol consumption (with the added benefit of more prejudice against First Nations people!)
It did a great job exposing some of the bureaucratic red tape that small Ontario vintners and distillers have to go through. Hell, there is even a complicated 9 step, up to 6 week long process for a distillery to sell alcohol directly (well, not that directly, as it turns out) to an individual or a business on a license or permit. The LCBO is a wasteful government monolith that can't decide if it wants to market alcohol or protect people from it. Don't get me wrong, I think that for the most part they do a good job, and they are a great boon to our provincial coffers; but this documentary sheds light on some of the things they can do better.
For example, I wondered for years why they do not use their considerable buying power to score the best wholesale price in the world. It is because their markups are set in stone as a percentage of what they paid wholesale, and begins with a predetermined retail price in mind. If they want to charge a certain price for a bottle of spirits, and the quoted wholesale price from a supplier is too low, the LCBO will ASK to pay a higher price. That's completely ridiculous. Having a set retail price target is well and good, however, they should be squeezing every last drop of value out of the business for the taxpayer. Hell, they even LIE about this happening on their corporate page:
As a result of the LCBO’s fixed mark-up structure, when LCBO buyers and suppliers discuss possible purchases, they focus on the product’s final retail price. The payment to the supplier for the products follows automatically from the application of the fixed mark-ups and other elements of the pricing structure (for example, freight costs and currency exchange rates if the purchase is in a foreign currency). As part of the agreement to purchase, the supplier must provide the final quote or cost to the LCBO, usually per case.
While the quote is derived from the agreed-upon retail selling price, suppliers occasionally make mistakes in the quote price due to changes in freight or currency rates or as a result of calculation errors. The LCBO’s practice had been to ask suppliers to correct any errors. Beginning in 2012, when suppliers provide a quote that is lower than that required to meet the agreed-upon retail price, the LCBO accepts the lower price. This encourages suppliers to be diligent in providing accurate quotes. If the price quoted is higher than that required to meet the agreed-upon retail price, the supplier is asked to provide a lower quote.
LCBO buyers make every effort to get the best products in each price band, whether for sub-$10 wines, or super-premium spirits. They review more than 50,000 submissions annually and negotiate with suppliers to make the best of these products available at good prices. The LCBO is an attractive customer for manufacturers and there is fierce competition for listings. As a result, suppliers frequently submit products to the LCBO at prices lower than those charged to other jurisdictions.Wow! That sounds like exactly what they should do! Take bids from companies the world over to peddle their wares, and don't take less than the best value for Ontarians! You know, instead of what they actually do.
Yes, the LCBO wastes taxpayer dollars on promotions and glossy magazines, makes it hard for small wineries and distilleries, and has ridiculous bureaucratic policies. That's great to know. I would feel that this was a great documentary and could be a driver for positive change if it ended here. After 42 minutes.
However, shortly after the 42 minute mark, this wonderful character makes his debut:
Yes, the section on TBS begins with, in narrator (and co-producer) Peter Lenardon's words
...Ontario's 87-year old, grumpy, smelly, grandaddy of government-sanctioned anti-competitive business practice: The Brewers' Retail Incorporated.
Well, I'm sure what's to follow is meticulously researched and a balanced look at a unique, somewhat flawed company and their practices. I mean, that's the only course after presenting a monocled foreign heel during an unbiased documentary, right?
Straight up? Nope.
Oh god, do I really have to slog through the last half hour of the film to point out all the ridiculous half-truths and lies about TBS? OK, I shall try to tackle a few.
-First off: Despite the president of TBS Ted Moroz being one of the most approachable heads of a company in Canada, and president and CEO of Canada's National Brewers (represents a collection of brewers in Canada, including the three owners of TBS) Jeff Newton being all over the media these days, they somehow didn't talk to anyone at TBS. All they say on the matter is a title card saying:
The Beer Store's media representative was "unavailable"
Yes, they actually put quotes around it. I'm sure plenty of effort was made. I mean, when you're doing a documentary about two organizations, it's best to not make any serious attempt speak to anyone from either of them. I hear that indie guy is available, though!
-This little burial starts by talking to two independent distillers about TBS. How that is better than talking to someone pulled off the street is beyond me. They talk about how sorry they feel for independent brewers in Ontario. They talk about how they may have it hard, but brewers have it worse. Bear in mind that a segment before, these same distillers were talking about things like a 140% markup applied to their wholesale price by the LCBO (also THEIR ONLY recourse for retail beyond their own distillery walls) and how you have to produce large quantities to even be profitable. Yet, THEY feel sorry for BREWERS. Truly, these men have the gift of empathy. They're like the poor and downtrodden Americans still voting Republican.
The LCBO sets prices based on their wholesale cost, jacks them way up, and can shut you out of any store for not selling enough or even on the manager's whim. TBS will charge a small brewer a one time fee to list in as many stores as they want to pay to enter, and let them sell their beer for any price of their choosing above the LCBO mandated floor. They will then charge them approximately $0.50 a litre to continue this process. In perpetuity. FOREVER. With all monies beyond that modest handling fee, government taxes/levies, and deposit going DIRECTLY to the brewer upon TBS receipt of the product.
The initial fee to enter the game aside, a small brewer will make back their listing fee from their cut, in an individual store, upon selling 25 six packs. Yes, I did some math. A small brewer producing under 200 hectolitres a year will net $9.21 per six pack sold at TBS if the sticker price is $13.25 (which they set themselves, by the way.) I don't know what the good folks at the Toronto Distillery Company think, but I think that a 70% margin returning to the manufacturer is pretty damn good, and not to be pitied.
-Jason Fisher of Indie Ale House gets his hard fought for camera time and immediately spouts misinformation like a sprinkler. Note: Indie Ale House says on their website that their on-site bottle shop sells out nearly every day. Also, they have never had any dealings with the LCBO or TBS, so they have no idea how the system works. Jason Fisher is the most devoutly outspoken critic of the current retail model, however, so by all means give him several minutes of camera time anyway.
He says that "Molson and Labatts" control the regulation, they contribute heavily to MPPs (what would he say if up against ALEC or Koch Industries?), and they own distribution (all brewers listing with TBS can use their distribution system at no extra charge, or do it themselves and get face-to-face in-store time and be able to monitor stock.) He also starts by saying:
We have a system that wouldn't stand any scrutiny of logical thought, but we can't really have any kind of conversation about it, because one side just throws up a bunch of nonsense.That's pretty rich. The majority of the nonsense in this conversation comes from journalists like Martin Regg Cohn and Lauren Strapagiel writing slanted columns. It comes from the OCSA making absolutely hilarious proclamations about the friend they'd be to craft brewers (70% margin friends, though?) when their current products all come from large corporations. It comes from paid off "academics" like Anidaya Sen straining to come to the same wrong conclusion over and over. TBS gets laughed at for a commercial where a disinterested convenience store clerk sells booze to kids, yet 56% of Toronto convenience stores sold tobacco to a 17 year old mystery shopper not too long ago. TBS provides the highest margins to craft brewers in the country, sells at the lowest tax adjusted price in the country, and has a record of responsibility that sees MADD, CAMH, and various police organizations providing their support. Which side is throwing up the nonsense, again?
-One more MAJOR point that I would like to throw up to be thoroughly refuted is the film's contention that non-owner brewers have to pay separate fees if they want to sell a 6, a 12, and 24 pack in TBS locations. This was in the Fraser Institute study from 2012 and seems to be gospel now, I suppose? TBS charges listing fees for access to their infrastructure, and to recoup expenses. It is not punitive, it is not to stifle competition. It is for an outsider paying for use of the TBS system and infrastructure that the 3 major brewers fund. Also, acting like 6, 12, and 24 packs are vastly different beasts speaks to an ignorance of the TBS sales model. TBS exclusively repacks smaller packages into larger package price points at the POS. This means that for ANY brewer, if they have LCBO approval for a price point, can sell 4 single cans as a 4 pack, 6 single cans as a 6 pack, 2x12 bottles as a 24 pack, and so on.
If a small brewer pays for a single 473mL can to enter the TBS system, if they get LCBO approval for price points, they can list as many iterations of repacks of their single can as they like. They are charged for JUST THE SINGLE CAN SKU. If a brewer lists a 6 pack bottle with TBS, they pay for the 6, and it can be sold as 12s, 18s, 24s, 30s, whatever they want. Why? TBS charges listing fees to access the system and for the space they take up. If they list only one physical SKU (like the 6 pack bottles or single can) THAT is what they are charged for. The physical thing occupying shelf space and warehouse space in a store paid for wholly by the "big three".
The LIE in this documentary makes it seem like microbrewers are charged THREE TIMES more than they actually are. I mean, yes, they will be charged that much if they insist on the TBS store of their choosing carrying 3 different physical SKUs, but that has only happened once ever, with Steam Whistle (who only brew one beer) and they only list 12 packs of bottles at nearly all outlets.
-There's another HUGE wave of misinformation spewed in this film in regards to per capita provincial revenue and where this purely hypothetical money despite different demographics goes. It has to do with how we "trail behind" Saksatchewan (but we get compared to Quebec when it comes time for "facts"? I'm confused how Sen and Lenardon/Wykes contorted their way into that logic) in per capita government revenue, but I'll save it for later. This deserves a takedown post all by itself.
Perfectly put.
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