Ontario Government Continues to Shut Out Beverage Alcohol Contract Producers from COVID-19 Relief Measures Critical to Their Survival

Thousands of Jobs and Millions in Revenue at Risk If Small Alcohol Producers Remain Unable to Sell Direct Online

TORONTO, Feb. 04, 2021 (GLOBE NEWSWIRE) -- As Ontario’s small businesses fight for survival during the current COVID-19 emergency, the Independent Craft Producers of Ontario (ICPO) is calling on the Ford government to allow Ontario’s newest and some of the smallest alcohol producers to conduct direct online sales. These 100 producers commonly known as “contract producers” are all fully licensed by the Alcohol and Gaming Commission of Ontario (AGCO) yet do not yet have physical breweries or stores. Pre-pandemic, there were no clear regulations on online alcohol sales, but in September the AGCO mandated that a producer must have a pre-existing physical brewery and store to enact e-commerce.

The result is that these newer producers, many which were started pre-pandemic in the last couple of years, are being shut out of distributing their product to their customers while thousands of Ontario bars, restaurants and more established, bigger breweries are free to conduct direct online sales. Consequently, Ontario consumers have no online or home delivery access to almost 1,000 made-in-Ontario products from some of the province’s most innovative beer, cider and distilled spirits producers, as current government policies clearly favour bigger, more established companies.

Fuelled by a passion for well-crafted products, ICPO’s producers are following the path of virtually every established brewery in contracting host breweries to make their distinctive recipes. They follow the same AGCO regulations & policies, brewing practices, taxation, and reporting requirements as physical brewers, and they hold the same manufacturing licenses for sales. But they have been excluded from the government’s relaxed restrictions which enable their brick-and-mortar colleagues (plus bars and restaurants) to sell and deliver their product to customers during the pandemic. Though the AGCO has yet to offer an explicit reason for its September bulletin interpretation, ICPO believes the restriction is the by-product of the lack of clear policies guiding the e-commerce space, making it expedient for government to utilize existing rules governing physical stores which sell directly to the public.

The lack of direct sales channels has been devastating for these small businesses who largely rely on sales to retailers, licensed bars & restaurants and events as their primary revenue stream. Much like the licensees they supply, contract producers have been hard hit by reduced on-site alcohol sales due to lockdowns and limited seating capacity, as well as the cancellation of special events, festivals and corporate gatherings. Unlike the licensees they supply, who are now able to sell ICPO member products online, ICPO’s pleas for its members to sell online have been ignored. The Ontario government has made no effort to temporarily ease the restrictions to help save these small companies and serve their customers who now have no choice but to enter retail stores to buy these 1,000 products.

Online sales for beverage alcohol in 2020 are booming; industry tracker IWSR estimates that U.S. online alcohol sales grew by 80% in 2020, as the pandemic has created enormous awareness that consumers can buy online with convenience being the driving factor. IWSR also reports that 44% of those who are buying alcohol online only began doing so last year. The online channel has become a crucial lifeline for small craft producers to reach their customers and recoup revenue losses. In fact, a survey conducted by IPCO in October, revealed that 80 per cent of these small businesses were experiencing sales declines of 50 per cent or more, which they attributed to the closure of bars and restaurants and the inability to sell online.

The urgency of addressing this lack of fairness is even greater now that Uber has announced that it is buying Drizly, the big online alcohol delivery service. It is believed that Uber plans to dominate online alcohol sales and delivery as it has in other sectors, which will put smaller Ontario businesses at a real disadvantage to the bigger players. Small Ontario craft companies will be at the mercy of “big business” which will likely favour multi-national brands over craft companies with less resources.

It’s a situation that has left brand new start-up contract producers like Crank Lite, whose official launch event was cancelled when it coincided with the March 2020 COVID-19 lockdown, unclear on how to pivot to meet their market demand. “We had inventory and customers eager to buy our beer when our licensee distribution channels were shut down last year – like other start-ups, we actively searched for workaround solutions to sell within the current pandemic restrictions,” said Jack Jelinek, co-founder of Crank Lite.

Jelinek continued, “Our customers wanted to buy online and have product delivered directly to them – that’s pretty easy, we built an e-commerce site and lined up people with Smart Serve training to make deliveries. But the AGCO ruling requires us to build a physical production facility and a retail store before we can sell online. Even if we could magically raise funds right away, how do we find the space, get equipment, permits and construction crews to do all this during COVID-19 while keeping our company afloat? It’s a process that could take years, not days.”

Paniza Brewing had just started selling to the LCBO in 2020 when the pandemic hit. Long time home brewers, the husband and wife Paniza team won gold for their German Pilsner, which encouraged them to start Paniza with a launch at the CNE. Megumi Hirasaka explains the effects of Paniza not being able to conduct e-commerce, “We’re a really young company but have fostered a strong following in the homebrew and online communities. No one can understand why we can’t sell online and ship directly to homes, which is a real service to our fans. The bigger companies shouldn’t get to own the online space.”

Other ICPO members have been around much longer and have thriving businesses with popular brands sold across Ontario. But the government’s September AGCO interpretation, which directly linked the ability to sell online to an existing retail store authorization and physical brewery, effectively shut down their online platforms which had been carefully constructed with the rules in place at the time. Now, not only have consumers lost online access to dozens of craft beers and ciders, but also virtually all ready to drink beverages, as over 95 per cent are made on contract right here in Ontario. Consumers are clearly suffering from a lack of choice and convenience, even as government “stay at home orders” continue.

Collectively, the small businesses represented by ICPO employ close to 1,200 Ontarians directly and more than 1,000 indirectly. These jobs are now at serious risk without the e-commerce sales necessary for their survival during the pandemic. They all buy Ontario ingredients and contract for goods and services through Ontario companies. The financial impact to the Ontario economy is staggering:

  • According to LCBO data, the top 12 contract manufacturers of craft beer alone produce 2.5 Million litres annually, contributing $16.5 Million annually to Ontario’s economy.
  • Virtually all Ontario distilled spirits products are produced on contract accounting for about $675 Million in annual sales.
  • Cider made in collaboration with Ontario farms & cideries generates revenue of about $10 Million.

About Independent Craft Producers of Ontario
The Independent Craft Producers of Ontario is a new trade association dedicated to representing small, Ontario-based contract producers in beer, cider, spirits, ready to drinks, radlers and more.

For more information, contact:
 Anna Withrow awithrow@rogers.com 416-805-2174

Website: http://www.icpo.ca

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/a8283f28-4da7-4d4b-bc37-c11a9692262f


Independent Craft Producers of Ontario at Warehouse