Ontario beer legislation could lead to future bump in Canadian beer sales

Amidst mounting dissatisfaction from the province’s beer consumers, the Ontario beer market is undergoing a transformation.

Canadian legislators recently announced that beer will be on shelves in 150 urban grocery stores by May 2017, expanding to 450 stores across the province over the next decade. While the recent legislation is part of a governmental revenue-building plan and will remain under strict regulation, the availability of beer in grocery stores could change the current trajectory of Canada’s beer sales which have been forecasted to remain relatively flat, according to Mintel’s Beer Canada 2014 report.

Despite flat sales, nearly two-thirds of Canadians have consumed beer in the past six months, including 56% of Ontarians who have consumed beer at home. Quebec surpasses Ontario in at-home consumption (64%). However, beer can be sold at grocery and convenience stores from 8 am-11 pm daily in Quebec. This illustrates the potential upside for the newly approved retail sales at a time when wine and spirits are experiencing double-digit sales lifts, even if six-packs are the largest size available for purchase.

20% of Ontarians consume craft beer, the highest rate among all Canadian provinces

Alternatively, this new sales avenue is a general liberalization of the province’s beer distribution market. While a small bump could occur given the added availability and convenience for consumers, the effect will not likely be immediate. Sales locations are being phased in over a long period of time and volume may be lessened comparatively at grocery stores, as 24-packs will not be available.

Making room for craft beer on store shelves

The new legislation allows for Ontario’s burgeoning craft scene to continue its growth. Craft breweries will now be given at least 20% shelf space in The Beer Store locations, the trading name for Brewers Retail, a privately-owned chain run mainly by Molson-Coors and Anheuser-Busch InBev. The Beer Store was previously required to reserve only 7% shelf space for craft beers and, until now, was Ontario’s only private retailer permitted to sell beer for off-site consumption, aside from breweries themselves. Furthermore, craft breweries will be allowed to open a second store if they have a second brewery.

This is encouraging news not just for Ontario’s craft brewers, but also for consumers. Despite making up a small fraction of the private retail marketplace, 20% of Ontarians have consumed craft beer in-home, the highest rate among all Canadian provinces. Though this new arrangement is likely to benefit all suppliers, independent craft brewers in particular could benefit as data suggests craft beer sales will grow with expanded shelf space. Some 45% of Canadians expect craft beers to taste better than non-crafts and 34% of consumers are willing to pay more for craft. Pointing to the belief that, while they are already typically more expensive than non-crafts, the additional taxes on newly-approved sales in grocery stores won’t have a negative impact on craft sales.

Women have the buying power

The gender divide among Canadian beer drinkers is significant, with 68% of men drinking beer compared to only 48% of women. However, the occasions for drinking could play a part in beer sales as beer becomes more easily accessible. In general, more men consume beer at home (68%). When it comes to drinking at home with a partner, friends or family, women are more likely (62%) than men (56%) to drink beer. With women overwhelmingly holding the responsibility for grocery shopping (59%) and being more inclined to drink in-home (48%), they may carry more power in the future of Ontario’s beer sales. This is something for brands to keep in mind as this legislation starts to take shape.

Joel Gregoire is a member of the Canada Reports team, covering the food and drink industry and is based in Toronto. As an analyst for over 10 years, he has amassed a breadth of industry experience, providing comprehensive consumer insight for Canada’s top brands.