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The Ties That Bind – How the BC Liberals Want to Limit Beer Choice

with 25 comments

It came to my attention yesterday that with respect to tied houses and related trade practices in British Columbia, the Liberal government intends to reduce current provincial regulations. For them, it isn’t a question of whether or not to do so; it is a matter of how much.

For those who do not know what a tied house is, this is the definition from the Liquor Control and Licensing Branch (LCLB) consultation paper that was recently circulated to some potential stakeholders:

A tied house is an establishment that has an association, financial or otherwise, with a liquor manufacturer or its agent that is likely to lead to its products being favoured.

What this means is that a pub that is owned or has some contractual arrangement with a brewery, may find itself obligated to sell beer from that brewery alone. As a result of the Liquor Inquiry Commission of 1952, this was made illegal due to the lack of competition that resulted from brewery consolidation. Those were the beer Dark Ages in Canada when “beer” was synonymous with mass-produced lager because that is all you could get. It took 32 years before craft brewing even resurfaced here!

With respect to regulatory changes currently being contemplated for tied houses in BC, the LCLB consultation paper offers the following three options:

  1. Total elimination of tied house prohibitions.
  2. Limits on the number of tied houses a corporate entity can own.
  3. Permit tied houses with “public interest restrictions.”

The options offered for related trade practices are:

  1. Elimination of all restrictions.
  2. Eliminate or reduce most restrictions.
  3. Streamline some policies and procedures.

Why is the Liberal government considering these at all? The consultation paper provides the following reasons:

  • The federal government already regulates business practices through the Competition Act.
  • The LCLB’s limited resources might be better spent on public safety priorities.
  • Inducements between suppliers and licensees are already quite common (even though they are illegal).
  • With 9,000 licensed establishments, it is unlikely a liquor supplier could adversely impact consumer choice.
  • The LCLB has approved a number of financial ties between liquor suppliers and licensees involving small wineries and bars.

It is instructive to also consider the remarks on this subject from Rich Coleman, BC Minister of Public Safety and Solicitor General, provided in the appendix of the consultation paper:

It was all about tied houses and things like that, where people would come in and offer: “You become a specific beer for the whole operation, and we’ll do this, this and this for you.” That would be called a tied house, and there was concern about those breweries coming in and owning the brewery as well as owning the retail.

The reality is that today the consumer has a number of choices that they want when they go into a licensed establishment, and so they do that.

The historical reasons for the policy are no longer very applicable. The rules don’t help us protect public safety, and experience has shown us that the rules are widely ignored and virtually impossible to enforce because of.

What role does Coleman see for his ministry in this area? Coleman said,

What we really want our people concentrating on is four things. We want them concentrating on four public safety issues with regards to enforcement of liquor. These are overservice to people, serving of people under-age, overcrowding in liquor establishments and the sale of illegal liquor. Those are the four priorities we want our people to be concentrating on.

We’ve always felt that as we modernize and we learned, prior to the Olympics and going through the Olympics, how we could handle these things with regards to the operation of liquor establishments, we can take this next step in modernization and still protect the public safety.

Now this may seem like a reasonable objective for the Ministry of Public Safety, but let us consider what the Liberal government is actually pushing for and if its case has merit.

The BC Libs say that the federal government already regulates business practices through the Competition Act. While it may be the case that there are relevant federal regulations, their actual enforcement is quite another thing. Considering the consolidation that has taken place in key industries such as banking, media, and telecommunications, we know this is a sick joke. Oligopoly is the name of the game, baby, and we all pay more because there isn’t much competition to speak of.

It is suggested that the LCLB’s limited resources would be better spent on public safety priorities, the four areas mentioned by Coleman above. Well, how much of a problem is over service, underage drinking, over crowding, and illegal liquor? More than the costs associated with tobacco? Why are resources limited? Is it because of Liberal tax cuts whose extent seems to be driven more by ideology than a reasoned assessment of necessity? And if these regulations seem out of place coming under the purview of public safety, why push to abolish them instead of seeking to place them in a more appropriate ministry?

The consultation paper offers that “inducements between suppliers and licensees are quite common. Given this, any deregulation may not lead to a significant change in actual business practices.”

So if you were wondering why so many places offer the same ten taps (if even that) of crap, now you know why. Because inducements for establishments to carry a particular beer portfolio are common, despite this being illegal. This is a concession by the provincial government that they (and, for that matter, the feds) are not enforcing anti-competitive trade regulations, the intent of which is to prevent the precise limitation of choice we have been experiencing. The only reason a chink in the armour has opened up is because of the many people working at the grass roots level to support our craft brewers. Enough people have become educated that they are dropping the monoculture of Wonder beer in droves for the spice of life that is the variety found in craft beer. This change is evident at liquor store tills, but it takes time for bars and pubs to come around because the inducement they accepted obligates them to continue selling whatever corn or rice juice they have chosen. The most effective way to push these establishments to change is by voting with your wallet. Don’t patronize places that celebrate swill!

How bad can this really be? According to the LCLB consultation paper, “there are over 9000 licensed establishments, including 5,600 restaurants.” Therefore, they assert, “It is unlikely that a liquor supplier(s) could purchase or induce a significant number of licensed establishments so as to adversely impact consumer choice.”

No shred of evidence is offered to back up that contention because it is standing on very thin ice. Those of us who enjoy our beer, know how mind-numbingly uniform is the pedestrian beer offering at the majority of these establishments, especially when you venture outside of Vancouver and Victoria. Perhaps our political elite think ten brands of suds is variety enough, regardless of who actually owns those brands and that the majority consist of generic, industrial lager. Is it a revelation that the top-selling brands happen to be the ones most heavily advertised? That the ones most heavily advertised are made by conglomerates with the deepest pockets? That the non-craft brewers garner over 86% of BC’s beer sales?

BC is only at the early stages of becoming a competitive beer market and the BC Liberals, it seems, want to kick the stool out from under it. How does allowing tied houses improve choice and competition for consumers? It doesn’t because it allows a corporation with sufficient financial muscle to legally lock out competitors. This is a very different set of circumstances from the final rationale offered in the LCLB’s consultation paper, that they have allowed a brewery or winery to have a tasting room that only serves its products — in essence, a tied house. This is a reasonable exception that hardly threatens to control choice and competition in BC’s 9,000 other licensed establishments.

In conclusion, it is clear to me that the case the Liberal government is presenting for the deregulation of tied houses and related trade practices is deeply flawed at best and spurious at worst. It has very little to do with public safety. To speak of it in such terms is offering a straw man.

I find it curious that the way the BC government approaches the brewing industry in our province is very different than our wineries. We can see from the latter that when small businesses are given the means to thrive without the threat of being undermined or shut out by dominant players, a vibrancy develops that is more beneficial to consumers. This is starting to happen in BC’s beer market with more people switching over to craft beer, spurring entrepreneurs to open new breweries and brewpubs. However, allow Anheuser-Busch InBev, SABMiller, Heineken, and Molson Coors the means to lock out competition, their insatiable appetite for greater profits would make them jump at the chance, even if it meant earning a mere wooden nickel.

If you don’t want to return to beer’s Dark Ages, you will need to actively support efforts to lobby the government because, as the LCLB consultation paper makes clear, the status quo is not an option for the Liberals. CAMRA is the organization that represents your interests when it comes to beer. If you aren’t currently a member, join today to help provide them with the means for protecting your rights. (See CAMRA Vancouver’s submission to the LCLB.) The best thing, is that you can enjoy a tasty brew while serving your community!

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25 Responses

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  1. […] This post was mentioned on Twitter by BCbrews, Chase LeBlanc. Chase LeBlanc said: RT @BCbrews: New blog post: The Ties That Bind – How the BC Liberals Want to Limit Beer Choice http://ht.ly/3XPop […]

  2. Great post Rick. I was eager to hear your thoughts on this.

    Frankly, I’m surprised that so many of the people (yourself included) that I thought would have a similar take on this to me, in fact don’t.

    I look at Portland where tied houses are common, and choice is plentiful. Rogue owns bars. Alex Ganum from Upright Brewing co-owns a small bar called “Grain and Gristle”. These establishments sell their own beer, but they sell other beers too. That isn’t possible here, for anyone. Big or small.

    While I respect the power of the big guys I’m very vocal that this can help small, passionate ‘grass roots’ beer people. Myself included. We don’t restrict vertical integration in most industries, and I don’t think it should be done here. I’m not afraid of the formation of an Oligopoly, as the barriers to entry aren’t anywhere as high as Telecom, or Banking. I also don’t think that every large brewery will want to enter the restaurant and bar business. They will try for exclusivity, though as they should. Most bars might go for it, but the market is thirsty (pun) for those that won’t bend to such inducements. Our mutual favourite hangouts prove this.

    I’m a small business owner, and I may face competition from the big guys as a result of this and I may lose accounts, but I want complete abolition of these Tied House rules.

    I believe it is possible for innovative small companies to thrive in this industry. I hope to prove it.

    I do agree that the “Public Safety” argument is bullshit, though!

    Adam Henderson

    February 16, 2011 at 3:54 pm

    • Thanks for your comments, Adam. From what I’ve come across, tied houses are illegal throughout the US. It sounds like the reason Rogue and the Grain and Gristle can exist is because they sell other breweries’ beers. Know if that is an OR government regulation?

      As a small business owner, I’m actually surprised that you accept tied houses because it means you can be locked out of an establishment and not be given the opportunity to compete on the merits of your product alone. Rather, your entry is based more on what inducement you can offer. That doesn’t sound like a free market to me. It sounds like the equivalent of a non-tariff barrier to trade. Historically, this was a problem, e.g. the need for regulation. What’s different this time?

      I don’t believe the current BC tied house regulations are holding back craft beer in any way. Rather, it is their lack of enforcement, as I’ve described above and what a number of brewers have told me directly. The difference we are seeing now is because consumers’ preferences are changing as their awareness of beer grows. The industrial brewers have not contributed to that one iota. If they had their way, there would only be one flavour of beer: ice cold.

      I respect your passion for your business, Adam, and I’m certain you would offer something innovative to the public. However, in an unregulated market, I don’t believe that is enough. There is enough of an historical precedent that shows oligopolies and monopolies choke off competition and reduce choice. I am fervently opposed to such a situation.

      BCbrews

      February 16, 2011 at 6:18 pm

  3. Reading this article caused my BS detector to go off the charts. There is no evidence to suggest that allowing breweries to control pubs and restaurants will improve public safety. This is the same argument our corporate-friendly government used when it introduced regulations that put a whole pile of small-scale organic farmers out of business in the B.C. interior. Guess who lobbied for that legislation? The big meat packers. Guess who’s behind “Tied Houses”? The big breweries. In the case of organic farmers, the new regs made a bunch of people outlaws, as our freezers are now full of meat stamped “not for sale / for personal consumption only”. I suppose the result of the current misguided, corporate-friendly legislation will be similar: I’ll be making more home brew, buying from bootleggers, and drinking in my garage instead of at the pub. You couldn’t make this stuff up if you tried. Get these fools out of office before they do any more damage!

    Library Dude

    February 16, 2011 at 5:31 pm

  4. I agree with the premise that the BC Liberal government has taken action to quash competition, but I don’t agree with the premise that de-regulation does that. The real question to me is why is the government involved at all when it comes to a discussion of selection.

    I am the buyer for a chain of privately held liquor stores and what you aren’t seeing is the structure of the system. At it’s core it is set up to re-inforce the power of the big boys. They do this through having different buying rules for the BC LDB stores vs all other licensees. Those rules include pricing, selection, distribution, and yes ‘inducements.

    On the subject of pricing. At present the LDB has a policy of a floor price for every category. This is sponsored by the big brands and serves not to reduce harm, but to limit competition. The big boys in wine, spirits and beer have figured out if the limit the price gap between call brands and ‘value’ brands you can not ony call yourself premium, but also limit competition from specific brewers or categories of brewers.

    The BCLDB, through the auspices of the Canadian Brewers Association, successfully petitioned the LDB to adopt a flat tax on beer. The result is that the LDB is more interested in moving volume because that is how they make more money. In the wine and spirits category they make exponentially more per bottle as the price of the bottle goes up. Why 86% national brands, because that is where the LDB makes their money.

    Did you know that the LDB requires ‘inducements’ to be paid to them. If a brand wants to be displayed in their stores, it is strongly recommended that they buy ad space in their magazine Taste. It costs $10,000 for a page and if you want big displays you need big ad buys. Again this re-inforces the leverage of the big boys and the BCLDB. By eliminating tied-house and trade practices, you spread the budgets around and reduce the negative influence of the LDB and yes that would mean certain pubs and stores would make it more difficult for craft brewers to compete, but the budgets won’t grow because of deregulation. In fact it is likely that the money spent per account would drop or the number of accounts that the money is spent on would stay the same. Coleman is right when he says that there are 9,000 licensees and it is not likely all, or even a majority of the licensees would receive money to curtail selection.

    If you want more selection and a healthier craft brewing market reduce the leverage of the LDB in the market. A drop in the 86% mark is a big deal to their dollars.

    Lastly brands like Budweiser, Canadian and Coors are comodities and are sold on price and advertising like Corn Flakes or Coca Cola. Craft beer is not a commodity. I know this by the fact that people are more interested in the ‘story’, people and idea of the brew than they are about the price. By definition Craft Brews are price elastic, where national brands are price inelastic.

    20 years ago wine only represent 10% of the volume of beverage alcohol sold in BC. Now it is approaches 35% and continues to trend up. This was done by emphasizing diversity and broaden the price bands and not by inducements. Craft beer today is where wine was 20 years ago. I want to see 60 IPA’s from 30 countries ranging in price from $5/650ml to $20/650ml. I want to see as many people coming into the stores asking what beer goes with dinner as I see today with wine.

    The BC Liberal government limits competition by having different rules for different people. Deregulating tied-houses and trade practices opens competition. Consider that right now I can not act as an agent/importer, but if tied-house regulation is eliminated I can. I can then source small batch brews, rums, brandy, vodka, wine here at home and abroad. I don’t have to wait to find out what the current importers have approved by the LDB.

    Sorry one last thing… don’t paint us private retailers with the same brush as the pub owner who doesn’t listen to his clientele. Our success will only come from jumping on demand as it goes up and reducing inventories on products that the demand is in decline. Every private retailer has their propostions and it seems that alot of the ones that support the craft brewers are making their living on providing a point of difference in terms of selection, service and product knowledge, and, yes price.

    Again, in conclusion, a level playing field is the best thing for the craft brewers of BC and the world. Limiting the leverage on the industry that the BCLDB has is a good thing. The government should not be making choices as to what is on tap in a particular pub. If you don’t like what’s on tap a particular pub, change pubs. Finally as attractive as a pile of cash from the big boys is, it doesn’t create a competitive advantage for anyone and competitive advantage is only thing that keeps profits growing.

    dorkuncorked

    February 16, 2011 at 6:36 pm

    • Thanks for your comments, dorkuncorked. I appreciate the greater issue at hand with the LDB system and I don’t disagree with you that they need to be removed from their current role of controlling the market. Nevertheless, I think you misunderstand what my post was directed at. It is specifically relating to a brewery being able to direct, compel, induce, or otherwise control the beer selection at a pub.

      A hospitality establishment that is not a brewery tap or winery tasting room should be able to freely choose whatever product they want to serve. Logically, that would be based on customer demand, amongst other things. How does allowing a brewery to limit a business’s product offering provide the consumer an advantage? How does not allowing a brewery to offer an inducement stifle competition when that is the intention of the inducement?

      When I say I am against deregulation, I am specifically referring to tied houses and trade practices related to them.

      As for the larger LDB system you describe, it most certainly needs to be dismantled. That, however, does not mean complete deregulation. I don’t think it is as simple as that.

      BCbrews

      February 16, 2011 at 10:08 pm

  5. An addendum…

    In the US craft brewing was easting the big boys lunch to the point where they had no answer. This was not done by inducements (BTW inducements are not the ticket entry into an establishment, nor would they every be anywhere that has more establishments than the big boys have budget). Rather it was done by quality brewing, word of mouth, retailers and pub owners looking for a competitive advantage.

    The cut into Coors and AB’s business was so significant that both went about buying 25% of the largest craft brewers in return for cash and access to their distributors. 25% is magic point at which a craft brewer would cease to a craft brewer in the eyse of the IRS.

    Today you can find Elysian, Stone, New Belgium, Rogue and Green Flash in every supermarket, gas station and corner store up and down the west coast. That only comes from having access to a giant’s distribution centre. Ask yourself how many mosquitoes does it take to get the attention of an elephant.

    dorkuncorked

    February 16, 2011 at 6:44 pm

    • When comparing the US with Canada, I think you need to take into consideration that it is a much larger market and they have a more entrepreneurial culture than here. As far as I know, tied houses are illegal there too, so this can’t be that great of a factor.

      The bigger issue, as you’ve pointed out, is how the system is rigged in favour of the big boys. When government gets into bed with corporations, the corruption that ensues is always a detriment to the people. Our province and our country is becoming increasingly corrupt. It now comes down to the vigilance of citizens acting in concert to return government to the proper hands.

      BCbrews

      February 16, 2011 at 10:19 pm

      • I agree with you. Republics are premised on maintaining trust in leaders, their offices and the the institutions that we pay for. Once that trust is lost, the first order of business should be to make the changes necessary to re-build that trust.

        dorkuncorked

        February 18, 2011 at 9:48 pm

      • Yeah, that is really important. There are regulations that can limit competition, and regulations that encourage competition.

        jablonowitz010

        June 9, 2011 at 11:35 pm

  6. Having read the document on the ‘Tied Houses’ I was surprised it was only raised recently via CAMRA/ Beer Community? Today is Feb 17th and even from Australia a response wouldn’t hit the desk of Barry Bieller by Feb 15th.

    The issue that was most alarming is the Liquor Board being aware of “Acecdotally, it is known that inducements between suppliers and licensees is quite common”(p.3). So they were aware of this ‘Tied’ issue already? In BC it means You buy 9 kegs and we’ll give you 1 free.. or we’ll help you setup your lines in exchange for our beer.

    As society we have become familier with ‘Stadia Beer’ and know its going to be from 2-3 brands, and this idea of restaurants and ‘normal’ bars is very much the same thing.

    The breweries are not going to get into the arena of buying bars and restaurants like occured in years past, but the ability to provide ‘inducements’ Legally is the aim. Remember with Macro Beer sales down, the only real power they have is lobbying.

    I would be interested in seeing the ‘Submissions’ from both large and small ‘Stakeholders’ to get a fair idea of how the decisions were made. CAMRA and the beer community as a whole should be emailing Barry Bieller and asking to be involved. Also asking local publicans for their viewpoints and getting them to make submissions for new laws such as this.

    6 weeks turn around time though for business stakeholders is very short.

    bierfesten

    February 16, 2011 at 7:21 pm

    • I think that you bring up a good point. I can not be sure of this but I have reason to believe that the groups asked for submissions were limited and hand chosen. As an example our chain of liquor stores is the second largest in terms of sales in the province (a prime target for inducements and such) and yet our input was not asked for. On the other hand the group called ABLE which represents about 1/2 of the LRS community in BC (but only 1/3 in revenue) was asked to submitt. The problem in BC is not the threat of tied houses or inducements, rather it is the fact that the rules of the game are different for every player. Until this gets fixed covert or overt inducements will be the order of the day because competition is not based on quality, selection, service, convenience or price.
      Under the current system Pub Owners would love to go back to the days of tied-houses for the simple fact that the money the big boys would provide would make up for the fact that they have to pay retail for their product. If they only had to pay wholesale then ‘inducements’ in this day and age would be competitive as well.

      dorkuncorked

      February 18, 2011 at 10:00 pm

  7. We have two ‘tied house’ topics.

    One – the wholesale to retail trade. This is a debate unto itself. This level of distribution needs to be changed dramatically.

    Two – The wholesale to bar trade. At best, in the macro world this is a sleazy business. This it the area the CAMRA BC response was directed towards.

    At this point, ‘silent contests where corvettes are won by bar managers’ and every tenth keg is left at the curb ‘accidentally’ or lines/tap systems are installed and paid for my a third party happen, but under the radar. Would opening this up completely change this? Nope. Instead we would likely see a value placed on a tap that would basically be stupid business (and yes, business is about the dollar) to refuse.

    It’s all about balance. Big brewers’ sales in dollars and volume are dropping. Their answer? Lobby to allow greater financial manipulation of the market. Greater. They already spend millions on advertising and they are still sliding. This change was not brought about because a few breweries can’t sell to pubs they may own, or to beer stores they may own, but because large corporate interests feel the need to use whatever means possible to stamp out competition.

    @Adam – Our mutual favourite hangouts prove this. Have a broader look. Craft beer taps are springing up all over the Lower Mainland. These taps are being brought in because there is a small margin of growth in this area. How much is this growth worth? Would a few thousand dollars of inducements legally offered change that? Given the cost difference between M-L kegs and craft brew kegs, I think it might.

    “Dorkuncorked – I don`know the wholesale to retail trade well enough to comment. Keen to learn more though.

    @Bierfesten – yes – CAMRA BC wants to be involved and has asked to be. 2-3 brands for Stadia beer? You lucky devil!

    Martin Williams

    February 16, 2011 at 10:52 pm

    • I think I am grasping what is being put out there. There seems to be an understanding that the growth in the Craft Brew business is because there is a place for these brews to be poured or bought. It is assumed that the reason to pour or retail craft beer is that it offers a slightly better margin than does the national brands. That is true especially when the national brand market is failing.
      Please do not take what I am about to say as an argument for tied houses in the pub/restaurant world, but I think we all need to give the pub owners, restauranteurs, and brewers a little more credit for having the guts to make decisions not solely based on the bottom line but also on quality. Quality always keeps people coming back, as does a selection of quality at the right price. Toys don’t. If the beers brewed by our craft brewers here in BC weren’t any good the pub owners would be forced to take the money/taps/toys from the big boys.
      I will leave you this. The ‘anecdotal’ evidence that inducements happen is pretty spot on, however what is not generally known is that at present the budgets for pubs and restaurants are 3-4x greater than those for retailers although retailers do 3-4x more volume.

      dorkuncorked

      February 18, 2011 at 10:10 pm

  8. […] The Ties That Bind – How the BC Liberals Want to Limit Beer Choice. OK, that’s fucking enough! I’m going to go and picket the convention. “We’re here! We’re beer! Get into it!” […]

  9. […] New BC Government Attempt To Limit Beer Choice.  If this proceeds, say hello to 1976 all over again, with nothing available to the consumer but fizzy yellow water made in a chemical factory […]

    Good Reads | hoplog

    February 18, 2011 at 12:21 am

  10. Please don’t overlook the fact that losing the tied house rule opens up opportunities for lots of smaller companies interested in brewing who cannot fathom the horrendous quagmire that is liquor control and licensing.

    Being able to sell your own product in a Food Primary licensed establishment would give some smaller producers the chance to capture their market directly rather than having to enter the cut throat world of draft sales.

    This could be very positive for the industry. Imagine a real small cottage brewery on a bicycle path with their own little food primary burger joint next door selling only the beer that they produce!

    Visions of Portland will surely appear.

    Please don’t get over zealous on focusing on the negatives.

    Give the Consumer a chance. Just because Molson owns a bunch of bars and pushes it’s own crap doesn’t mean a bunch of craft beer drinkers are going to convert. No! Nothing will change.

    Pickle CEO

    February 18, 2011 at 1:55 pm

    • I don’t see how my position on tied houses is not from the perspective of the consumer’s interest.

      As for your scenario, I am not against a brewery having a brewery tap, but that doesn’t offer much potential in the way of sales for a brewery. For a startup brewery, your best option is draught, bottles in restaurants, and LRSs. The reason why it is a tough market is because of inducements that are currently tolerated. Deregulating means inducements are no longer illegal and there is nothing to hold an establishment back from demanding even more of the same. I’d like to know how that makes it easier to get in the market.

      And you’re right, no matter what happens in the market, a craft beer drinker won’t drink industrial suds. It may, however, make it harder to get a good brew and spur a growth in home brewing. That’s not where the problem lies. The challenge is being able to reach the non-craft beer drinkers and make them aware of the fact that there is beer other than corn/rice lager or beer with honey.

      BCbrews

      February 18, 2011 at 2:09 pm

  11. If we are talking about a 10-15 hec brew system the biggest return for a cottage brewery is on in house tap sales.

    The ramp up time for micro breweries is very slow. They often run into cash flow problems, often as they become more successful.

    Bottling & kegging is very expensive.

    And I’ll tell you what, there are many micro breweries offering inducements from the moment they walk through your door.

    It’s the people who are running the restaurants and bars who need to change their ways. They are the ones accepting these gifts and being put in the pockets of whoever makes the offer.

    There are very few operators who turn these offers down and choose their beer options on simple criteria, “is it good, and how does it fit into my line up”?

    As a start up with your own outlet you don’t have to enter the dog fight.

    You can create your own demand and sustain yourself through on site sales in the process.

    Still sell your bottles in LRS’, still have draft beer available. But hey! Get this, if the beer is good, people will come to you. And nothing increases demand in beer world better than restricted supply (as long as the product is good!)

    thus creating slower growth. You don’t have to hit the ground running. You don’t need a sales force, you don’t need to compete with inducement offers. You create your own demand.

    Look at surgenor. They did not grow slowly. They went head to head with the big boys. Massive capacity brewery, not bad product, no other outlet options other than their keg & bottle sales. But no grass roots presense in the beginning. Now where are they??

    Now look at Deschutes. Massive craft brewery. Did they start with a big manufacturing plant. No. They started with a grass roots, very small production brew pub (bond street) with on sight sales, a restaurant and just their beer. Their great beer.

    The “brew pub” gave them the dollars and marketing momentum they needed to grow into a craft brewery that can challange those “big industrial suds” producers you are on a quest to challenge.

    The outcome, I’m sure would have been completely different, I’m sure, if they had not had the option of selling their OWN beer in establishments THEY own.

    You’ve already made up your mind. You HATE the tied house amnendments proposed.

    Me, I think you’re cutting your nose off to spite your face without realizing it.

    You don’t seem to want to hear any other arguments for it.

    I hope it goes through. I think it’s one more step towards making things easier for those hoping to start a craft brewery, a nano brewery, a brew pub whatever it may be.

    Do I think the laws are being changed to benefit small producers? HELL NO! Do I think with a little bit of resourcefulness and entrepreneurial creativity some Artisans with a passionate connection to the wonderful world of beer will be able to take advantage of the proposed changes? HELL YES!

    And in the end I think it will be a fantastic thing for you, me and everybody else who gives a shit about beer.

    And hey, if the beer is

    Pickle CEO

    February 19, 2011 at 9:45 am

    • Re. “You don’t seem to want to hear any other arguments for it.”

      I’m all ears. However, you haven’t made a strong enough argument to convince me it will be easier for a craft brewer to start up with tied houses being legal.

      You are absolutely correct about Surgenor, but look at Central City/Red Racer. Are they not going the direction of Deschutes? Plan B is another example of starting small and growing as demand grows — very sensible.

      So if the paying of inducements was not possible because the government actually enforced the regulations, what then would the landscape be like for craft brewers?

      That said, I’m not suggesting that the tied house issue is the biggest problem facing craft brewers. Read dorkuncorked’s remarks above for where the main problem is.

      BCbrews

      February 19, 2011 at 9:39 pm

  12. Just when I thought the Libs couldn’t suck any worse, they try to pull something like this. What’s up with these guys? It seems like more corporate back-scratching as I cannot really see what benefit there would be to allowing tied-houses, other than pleasing the macro-brews. As you say, the best way to vote on this one seems to be with your wallet. (thats all the say we seem to get on any issues these days in this “democracy” of ours) As long as the public insists on good product it will be there. But what really concerns me is how this will effect brand new breweries, where the fight is really to get their beers on to taps. It could make their fight much harder if these taps become increasingly “tied” to the products of large breweries. Great post, I wish you would post more,
    BB

    Basement Brewer

    February 21, 2011 at 7:06 pm

    • Thanks for your comments, BB. Wish I could post more too, but paying gigs get the priority.

      I was hoping to transform this into a collective of contributors to keep the blog diverse, timely, and relevant. However, everyone seems to want to blog on their own. Unfortunately, it just makes it harder for people to follow the scene in BC because they have to keep track of multiple sites; much easier going to just one.

      BCbrews

      February 21, 2011 at 8:44 pm

  13. Hi Rick,

    Great article! You’ve really highlighted how backwards the LCLB can be. It’s exciting to see you create such interest in our outdated liquor regulations here. My views on this matter seem to be at odds with most craft beer fans, but I thought I’d share them anyways.

    Although tied houses and inducements are closely related, I’d like to look at them separately for the moment. For now I would like to comment on tied houses.

    I believe that the previous tied house restrictions were actually were too restrictive for our craft beer scene here in BC. A few examples: They prevent Spinnaker’s from selling their own beer at their private liquor stores, they prevent Podium Sports Grill from carrying Lighthouse beer (as they share a common owner), and the prevent Red Truck from being sold at MJG establishments. Central City would find themselves in the same position with their planned off-site brewery.

    Further, Craft brewers are not able pursue certain business opportunities that would promote their beer to a larger audience, in part due to tied house restrictions. Tied houses restrict how craft brewers are able to reach customers. For example, fearing that they are loosing potential customers due to their location, Central City may wish at some point to open a Red Racer location downtown, similar to the Deschutes brew-pub in Portland. With the tied house regulations previous to this summer that would not be possible.

    From what I’ve heard it is very hard to start a brewpub here in Vancouver in part due to zoning restrictions, and I imagine the situation may be similar around the province. While I would much rather see zoning regulations become more permissive in this regard, tied houses allow a work around for a potential new brewpub. Anecdotally, I’ve heard that it is next to impossible to find a site zoned to be potentially used as a brewpub. With tied houses, a potential new brewpub could brew off-site, in a potentially lower-rent facility, and market their beer at a location they feel is closer to craft beer fans. They pay lower rent for their production facility, and can afford a much higher rent-per-square-foot location to server their beer.

    These are just a few benefits to our local craft beer scene that I can think of regarding permissive tied house regulations. Given the above, I’m inclined to support permissive tied house regulations, and I would urge those concerned by potential buy-outs by industrial brewers support a limit on the amount of tied houses owned by a corporate entity.

    I’ll save my thoughts on trade practices and inducements for a future reply. Thanks again for bringing up this topic, its exciting to see so many people comment on this issue.

    -Ryan

    Ryan

    February 22, 2011 at 3:46 pm

    • Thanks for your comments, Ryan.

      Considering how inducements are already common place, the current situation should give one an idea of what it would be like when it is no longer illegal to shut out competition from restaurants and pubs. To be fair, I’m not entirely against all tied houses. The arguments you make in favour are valid to a certain extent. However, the scenarios you detailed are limited in terms of the amount of revenue that can be generated. If Red Truck and Central City were cut out of most pubs by the deeper pockets of AB InBev and could only sell mostly in their own establishments, they would remain small breweries. Deschutes and Rogue didn’t become as large as they are by owning their own retail establishments. It was by making excellent beer and gaining a beach head in the fierce Beer Wars that take place in hospitality and retail establishments throughout America.

      The bigger issue is changing the system that dorkuncorked outlined above. If nothing is done about this and all restrictions on tied houses are removed, I suspect it will become more difficult to get pubs to change their taps. After all, over 85% of people in BC still drink industrial suds. Why? Because they are the most-heavily advertised. I think it will be a while before we see Red Racer and Red Truck on TV.

      And while we like to think craft beer drinkers have a growing number of choices with places like the Alibi Room and St. Augustine’s, let’s not forget that this is only the case in Vancouver and Victoria. The rest of BC is firmly in the grip of the corporate brewers.

      BCbrews

      February 22, 2011 at 4:32 pm

  14. […] around advancing our mission. This does need to happen because as the comments generated from my post on tied houses showed, a unified vision of the future does not currently […]


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