Spirits suppliers forced to seek court review of LCBO's contradictory pricing policies

Following suppliers' fruitless attempts to negotiate, LCBO responds with retaliatory measures

TORONTO, July 24, 2024 /CNW/ - The Liquor Control Board of Ontario's (LCBO) sudden decision in 2023 to penalize suppliers for non-compliance with contradictory pricing policies has led to an unavoidable legal challenge from the makers of familiar brands such as Crown Royal, Canadian Club, JP Wiser's, Forty Creek, Bacardi rum and El Jimador Tequila.

The collective of spirits suppliers, which together represent almost 70% of the spirits products sold in Ontario, have filed a court application with the Ontario Superior Court of Justice to declare a controversial LCBO pricing term invalid and unenforceable. Simultaneously, the suppliers have alerted the Competition Bureau of Canada that the LCBO's enforcement of this pricing term, in their view, is an abuse of dominance with major anti-competitive implications for pricing and product choice impacting all Canadian consumers.

"As spirits suppliers, we have always appreciated our longstanding strategic partnership with the LCBO," said Cal Bricker, President & CEO of Spirits Canada. "We are disappointed that we have had to refer the LCBO's contradictory policies to the courts, but at this time, and amid retaliatory measures by the LCBO, we have been left with no other options."

For months, suppliers have been trying to resolve the issue of the LCBO suddenly levying tens of millions of dollars in penalties for products sold more than a year earlier. Suppliers have proposed solutions; the LCBO has failed to do so. Instead, it has continued to apply new retroactive penalties. When suppliers previously sounded the alarm about this significant threat to the entire sector, the LCBO, as the sole purchaser of spirits in Ontario, doubled-down by imposing retaliatory measures on those specific suppliers.

Key Points:

• The LCBO has taken an unreasonable, contradictory position: suppliers must meet the LCBO's dictated minimum pricing requirements, but now are issued penalties if Ontario prices exceed prices elsewhere in Canada.
• The enforcement of a most favoured customer clause in conjunction with the LCBO's fixed standard mark-up regime and minimum retail pricing requirement means, effectively, that suppliers cannot lower prices to the LCBO; instead, they must raise prices in other provinces.
• Indeed, the LCBO goes further and dictates shelf space and merchandising programs based on price bands, like standard, premium, super premium, and benefitting from consumers' interest in trading up to more premium quality products while encouraging suppliers to offer products at a range of price points. This is all in total contradiction of the purported lowest price requirement.
• The LCBO itself has previously noted that its policies are at odds with each other; specifically, it has said that, while other Canadian jurisdictions may purchase products at a lower cost, the LCBO would be unable to purchase those same products at the same wholesale price if the application of its fixed-pricing structure resulted in a retail price lower than what minimum pricing allows.
• Spirits suppliers of all sizes have no choice but to comply with the LCBO's demands or face reprisal. The companies that supply the majority of spirit products the LCBO sells are pursuing this court application for the benefit and viability of the entire sector.
• As the largest purchaser of beverage alcohol in Canada, the LCBO does not seek competitive pricing for its consumers, instead it takes as much profit as possible from both consumers and suppliers.

About the companies impacted:
We are Bacardi Canada Inc., Beam Canada Inc., Brown-Forman Corporation, Corby Spirit and Wine Limited, Diageo Canada Inc., Forty Creek Distillery Ltd. (operating as Campari Canada), and Rémy Cointreau USA, Inc. Together we represent almost 70% of the spirits products sold by the LCBO and almost 35% of all products sold by the LCBO. Here are just a few of the brands we supply to Ontarians:

Bacardi Canada Inc.

• Bacardi Rum
• Grey Goose
• Martini
• Dewar's
• Bombay Sapphire

Beam Canada Inc.

• Canadian Club
• Alberta Pure
• Alberta Premium
• Sauza Tequila
• Jim Beam
• Maker's Mark

Brown-Forman Corporation 

• Ben Riach
• Chambord
• El Jimador
• Ford's Gin
• Gentleman Jack
• GlenDronach
• Herradura
• Jack Daniel's
• Old Forester
• Woodford Reserve

Corby Spirit and Wine Limited

• J.P. Wiser's
• Polar Ice
• Lamb's
• Lot No. 40
• Jameson
• Absolut
• Beefeater
• The Glenlivet
• Chivas Regal
• Kahlua
• Malibu
• Altos

Diageo Canada Inc.

• Crown Royal
• Smirnoff
• Guinness
• Johnnie Walker
• Captain Morgan
• Tanqueray
• Baileys
• Ketel One
• Talisker
• Lagavulin
• Bulleit
• Gordon's

Forty Creek Distillery Ltd. (operating as Campari Canada)

• Campari
• Skyy Vodka
• Wild Turkey
• Appleton Estate
• Aperol
• Grand Marnier
• Espolon
• Courvoisier
• Wray & Nephew
• Forty Creek
• Frangelico
• Cinzano

Rémy Cointreau USA, Inc. 

• Remy Martin
• Louis XIII
• Cointreau
• Metaxa
• Mount Gay
• St-Remy
• Bruichladdich
• The Botanist
• The Hautes Glaces
• Westland Distillery
• Telmont
• Belle de Brillet

#onpoli #foodandbeverage #lcbo #qcpoli

SOURCE Spirits Canada

For media inquiries, contact: Via Dulay, Director, Communications & Public Affairs, Spirits Canada, [email protected]