How does removing U.S. alcohol off LCBO shelves impact the spirits industry? An expert weighs in

The provincial liquor retailer says all the products will be stored until the tariffs are removed.

Ontario Premier Doug Ford has warned that the removal of U.S. alcohol from LCBO shelves will be an “enormous hit” for American producers amid an ongoing trade war but at least one industry representative is questioning whether the policy will actually accomplish its intended goal.

As of Tuesday, Ontarians can no longer buy Californian wines, Kentucky bourbon and a slew of other American-made alcohol products as part of the province’s “first round of retaliation” against U.S. President Donald Trump’s tariffs. To fill the void, the LCBO says it will be replacing these products with “suitable alternatives,” including Ontario and Canadian-made products.

Since the province controls a majority of the alcohol market through the Liquor Control Board of Ontario (LCBO) and sells up to $965 million worth of U.S. alcohol annually, Ford says this move will hit hard.

But while the province no doubt sells a lot of liquor from the U.S., Spirits Canada President and CEO Cal Bricker says that there is a significant disparity at play as Canada exports three times as much alcohol as it imports.

Spirits Canada is a trade organization that represents the interests of the distilled spirits industry.

“The U.S. has (340) million people, we have 40 million people—it’s driven primarily by that,” Bricker told CTV News Toronto. “These arguments have been made to both the federal and most of the provincial governments that using the liquor boards and punishing the spirits sector is not the way to go here for a number of reasons.”

Ford has said the ban will impact 3,600 products from 35 different states.

Bricker, however, says that isolating an American company as a retaliatory measure may be challenging given the nature of the spirits industry.

“It doesn’t exist anymore. If you take a look at a company like Diageo, for example, they own Crown Royal in Canada. They own Bulleit Bourbon in the U.S., and they own Don Julio in Mexico,” Bricker said. “So, if you retaliate against them – who are you retaliating against? You are retaliating against yourself.”

To understand why the province—and even others across Canada—made this move, Bricker says that you have to view the move through a political lens versus an economic one.

“If the Government of Ontario is looking to adopt non-tariff barriers to send a signal to the United States, it doesn’t have a long list of things it can look to that it can actually control,” Bricker said. “But right at the top of the list, in terms of public visibility, is U.S. products in the LCBO, and the government controls the LCBO, so it can take those actions and it can be seen to be taken by the public.”

Bricker goes on to say that yanking U.S. booze from the LCBO’s shelves and catalogue will have “severe” impacts on the spirits industry across North America due to an intertwined supply chain and trade protections on Canadian whiskey, American bourbon and Mexican tequila, which will shut some products out of certain markets.

“It’s a far, far more severe penalty that’s being put on American whiskey and American liquor products than is being charged on Canada for exporting to the United States, although a 25 per cent tariff is very severe,” Bricker said.

Just recently, the maker of Jack Daniel’s said removing its products off store shelves is “worse than a tariff” and a “disproportionate response” to the levies imposed by the White House.

“I mean, that’s worse than a tariff because it’s literally taking your sales away (and) completely removing our products from the shelves,” Brown-Forman’s CEO Lawson Whiting said on a post-earnings call on Wednesday. Canada accounted for just one per cent of the company’s total sales, however.

Trump has granted Canada and Mexico a one-month exemption on the 25 cent tariff for products that fall under the United States-Canada-Mexico Agreement, though Ford has vowed to keep Ontario’s retaliatory measures in place until the tariffs are dropped altogether.

In a statement, a spokesperson for the premier said that “any alcohol purchased in Ontario is bought through the LCBO,” including what is sold by bars and restaurants.

With files from Reuters