Some GTA grocers are pulling booze off the shelves. Will more follow?

Ontarians have waited decades to buy their favorite wine and beer from local supermarkets, and their wish was finally granted nearly 10 years ago by the previous Liberal government. But in recent months, shoppers have reported a puzzling new trend: Several retailers have quietly closed their alcohol sections.

The Star has confirmed at least four supermarkets in the GTA in recent months where alcohol has disappeared from the shelves. They include Sobeys-owned FreshCo in Bathurst and Nassau, Loblaws in Queen and Portland, Loblaws in Empress Walk in North York, and Loblaw-owned Real Canadian Superstore in Brampton.

Loblaw and Sobeys did not respond to questions about how many of their stores have stopped selling alcohol and why. However, the Retail Council of Canada, which represents the country’s largest grocers, including Loblaw and Sobeys, said high levels of theft have hurt the profitability of alcohol sales in some locations and an industry expert told the Star that profits from beer and wine sales are often surprisingly small at first.

As food prices continue to rise, shoplifting in all categories of supermarkets, including alcohol, has soared and is costing stores billions of dollars, said Michelle Wasylyshen, a spokesperson for the Retail Council of Canada. Ironically, retailers’ increasing reliance on self-checkouts to cut labor costs and fill staff shortages is making it easier for customers to walk away without paying.

While she did not confirm how many retailers have stopped or will stop selling alcohol, Wasylyshen said some supermarkets will no longer sell beer and wine “partly because of the high rate of theft, which has made the current business case for selling alcohol unprofitable .”

“In some locations, (theft) has become more unmanageable,” Wasylyshen said. “And so that the retailer makes a choice about what to take off the shelves.”

Gary Sands, a senior vice president at the Canadian Federation of Independent Grocers, added that the problem is exacerbated by the razor-thin margins on alcohol sales in some supermarkets.

“The main thing that would force the grocer to exit the beer and wine market is without a doubt the margins,” Sands said.

That’s because many stores had to agree to withhold only a small portion of the total profit from beer and wine sales in order to get a license to sell alcohol to begin with.

Under a program started by the previous Liberal government in 2015, up to 450 retailers – a mix of large and independent grocers – were chosen to sell alcohol through a competitive bidding process. As part of their offer, retailers had to pay a margin, the percentage of the profit they could keep for themselves. The government allowed retailers to offer margin rates between two and 6.9 percent.

Retailers in competitive markets “with lots of stores nearby should bid low to have a realistic chance of getting a license,” Sands said.

The bids were submitted to the Liquor Control Board of Ontario (LCBO), and successful bidders then submitted their individual retail locations to the Alcohol and Gaming Commission of Ontario (AGCO) for approval.

Once authorized, grocers entered into a wholesale supply agreement with the LCBO as the sole supplier of wine, beer and cider to the stores. In 2021, the LCBO reported that it drew $486 million in revenue from supermarket sales, a significant increase from $247 million in 2019.

According to Wasylyshen, the average gross marginal rate paid to supermarkets for alcohol is only 2.2 percent. Sands said many of his federation members have a margin of about two to three percent on alcohol sales.

“Selling alcohol at those margins is just not sustainable,” Sands said, adding that when a customer buys alcohol with a credit card, the interchange fee alone erases all profits.

Factor in an environment where theft is on the rise along with labor costs, “simply put, grocers lose money when they sell beer,” Wasylyshen said.

Sands expects more grocers to remove alcohol from their shelves in the future.

“If margins don’t change, we can expect more and more grocers to stop selling alcohol,” Sands said.

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