Canada - Food and Drugs Law (2024)

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On May 24, 2024, the Ontario government announced an acceleration of its plannedexpansion of the province's alcoholic beverage marketplace. Theacceleration will take place via a phased rollout beginning thissummer. According to the announcement, by the end of October 2024,every grocery, convenience, and big-box store in Ontario will beable to sell beer, cider, wine, and ready-to-drink alcoholicbeverages if they apply for a licence to do so. The acceleratedexpansion has implications for both current and future alcoholicbeverage retailers.

What you need to know

• Key rollout dates. The government hasidentified three phases to the rollout:
  • August 1, 2024: On this date, the 450 grocery stores that arecurrently licensed to sell beer, cider, or wine may start sellingready-to-drink alcoholic beverages. They may also start offeringlarger pack sizes.
  • September 5, 2024: After this date, all licensed conveniencestores may start selling beer, cider, wine, and ready-to-drinkalcoholic beverages.
  • October 31, 2024: After this date, newly licensed grocery andbig-box stores may start selling beer, cider, wine, andready-to-drink alcoholic beverages, including larger packsizes.
• Changes to the recycling program. While TheBeer Store will continue to run its recycling program until atleast the end of 2030, starting in October many grocery stores thatsell alcohol will need to start accepting empty containers forrefund and recycling. For grocery stores that are located within5km of an existing The Beer Store location, such stores will onlybe required to accept returns starting in 2026.
• Delivery scope for convenience and grocerystores. Convenience store and grocery store licences nowinclude an authorization allowing such stores to deliver alcoholfor a fee. Prior to May 24, 2024, existing grocery store licenseeswere not permitted to deliver alcohol under their retail storelicences. Additional restrictions which have limited grocery storedelivery models will be revoked on August 1, 2024¹.
• Compensation for The Beer Store. The Ontariogovernment will reimburse The Beer Store up to $225 million tocompensate for costs incurred as a result of early implementationof the expansion².

Potential new retailers: eligibility

Ontario is expanding permission to sell alcohol to all grocerystores, convenience stores, and big-box stores across the province.This will allow up to 8,500 new retail locations to begin sellingalcoholic beverages. After September 5, 2024, all newly licensedconvenience stores may start selling alcoholic beverages. AfterOctober 31, 2024, all newly licensed grocery and big-box storesthat do not currently sell alcoholic beverages may start doing so.The timelines for this phased rollout have been incorporated intothe regulatory amendments that accompanied this announcement. TheAlcohol and Gaming Commission of Ontario (AGCO) has indicated that it will start acceptingapplications from new convenience stores and grocery storeoperators on June 17, 2024.

Convenience stores eligible for licensing are stores with nomore than 4,000 square feet of retail space, in which food products(excluding prepared food that may be consumed on site) occupy atleast half the floor space, which sells at least five types of foodproducts, and which are not primarily a pharmacy³.

The definition of "grocery store" has also beenexpanded, so that certain big-box stores may be eligible forlicensing as grocery stores. To be considered a grocery store forthese purposes, a store must have more than 4,000 square feet ofretail space, in which food products occupy at least half the floorspace (or 10,000 square feet of floor space), which sells a varietyof types of food products, and which is not primarily apharmacy⁴.

Convenience and grocery stores will be subject to similarlicensing conditions and sale requirements, including hours ofsale, online ordering requirements and the newly introduced abilityto deliver directly to customers for a fee. Convenience stores willnot be permitted to offer alcohol samples, as may be done inlicensed grocery stores.

Changes for existing retailers

Up to 450 grocery stores are currently licensed to sell beer,cider, and wine in Ontario. On August 1, 2024, these existingretailers may start selling ready-to-drink alcoholic beverages(defined as ready-to-consume coolers, hard seltzers, or otherpremixed co*cktails made from spirits, wine, beer, or fermentedsugar)⁵. These existing retailers may also begin sellinglarger pack sizes. After August 1, 2024, existing grocery storelicensees will also be granted increased flexibility to offerdelivery services to customers for a fee. Licensees will also nolonger be required to display alcohol pricing inclusive ofapplicable taxes and container deposits as of September 5,2024.

As per a prior agreement, the Liquor Control Board of Ontario(LCBO) will be the exclusive wholesaler of alcoholic beverages togrocery stores. It will operate a single order-taking system forall alcoholic beverages. However, during an interim period lastingfrom August 1, 2024 to December 31, 2025, The Beer Store willremain the exclusive wholesaler of beer for existinglicensees⁶. The Beer Store, currently the primary beerretailer in Ontario, is a chain of privately owned retail stores,owned mainly by three brewing companies, which are themselves ownedby multinational corporations.

Early Implementation Agreement

Under a 2015 agreement between The Beer Store and the Ontariogovernment in power at the time, there was a limit to the number ofretail stores that could be authorized to sell alcohol⁷.This prior agreement, set to expire on December 31, 2025, allowedThe Beer Store to be the primary retailer of beer in the province.Now, the current Ontario government has signed an EarlyImplementation Agreement with The Beer Store, under which theprovince will provide The Beer Store with up to $225 million tocompensate the company for costs associated with the acceleratedtransition and the early cancellation of the prior agreement. Costswhich may be compensated include those associated with storeconversions, employment (e.g., salaries, wages, and training costsof those hired with respect to expanded distribution activities),overflow storage and distribution, among other potentialcosts⁸. Other costs, including legal fees or consultingfees, will not be reimbursed.

Under the Early Implementation Agreement, the province and TheBeer Store have agreed on a framework for The Beer Store'ssupport of new retailers in the beverage container recyclingprogram. These terms and the related timelines agreed upon by theOntario government and The Beer Store have been incorporated intoamendments to the regulations under the Liquor Licence andControl Act, 2019, which apply to all licensees. The newrequirements mandate that all alcoholic beverage retailers mustbegin accepting the return of beverage containers for recycling.Convenience stores will be exempt from thisrequirement⁹, and until December 31, 2025, grocerystores located within five kilometers of a The Beer Store outletwill also be exempt¹⁰. The Beer Store will be requiredto collect the containers from each retailer that is required toaccept returns¹¹. The Beer Store will also continue torun its recycling program for alcoholic beverage containers untilat least December 31, 2030.

What's next

Ontario businesses should prepare for the key implementationdates that affect them. On August 1, 2024, the 450 currentlylicensed grocery stores may begin selling ready-to-drink alcoholicbeverages and larger pack sizes. On September 5, 2024, all licensedconvenience stores may begin selling beer, cider, wine, andready-to-drink alcoholic beverages. On October 31, 2024, newlylicensed grocery and big-box stores may start selling beer, cider,wine, and ready-to-drink alcoholic beverages.

In view of these timelines, AGCO has announced it will start accepting applicationsfor new retail licences from convenience stores and grocery storeson June 17, 2024. AGCO will also be hosting a public webinar on June 11, 2024 regarding theapplication process and eligibility requirements.

Footnotes

1. O. Reg.746/21: Licensing.

2. Improving Choice and Convenience Through aModernized Marketplace for the Retailing and Distribution of Beerand Recycling in Ontario: Early Implementation Agreement,section 7 (PDF).

3. Ontario Regulation made under the Liquor Licenseand Control Act, 2019, amending O. Reg. 746/21(Licensing), section 1 (PDF).

4. Ibid.

5. Ibid.

6. Improving Choice and Convenience Through aModernized Marketplace for the Retailing and Distribution of Beerand Recycling in Ontario: Early Implementation Agreement,section 3(a)(viii) (PDF).

7. Alcohol Master Framework Agreement, September2015.

8. Improving Choice and Convenience Through aModernized Marketplace for the Retailing and Distribution of Beerand Recycling in Ontario: Early Implementation Agreement,Appendix D (PDF).

9. Ibid, section 5(b)(vi).

10. Ibid, section 5(b)(vii).

11. Ibid, section 5(b)(ix).

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circ*mstances.