Ontario keeps paying Beer Store agreement as alcohol revenue falls

Global News

15-05-2025

The Ford government has paid the privately-owned Beer Store almost two-thirds of the $225 million it promised the company to reduce the layoffs from alcohol liberalization, new figures released along with the budget show.
The latest update to the public cost of alcohol liberalization comes as the Ontario budget shows revenues at the LCBO are down, along with taxes on the sale of beer, wine and spirits.
Last year, Ontario broke its longstanding exclusivity agreement with The Beer Store as part of its bid to allow convenience, grocery and big box stores to sell beer and wine.
The government earmarked $225 million for the chain, including measures to reduce store closures.
To date, The Beer Store has been paid $130.5 million of that fee, according to the government. It expects to pay the remaining $94.5 million by the end of the year.
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Under the $225 million agreement with the government, at least 300 Beer Store locations must remain open until the end of 2025. After that, there will be no restrictions on shutdowns.
The Beer Store has already announced several closures across the province — ranging from Oakville to Toronto and London.
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They did not immediately respond to a request for comment from Global News asking if they planned to close more, or all, of their stores after the agreement expires.
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Finance Minister Peter Bethlenfalvy said the funds his government had put aside for the company were designed to ease the transition — but didn't guarantee there wouldn't be long-term job losses.
'They have to make business decisions, strategic decisions,' he said.
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'Now, you can get alcohol in grocery stores, your corner store, the convenience store, the gas station, all kinds of different outlets, the LCBO, you have more choices. So, we provided some support so they could make a transition as consumer behaviour developed and to protect their employees as they went through this transition.'
The latest figures for how much The Beer Store has been paid by taxpayers come in a budget document with substantial changes to alcohol sales rules — and a drop in revenue.
The government's 2025 Ontario budget shows that the revenue the province makes from taxing the sale of beer, wine and spirits has dropped substantially.
In 2022, the government made $600 million in taxes on alcohol, dropping to $593 million in 2023 and $562 million in 2024. For the 2025 year, it will fall again to $388 million.
Officials with the Ministry of Finance attributed some of that drop to changing consumer behaviour as people drink less.
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Bethlenfalvy said, even if consumption is down, small businesses that are now able to sell alcohol are seeing the benefits.
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'I think our modernization of the alcohol system has been amazing,' he said. 'Consumption patterns are changing, people are drinking less and the U.S. factor but … I think it's going extremely well, we're hearing from convenience stores this has been a game changer. Their revenues are up; they're hiring more people.'
At the LCBO, which was bracing to lose customers to other retailers, it's the same story. Revenue from the LCBO in 2022 was around $2.5 billion; it is expected to drop to just under $1.9 billion.
Changes introduced in the latest budget could compound that number.
In an attempt to boost alcohol sales by lowering the price to buy, the government is planning to direct the LCBO to reduce the markup it is allowed to add to cider, ready-to-drink beverages and products from small breweries in Ontario.
The changes, which will kick in in August, would not reduce what the LCBO pays to alcohol producers but would limit the profit the Crown corporation can make. That, in theory, would reduce the cost to buy booze and also lower the amount of money the province raises through alcohol.
The various changes to tax credits, markups and fees are expected to cost the government $410 million over the next three years.
Separately, Ontario will spend $175 million over five years as part of a new program designed to boost the number of Ontario grapes in blended wine. The province said the program will eventually double the percentage of Ontario grapes, 'leading to the purchase of thousands of additional tonnes of Ontario grapes from farmers.'
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Ontario NDP Leader Marit Stiles said the government was 'consumed' with alcohol sales — instead of focusing on tariff supports.
— with a file from The Canadian Press