Is the BC Beer Market About to Become the Wild West?
If the rumours I have been hearing the past few weeks are true, the BC beer market may resemble the Wild West by the middle of January. I have been informed from two completely different sources that the BC Liberals will finally be making an announcement about tied houses and trade practices. This comes two years after the Liquor Control and Licensing Branch put out a consultation paper requesting industry input on proposed changes to the relevant provincial regulations.
If the information I am getting is correct, and I do believe it to be so, tied house laws and trade practices will be completely deregulated, leaving the BC market wide open for the highest bidders to lock down pubs, restaurants and liquor stores. There will be no government restrictions on buying these outlets or offering large amounts of cash and other inducements for exclusivity rights (bars/restaurants) or preferential shelf placement (liquor stores).
The original government call for input outlined three options for tied house law changes:
- eliminate tied house prohibitions altogether
- permit tied houses between the same corporate entity, but limit the number of tied houses a person can hold to limit risk of market consolidation
- permit tied houses with public interest restrictions
They also laid out three options for trade practice regulations:
- eliminate trade practice restrictions altogether
- reduce or eliminate most trade practice restrictions
- streamline some trade practice policies and procedures
For better explanations as to what those options mean, click on the “consultation paper” link above.
There has been significant disagreement among the players in the craft beer industry as to whether deregulating tied house and trade practice restrictions will have a negative impact on the industry or not. You can read about this in more detail here and here.
The biggest fear is that the larger, deep-pocketed, national and multinational breweries will simply buy pubs and restaurants or pay licensees to favour their products. This may stop the growth of the local craft beer industry, which has managed to claw its way from 7% to about 15% of the domestic beer market in BC over the past five years. That growth may not sound like much, but when you consider that each percentage point represents over $8 million in sales, you can see why the macro-breweries do not want the smaller breweries to get any stronger.
There are also concerns that the more aggressive, growth-oriented local breweries will accept short-term losses for long-term gains. They might just try to buy a larger share of the market by stepping on their competitors who are more focused on sustainability and producing great beers. There is an added fear that licensees will begin to demand cash, free product, or kickbacks for the right to sell beer in their establishments. This may make it prohibitive for smaller breweries to sell their beer in those types of establishments.
Many others say that the deregulation of the tied house laws will not impact the major craft beer markets, like Greater Vancouver and Victoria, and will give craft breweries in smaller markets, where marco-beers dominate, another outlet to sell their beer if they have the means to invest in a pub, restaurant, or liquor store. There is also the argument that inducements from breweries and payment demands from licensees are already common in the beer industry because the laws are impossible to enforce. Therefore, deregulation will have little impact.
If the laws are wiped from the books, it will be interesting to see what happens. As a consumer, I would like to see a middle ground, where there are some safeguards in place to stop the larger, richer breweries from simply buying tap, fridge and shelf space to the point of restricting their competition, similar to what happened in the UK in the 1990s. But I think, at least here in Vancouver, there are too many licensees who are committed to craft beer because it is simply a better product, because selling craft beer is profitable, and because there is a great thirst amongst local beer drinkers for superior products.
In the end, as a consumer, I can only hope that if there is deregulation, it does not result in restricted access to locally-brewed craft beers or higher prices. If so, it will have to be the consumers who rally and demand a further review by whichever political party gains power in the upcoming election. The industry is too divided on these issues.
~ originally published on the VanEast Beer Blog on December 30, 2012.