Beer Store Loss Reaches $ 51 Million Amid Competition, COVID

Red ink continues to flow at The Beer Store.

The retailer, majority owned by Molson Coors and Labatt, suffered an operating loss of $ 50.7 million in 2020 as competition from grocery and restaurant bottle stores increased and keg sales were crushed by COVID-19 restrictions.

That loss, which the retailer disclosed in its recently released annual financial statement, was up from an operating loss of $ 46.5 million in 2019 and a loss of $ 18.1 million in 2018.

The Beer Store declined to comment for this story.

This level of red ink raises questions about The Beer Store’s long-term future, says Matt Sooy, assistant professor of management accounting at the Ivey School of Business at Western University.

“There is only a time when you can lose $ 50 million a year. It’s not sustainable, even in the short term, ”Sooy said. “A loss of $ 50 million is nothing to celebrate.”

The Beer Store also saw its operating revenue drop to $ 399.4 million, from $ 402.2 million in 2019 and $ 418.9 million the year before.

With bars and restaurants closed for eating and drinking on-site for much of the year due to restrictions designed to slow the spread of the COVID-19 pandemic, sales of kegs have slowed.

Meanwhile, bars and restaurants were allowed to offer beer and wine to take out and deliver, a change the Ontario government has since made permanent.

Under a framework agreement signed with the province in 2015, The Beer Store is supposed to operate on a revenue neutral basis, meaning that operating losses must be covered either by a call for funds between owners, sale of the assets of The Beer Store or others mean.

Molson Coors and Labatt each own about half of The Beer Store, with Sleeman Breweries owning a small percentage. In 2016, under pressure from the provincial government, The Beer Store offered “ownership” stakes in independent craft breweries with no financial obligations, and a place on the board of directors. The Beer Store was originally established as a result of Prohibition as a warehouse and retail cooperative for the province’s breweries.

Retail analyst Lisa Hutcheson said The Beer Store’s retail model is outdated and doesn’t have much appeal to shoppers.

“Now that grocery stores can sell beer and the LCBO sells beer, wine and spirits, why make an extra stop at The Beer Store when you can just buy beer with your other purchases?” Said Hutcheson, managing director of retail consulting firm JC Williams Group.

At its peak, The Beer Store controlled over 90 percent of beer sales in Ontario. That figure fell to 63% in fiscal 2019, however, according to statistics in the LCBO’s annual report.

According to several industry sources, The Beer Store now accounts for around 60 percent of sales.

In 2019, the provincial government threatened to tear up the 10-year framework agreement signed with The Beer Store in 2015, and pledged to introduce the sale of beer and wine in convenience stores. The Star reported that the provincial government could have to pay up to $ 1 billion for breaking the deal.