Canada and the United States share certain similarities in how the countries’ economies work. As a result, industries operating in both countries often experience similar trends and operating conditions. However, there are certain Canadian industries that perform markedly different when compared with their US counterparts. At the same time, some Canadian industries are inherently different compared with their US equivalents by their very nature (e.g. the actual structure of the industries differs).
These industries, which all fall under the banner of the alcohol industry in aggregate, occupy different locales when it comes to the supply chain for alcohol manufacturing and distribution. However, the Canadian industries are measurably different compared with the equivalent iterations of these industries in the United States.
Regulation differences affect supply chains
In both countries, liquor laws have shaped the overall regulatory environment for operators involved in alcoholic beverage production and sales. Still, the Beer, Wine & Liquor Stores industry in Canada experiences tighter regulations relative to its US counterpart. The Canadian government is much more hands-on regarding the distribution and purchase of alcohol across provinces. By contrast, in the United States, federal law reigns supreme over state law, with the same legal drinking age applying across all 50 states. However, liquor laws in Canada, including the legal drinking age, vary by province to the point in which the only way one can legally move alcohol between provinces is with the explicit permission of the provincial liquor control board(s) in question.
Provinces lay down the law
In Canada, each province has an established agency, or liquor control board, that controls the distribution, sale and downstream consumption of wine, beer and spirits. Further, as a result of varying liquor laws by province, it is often easier to buy liquor in some provinces than others. For instance, in Quebec, a consumer can purchase liquor in both corner and grocery stores. However, in Ontario, a consumer can only purchase beer, wine and liquor at the Beer Store and Liquor Control Board of Ontario. Still, other provinces contain private retailer markets (Alberta), mixed public-private retailer markets (British Columbia) or even government-only markets (New Brunswick, Nova Scotia).
Market share variations
The Distilleries industry in Canada and the Breweries industry in Canada exhibit a low and a medium level of market share concentration, respectively. In contrast, the Distilleries industry in the US and the Breweries industry in the US both possess high levels of market share concentration. Although there are many reasons as to why this may be the case, one potential explanation may be found in relation to the aforementioned regulatory environment for alcoholic beverages in Canada.
Fragmentation and oversaturation
Generally, industries that have a medium-to-low level of market share concentration tend to be more fragmented. Part of this fragmentation may ultimately be explained through the geographic scope of the services they provide, which is inherently limited in Canada.
Since each province is in control of its own liquor market, the opportunity for external companies to singularly distinguish themselves as a competitive force and occupy a notable percentage of the market does not exist. Conversely, in the United States, the supply chain for alcohol manufacturing and distribution is formulated differently, giving US operators a competitive advantage their Canadian counterparts lack. Nevertheless, the alcohol market in both countries serves as an interesting ground for comparison as to somewhat explain the diverging performance of equivalent industries.
