TORONTO -- The Calgary-based brother-and-sister team behind Minhas Craft Brewery has given up on building a new brewery in Hamilton and are blaming their decision on what they call the “legalized retail monopoly” controlling Ontario’s beer market.

Ravinder and Manjit Minhas, who began selling their low-priced Boxer lager in the province just over a year ago, wanted to double or triple their brewing capacity and have been looking to do it at a Canadian facility.

The pair, who bought the company in 1999 as 18- and 19-year-old university students and began selling their beer in 2006, have a brewing facility in Monroe, Wis. They offered initially to buy the assets of the Lakeport Brewery in Hamilton from Labatt Brewing Co. after the brewer announced in March that it was shutting the facility down. But Labatt refused to sell to them, a move the big brewer made, the Minhases believe, to thwart the upstart competitor.

“Building a new brewery is just so much more expensive than [buying an existing one] that is in place,” Ravinder Minhas said Thursday. His company sells 15 brands of beer in Alberta, Saskatchewan, Manitoba, Ontario and 35 U.S. states and has $100-million in annual revenue.

The big brewers have an unfair advantage in the province that exists nowhere else in North America, he argued, in owning the retail network that sells 85% of the beer sold in Ontario. The Beer Store is 95% owned by the conglomerates that bought Labatt and Molson in Canada: South African Breweries, which brews Miller, Coors and Molson; and Anheuser Bush/ImBev/Labatt; 5% is owned by Sapporo of Japan, which owns the Sleeman Brewery in Canada.

“They have a stranglehold on the beer industry in Ontario,” Mr. Minhas said in an interview. “We have to pay [The Beer Store] listing fees. They get to approve our marketing. This astonishes us. In other jurisdictions in North America, no brewer is allowed to have anything to do with a retail store. I do not want to tell my competition what my next marketing program is going to be.”

The remainder of beer in the province, about 15% of the total market, is sold by the Liquor Control Board of Ontario (LCBO), a provincial Crown corporation, through its provincially owned liquor stores, which carry mostly higher-end brands and can only sell six-packs, not cases of 12 and 24 cans and bottles.

Mr. Minhas claims The Beer Store has been slow to allow him to market Boxer inside the stores.

But Jeff Newton, a Beer Store spokesman, said Mr. Minhas’s claims are not supported by facts or statistics.

“We would categorically reject the notion that The Beer Store has done anything that would inhibit their company’s ability to access the market and grow.”

Before it was purchased by Labatt, Lakeport built up a 10% market share in the province when The Beer Store had the same ownership structure, he said.

Meanwhile, Sleeman, before it was bought by Sapporo, had become the third-largest brewer in the country. “They grew and became successful working inside this system,” Mr. Newton said.

While they are growing sales off of a smaller base, Mr. Newton noted the brewers who are not owners of The Beer Store have increased business at a much faster rate than the total market average in the past five years, vastly outperforming the brands of the brewers who own the retail chain.

Sales by the owner-brewers have declined in volume over the period, “while all the others have been growing,” he said. Sales by Brick Brewing Co. and all out-of-province brewers have risen 31% over the past five years. Sales by small brewers are up 71% in that period.

Mr. Minhas has complained about The Beer Store to the Speaker of the House in Ontario and an MPP. He wants the Ontario government to prohibit brewers from owning retail stores in Ontario and wants the beer selection expanded at the LCBO to include all brands and sizes.

He and his sister are looking for opportunities to open a brewing facility elsewhere in Canada.

Financial Post

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