Deal may be brewing

Agreement governing the Beer Store, which is in decline, will end in 2025

When the Ontario government unveiled legislation to rip up an alcohol-retailing agreement two and a half years ago, big breweries responded furiously, 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 over the future of the Master Framework Agreement, which gives the Beer Store an effective duopoly over beer sales in the province. The legislation, the Bringing Choice and Fairness to the People Act, has been passed by the legislature, but still hasn’t been signed into law.

Could next year’s provincial election and the looming expiry of the MFA in 2025, and changes prompted by COVID — including home delivery and bottle shops — finally kickstart talks again?

There are incentives for both sides to get a deal done sooner rather than later, says Trevor Farrow, a professor at York University’s Osgoode Hall Law School. For one thing, there’s the price and time, said Farrow, who was a corporate litigator before becoming a professor.

“Big-ticket litigation and disputes are really costly,” Farrow said.

The breweries, which together control 98 per cent of the Beer Store, also likely know they have less leverage the closer it gets to 2025, Farrow said. The government, in turn, might want to use big change to the alcohol retail system as a vote grabber.

“I think it would be really strongly within the government’s interest to get a deal done, or the framework for a deal done in advance of the next election,” said Farrow. “They could still point to the fact they got the legislation passed, but it’s not in force.”

The Bringing Choice and Fairness to the People Act would have ended the MFA, allowing the government to expand beer and wine sales to corner stores and any other retail outlets it wanted to. The act was passed, but still hasn’t been signed by Lt.-Gov. Elizabeth Dowdeswell, meaning, effectively, that it still isn’t the law of the land.

Jordan St. John, editor of the Growler, a magazine devoted to Ontario’s beer scene, suspects Dowdeswell won’t be signing the legislation any time soon. Having the legislation come into effect would give the brewers a legal excuse to finally file their lawsuit.

“It’s going to sit on the lieutenantgovernor’s desk until the end of time,” said St. John. The government, says St. John, would hold the upper hand if talks resume with the brewers. He’s unimpressed by the dollar figures thrown about by brewery sources in 2019, and by suggestions the government could give the Beer Store a guaranteed distribution contract in exchange for the damage to their retail arm.

“I don’t see the brewers having any leverage at all. I wouldn’t give them a damned thing if I were the government,” St. John said. “After 2025, there could be beer and wine in every single store in the province.”

The Master Framework Agreement, which came into force in 2015, is doing just what the former government of Kathleen Wynne had hoped, said St. John: Serving as the thin end of the wedge to kill the Beer Store.

“Make no mistake about it: That was the end game of the MFA. And their retail operations are in a death spiral,” said St. John.

The Beer Store has seen its share of the Ontario beer market drop from more than 90 per cent at its peak, to barely 60 per cent. It has also seen ballooning operating losses and falling store counts, a trend that has sped up since the MFA was signed.

In a joint statement, MolsonCoors and Labatt acknowledged the negotiations have stopped during the global COVID-19 pandemic.

“We have nothing new to share at this time regarding MFA negotiations with the government, which have understandably been paused during the pandemic. We have been in contact with government officials in recent months to discuss COVID-19 related issues,” the statement read.

A spokesperson for Ontario Finance Minister Peter Bethlenfalvy said the province hasn’t had any substantive discussions with the breweries about the MFA since 2019, partly because of COVID. Still, spokesperson Emily Hogeveen said the government hasn’t been sitting on its hands.

“In response to the pandemic we have made changes to alcohol takeout and delivery for bars and restaurants, and just last month announced changes to allow for local beer to be sold in farmers’ markets across the province,” Hogeveen said.