| Alberta’s largest liquor store chain is about to increase their hold on the market after purchasing 10 locations from Willow Park Wines and Spirits.
The sale has worried advocates of small craft breweries who fear that this trend threatens their market share.
The large chains are getting larger, absorbing independent retailers to compete with the grocery stores, which have gained considerable power in the industry by setting up liquor stores outside of their supermarket locations.
Smaller retailers, meanwhile, are having a harder time competing — some are lucky enough to stay viable by catering to niche markets, but it is unlikely they alone will be enough to provide a strong market for the smallest of Alberta’s breweries.
Craft brewers will always have their cult following, but in the current market conditions, these smaller companies are finding it difficult to stay in the game.
"The brewers most in jeopardy would be the smallest companies, like Brew Brothers, Wild Rose and Alley Kat," says Don Tse, a local beer expert.
Brad LeDrew, chief beer officer of the Calgary-based Brew Brothers, says the trend is making it difficult for craft brewers to penetrate the market.
"We’ve been seeing the consolidation of the industry for awhile now…. It’s really starting to surge these days," LeDrew says, adding that Willow Park has been a reliable supporter.
"Chains look at us and say we’re too small and we don’t have the power to give them the price they want — either we don’t have the volume or we can’t compete on the price."
The chains do not tend to align themselves with smaller enterprises, due partly to economies of scale and the fact that larger brewing agencies have more sway over retailers in bargaining for shelf space.
"Ma and pa operations will carry our product because they grow up in the same environment," said LeDrew.
"But even stores catering to niche markets are not without influence by the big names. They are carrying a variety of import beers brought in by big brewing agencies — Labatt, Molson, etc. People see these authentic beers from Europe, but often don’t realize they are being profited from by bigger organizations. Money talks and there is lots of it in Calgary."
Before privatization, liquor stores were divided into categories. The A category stores sold the widest range of products and were required to support local breweries, a policy to which Big Rock partly owes its success. They were also common enough to be convenient, regardless of where one lived in the city.
"When you had a liquor store, you tended to have a complete range of products," says David Climenhaga, spokesperson for the Alberta Union of Provincial Employees, of the days before privatization. "Now there is a trend toward more stores and fewer companies. The market is so small, so it is all the same."
Because chains can afford to buy large amounts of the same product at a discount, they can compete with one another by offering sales. This then allows them to steal customers from independent retailers.
Grocery store chains, in particular, use economies of scale to their advantage.
"The change from a government monopoly to a private market has resulted in a monopolistically competitive market structure…. The disadvantages include inefficiencies in the form of excess capacity, duplication and redundancy," according to a Parkland Institute report on the issue, entitled Sobering Result — The Alberta Liquor Retailing Industry 10 Years After Privatization.
The study concludes that the Alberta market will evolve into an oligopolistic market structure as chain stores gain a stranglehold on the industry.
Greg Flanagan, the author of the report, says an acquaintance of his ran a small liquor store a few years back, but sold the business after she found herself having to buy product from her competitor, The Real Canadian Liquorstore. |
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