Ontario liquor strike sows supply-chain havoc for alcohol importers, restaurants

The strike by more than 9,000 employees of the Liquor Control Board of Ontario is creating confusion in the supply chain for alcoholic beverages in the province, as import agents seek clarity on the state of shipments, and restaurants and bars struggle to keep products in stock.

On Monday, the LCBO sent a memo to shipping companies that transport products, instructing them to hold cargo already received at warehouses, and to pause activities such as bookings of shipping vessels until further notice.

LCBO workers represented by the Ontario Public Service Employees Union (OPSEU) walked off the job last Friday, forcing 669 stores to close. The union opposes the Ontario government’s plan to greatly expand sales of ready-to-drink, spirit-based beverages in convenience stores later this summer. Union leaders have said that wider privatization of alcohol sales would threaten the LCBO’s viability as a retailer. They are also advocating for improved job security and working conditions and greater access to benefits, among other issues.

The LCBO has continued to sell alcohol through its website and mobile app during the strike, and alcohol remains on sale at private retailers such as The Beer Store, grocery stores, and on-site at wineries and breweries.

Ontario directs LCBO to increase promotion of local products amid strike

The notification about shipping pauses, however, raised questions among import agents, who strike deals on behalf of manufacturers, such as wineries, to promote and sell their products, about possible disruptions to their businesses.

The LCBO is still the importer of record for those products coming from outside of Ontario, and transactions go through the LCBO, with agents earning a commission – whether on sales to restaurants and bars, or directly to consumers willing to purchase a case. Some agents also facilitate deliveries within the province.

“If all our shipments are being frozen now, we’re not going to have wine in two to three months,” said Harris Davidson, managing director of Toronto-based Rogers & Company, which has been in the fine wine business for roughly 40 years.

Part of his revenues come from commissions on sales of products to LCBO stores, which dried up as a result of the strike, he explained. “I had a potential partial lift from being able to serve customers who weren’t going to shop in the LCBO during the strike. But now that consignment side of my business is in serious jeopardy.”

However, the scale of the shipping disruption remains unclear. The memo, posted online by industry association Drinks Ontario, noted that the LCBO’s transportation division would conduct “a daily call to review open items and shipment status updates.”

Drinks Ontario – which represents agents, suppliers and other industry members – is seeking additional information from the LCBO about which products are affected by the freight pause, according to a bulletin sent to its members.

“Given the impacts of OPSEU’s strike on LCBO operations, we had to pause carrier partner pickups to help reduce congestion in our warehouses and across our supply chain,” the LCBO wrote in an emailed statement to The Globe on Tuesday “Consignment orders are being reviewed individually to optimize product flow.”

The OPSEU did not respond to requests for comment on Tuesday.

“This has the potential to be cause of alarm, but I’m not sounding the alarm yet,” said Colin Halpern of Toronto-based Halpern Enterprises, which represents more than 175 wineries and distilleries around the world. He has reached out to the LCBO to ask how the freight pause will impact his orders going forward, and is waiting for clarification, he added.

LCBO strike spells opportunity – and uncertainty – for businesses

Meanwhile, restaurants and bars are also growing concerned about their ability to order the products they need to run their businesses, said Kris Barnier, vice-president of Central Canada for industry group Restaurants Canada. Business owners who have tried to order through the LCBO’s website have noticed many products out of stock.

“The inventory is not in the system,” Mr. Barnier said. “It’s creating increasing challenges for restaurants.”

He added that many establishments are already struggling with debt left over from temporary closings during the pandemic, and expenses such as food costs, rent and wages that have risen significantly over the past two years.

“This creates some real risk for a lot of businesses,” Mr. Bernier said.