Premier Kathleen Wynne’s government will auction off licences to sell beer and wine in about 300 supermarkets with no single grocer allowed to buy more than a quarter of them, the Star has learned.

As Wynne prepares to liberalize Ontario’s $5-billion-year alcohol retailing system‎, distribution to grocery stores will still be handled through the existing publicly owned LCBO and the private Beer Store chain.

Sources say the government hopes to generate revenue by selling the first wave of licences at auction, but wants to ensure they are fairly spread out to different companies for supermarkets across Ontario.

The Star’s Martin Regg Cohn revealed Friday that Finance Minister Charles Sousa’s spring budget will boast the greatest liberalization of booze sales laws in Ontario history.

At the same time, the Beer Store — the 448-outlet quasi-monopoly owned by the foreign parents of Labatt, Molson and Sleeman — will be charged an annual “franchise fee” of as much as $100 million and forced to open more shelf space to Ontario craft brewers.

Beer Store spokesman Jeff Newton said Friday the company is “subject to a non-disclosure agreement” during negotiations with the province and could not say much.

“The government of Ontario has a fiscal challenge and we have committed to being a responsible part of the solution,” said Newton, referring to the Liberals’ $12.5-billion deficit.

While details are still being finalized, Economic Development Minister Brad Duguid said Wynne is committed to solving an issue that has bedeviled successive governments since then-premier David Peterson broached it in 1985.

“If you’re questioning the determination of this premier to make some of these tough decisions that have not been made in generations . . . I would suggest that this premier has the steel to make those decisions,” said Duguid.

“She’s determined to ensure we get full value out of those assets not for the sake of doing so, but to ensure that we have the ability to invest that value in building a stronger province through investing in public transit and investing in infrastructure.”

Duguid said Queen’s Park is awaiting the final recommendations of former TD Bank chair Ed Clark’s advisory council on government assets to determine the future of the Hydro One transmission utility, and beer and wine distribution.

“The demands of customers are growing in retail, the expectations are growing. This does provide an opportunity for the government to provide Ontarians with a better retail experience,” he said.

The LCBO’s Genevieve Tomney said the publicly owned retailer, which runs 649 stores and supplies 212 rural agency outlets, is awaiting the final report from Clark’s panel.

“We look forward to the council’s recommendations and to further direction from government on next steps in the weeks ahead,” said Tomney.

But Ontario Public Service Employees Union president Warren (Smokey) Thomas, who represents 5,000 LCBO workers, opposed the “privatization,” predicting it would cost the government much-needed revenue.

Small breweries like the way things are headed, but want to make sure any changes will work for them whether it’s in Beer Stores or supermarkets, said John Hay, executive director of the Ontario Craft Brewers.

“We appreciate the effort everybody’s making,” he said in an interview, raising a note of caution about costs craft brewers could face under the planned reforms.

“If we have to pay a fortune for listing fees it’s a non-starter because the major brewers could buy it all up,” said Hay, noting Labatt, Molson and Sleeman have deep pockets.

Earlier this year, the Beer Store said it would make it easier and cheaper for craft brewers to list their products, but most characterized that as tinkering.

Wine Council of Ontario president Richard Linley was optimistic the changes could boost sales of locally grown VQA wines.

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“Our hope is that the modernized retail model will ensure more VQA wine is accessible to the Ontario wine consumer, create more opportunities for our industry’s growth and generate better returns for the government,” said Linley.

New Democrat MPP Gilles Bisson (Timmins—James Bay) blasted the Liberals, saying, “Don’t open it up in the way that’s being proposed.”

“Am I in favour of beer being distributed through grocery stores? No. We have a very robust system in this province, the LCBO and our Beer Stores, that do an excellent job providing good access,” said Bisson.

Progressive Conservative MPP Vic Fedeli (Nipissing) said the reforms are not about consumer convenience.

“This is a cash grab to help the government with its huge deficit . . . it’s not about whether it’s good or bad for the consumer. That’s not their motivation in all of this,” said Fedeli.

Jan Westcott, president and CEO for Spirits Canada, said it is “not acceptable” to the liquor industry that it would not have the same access as beer and wine producers.

“We have been assured on a number of occasions that we would see similar access for spirits. I guess we will have to wait and see,” he said.

Westcott stressed “we are a significant Ontario industry with five plants and we export something like $400- to $500-million of goods out of Ontario every year and we are the fourth largest buyer of corn in province.”

As the Star revealed, hundreds of larger supermarkets — from among the roughly 1,500 across Ontario — would initially be permitted to sell craft beer and major national brands on their shelves.

At the same time, they could also be licensed to carry Ontario-made and imported wines in their stores.

Sources said the government may also “repurpose” some licences now held by the Wine Rack and Wine Shop, which have supermarket kiosks selling Ontario and blended foreign bulk wine.

Grocery executives have been called in by Clark’s panel to discuss the sweeping liberalization.

The new policy will be a centrepiece of Sousa’s budget that is also expected to include the partial privatization of Hydro One, which is worth $16 billion.

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