Sunday, December 30, 2012

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 in regards to what course of action they will take two years after the Liquor Control and Licensing Branch.put out a consultation paper requesting industry input in regards to proposed changes to the laws regulating tied house and trade practices.

If the information I am getting is correct, and I do believe it to be so, the changes are to be announced by mid-January and will completely deregulate tied houses and trade practices, leaving the BC market wide open, reminiscent of the Wild West, for the highest bidders to lock down pubs, restaurants and liquor stores by either buying these outlets or offering large amounts of cash, or other inducements, for exclusivity rights (bars/restaurants) and preferential shelf placement (liquor stores).

The original call for input outlined three options for tied house law changes, those being to 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 or to permit tied houses with public interest restrictions.

They also laid out three options in regards to trade practice regulations, those being to eliminate trade practice restrictions altogether,  reduce or eliminate most trade practice restrictions or to streamline some trade practice policies and procedures

For better explanations as to what those options mean, click on the consultation link above.

There has been a great divide 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 in more detail what this is all about 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 favor their products, to stop the growth of the local craft beer industry which has managed to claw their way from 7% to about 15% of the domestic beer market in BC over the past five years. That growth may not sound much, but when you consider that each percentage point represents over $8 million dollars in sales, you can see why the bigger, national macro-breweries do not want the smaller breweries get any stronger. There are also some concerns that the more aggressive and growth-oriented local breweries, willing to incur short-term losses for long term gains, might just try to buy a larger share of the market by stepping on their competition who are more focused on sustainability and producing great beers.

There is also the fear that licensees will begin to demand cash, free product and kickbacks for the right to sell beer in their establishments which will prohibit smaller breweries from being able to sell their beers 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 the practices of bribery by breweries and demanding payment of some type by licensees are alive and well in the beer industry because the laws are impossible to enforce and that deregulating 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 approach, where their 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 1990's. 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 among local beer drinkers for superior craft beer 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 which ever political party gains power in the upcoming election as the industry is too divided on these issues.


  1. If deregulation happens then educating consumers will be extremely important. As long as people spend their beverage dollar properly we will have nothing to worry about. We all need to keep doing what we have been doing, tell your friends, host tastings, support local, and demand quality craft beer at every business you visit.

  2. I agree 100% Warren. If the changes happen, where I see things being impacted more are in the areas of the province where craft beer does not have a real presence and where macro-lagers still rule with an iron fist. It will be much easier for the larger breweries of the county to buy up small towns distribution points ensuring that craft beer does not get a chance to get a foothold on the market there. In Greater Vancouver-Lower Mainland and South Island areas, I feel the consumer dollar will keep things as is, but beyond Hope.....well, it could really be beyond hope in many areas for craft beer lovers

  3. It should be interesting times in the future for sure, I think some bars will go back to the macro's since money rules over "trendiness". Might be more competitive/cutthroat for craft brewers who will try to access the remaining taps, however maybe some new craft beer bars will emerge ? I agree with Warren, education and "getting the word out" will be so important in the future.

  4. I'm all for dropping the Tied Houses rules because I think the craft beer market is strong enough now to sustain itself against attempts by macros to buy out all the taps at bars. Craft beer drinkers will follow their tastes to another pub if their favourite place stops selling craft beer.

    My fear about trade practices deregulation is that the price of craft beer will go way up. If private liquor stores start demanding high shelving fees to stock beers then the breweries will simply have to charge more for their beers to make up for that. So a bomber that costs $6 or $7 now might go up to $8 or $9. And since (I think) breweries have to set a base price with the LDB that is then marked up by the private stores, that will mean the price at government stores will also go up. The only people benefiting from these higher prices will be the private liquor store owners who are by definition wealthy already since the licences for private LRS outlets are a rare and precious commodity.

    1. Take away tied house and the doors should open for more brewpubs to exist. Right now you need a liquor primary to build a brewpub, which is difficult to obtain. With tied house gone it will be possible to open a food primary (which is very easy to get) next to a small brewery and cut a hole in the wall and now you have a brew pub. However if breweries all get a lounge endorsement starting in February then there wont be any need for this. It's only fair since the wineries all basically get one.

  5. I agree Iain and the tied house portion of these possible changes is not the big worry for me. It is the total deregulation of the trade practice-inducement laws that could be a bother. I know that inducements and bribery already are common practice, even though illegal, but with the way cleared completely, I foresee some difficulties in some markets for smaller breweries getting their beer to market enough to survive. Look at Plan 9 in Prince George where I am sure being shut out of much of the market by the bigger breweries via inducements played a role in that brewery not being as profitable as it could have been therefore closed.
    We have to remember that BC liquor laws are for the entire province, not just Great Vancouver and Victoria.