The Progressive Conservatives' proposed termination of The Beer Store deal has a "huge economic upside" for Ontario's craft brewers, says the province's top adviser on alcohol.

Ken Hughes vows that reforming beer sales will "free up" the market for smaller craft operations, which he says are a cornerstone of Ontario's identity.

"Today the craft brewers in Ontario are disadvantaged by the way The Beer Store operates. Only two per cent of the beer sold through The Beer Store is from craft breweries," he said in an interview with CBC Radio's Metro Morning.

Hughes, a former Conservative MP who also served as an Alberta cabinet minister, delivered his report to Premier Doug Ford late last month on ways to boost consumer choice and convenience in alcohol sales.

Based on Hughes' recommendations, the Tories tabled legislation last week that would allow the province to turf a 10-year agreement with The Beer Store.

Before the Ford government can open the beer retail market to corner and big box stores, it needs to scrap a contract with The Beer Store that limits the number of retail outlets in Ontario until 2025. (Jeff Walters/CBC)

The deal, signed by the previous Liberal government, permitted the expansion of beer and wine sales to hundreds of grocery stores across Ontario. But the contract also barred them from using their own distribution system and negotiating their own price deals with brewers.

The PC's sweeping move would lay the groundwork to allow every grocery and convenience store in Ontario unfettered access to sell beer, cider and wine.

In order to expand those sales, however, the Ford government must pit itself directly against a coalition of the province's top brewers — Labatt, Molson and Sleeman — which retain predominate control of The Beer Store.

"There is no other place in the world where the government has handed over to the three largest players in the industry essentially a management control position in the marketplace," Hughes said on Monday, noting that the current monopoly is bad for consumers.

But the beer giants already have plans to fight back.

Labatt and Molson warned the province last week that breaking the beer agreement would trigger steep financial penalties and indicated they will file a legal challenge over the proposed termination.

When asked about this looming expense and what it could cost the taxpayer, Hughes stated "it's completely premature to suggest that it'll cost anything."

"Let's see how it plays out," he said.

Scott Simmons, president of the Ontario Craft Brewers Association, has long been encouraging the province the expand alcohol sales beyond The Beer Store.

The group represents some 95 of the province's 270 small-scale brewers.

Craft breweries can currently have a maximum of two retail locations, but an indefinite number of production facilities.

While craft beer accounts for eight per cent of all beer sales in Ontario, Simmons told CBC News last month that further privatizing the market could raise that number.

"When you start expanding retail access to more grocery stores, big box stores or specialty alcohol stores or convenience stores, you're just creating more distribution."