Ontario’s alcohol container return program is facing significant challenges, as very few grocery stores currently required to accept returns are actually doing so. This situation jeopardizes the future of the system, particularly as The Beer Store, which manages the program, begins closing locations across the province. The low compliance raises questions about the feasibility of a province-wide mandate for all grocery stores starting in 2026 and could leave consumers with fewer options to redeem deposits.
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Key Takeaways:
- Only a handful of grocery stores required to accept alcohol container returns are complying.
- Grocers cite high costs, logistical issues, and unfair treatment compared to other alcohol retailers.
- The Beer Store is closing locations, potentially reducing return points ahead of a 2026 mandate for all grocers.
- The viability of Ontario’s recycling and deposit system for alcohol containers is at risk.
The Current State: Low Compliance Among Grocery Stores
Since last fall, approximately 70 grocery stores located more than five kilometers from a Beer Store have been mandated to accept empty alcohol containers. However, The Beer Store reports that only four of these stores are currently complying. The Ministry of Finance offers a slightly different number, stating 13 stores are complying and that more are expected to join soon.
This limited participation comes ahead of a major policy shift: starting January 1, 2026, over 1,000 grocery stores licensed to sell beer and wine in Ontario will be required to accept bottle returns. This date also marks when The Beer Store is permitted, under an agreement with the province, to close an unlimited number of its stores.
The Beer Store currently operates the deposit return system and processed 1.6 billion containers last year. Environmental advocates warn that reducing convenient return locations as Beer Stores close could severely undermine the program.
Karen Wirsig, a senior program manager at Environmental Defence, highlights the program’s importance for reusing beer bottles and recycling vast amounts of material, keeping it out of landfills. “As the Beer Stores keep closing, that will kill the Ontario deposit return program,” she stated. “If you don’t make returns convenient for people, they won’t do it.”
John Nock, president of the union representing Beer Store employees, argues for enforcement, questioning why consumers would pay a deposit if they can’t easily get it back. He contends that any retailer selling alcohol should be required to accept returns.
Why Grocery Stores Are Pushing Back
Grocery stores have voiced strong concerns about the deposit return program’s current structure for months. Issues range from sanitation and space constraints to the fundamental economics of operating a return system.
Earlier this month, associations representing small and large grocers sent a joint letter to Premier Doug Ford. The letter warned that many stores might cease alcohol sales altogether if the program isn’t improved. The Retail Council of Canada and the Canadian Federation of Independent Grocers stated, “Unless urgent changes are made to build fairer economics and to move away from a mandatory return-to-retail recycling system, our grocery members have advised that their stores will start the process of reviewing their future participation, potentially exiting the category all together.”
Grocers also feel disadvantaged by a recent government decision to increase a wholesale alcohol discount for bars, restaurants, and convenience stores from 10% to 15%. These businesses are not required to accept empty containers, unlike grocery stores, creating what grocers see as an uneven playing field.
Shopper views alcohol display in a grocery store, depicting the expansion of alcohol sales under new Ontario regulations.
Gary Sands, senior vice-president of public policy and advocacy with the Canadian Federation of Independent Grocers, called the disparity “inexplicable,” suggesting that if anyone should receive an increased allowance due to taking on recycling responsibilities, it should be grocers. This move, he argues, puts grocers at a competitive disadvantage, contradicting the government’s promise of “no winners and losers” in the new system.
Major chains echo these concerns. Loblaws is reportedly testing a return system in one store and finding it “ludicrously expensive,” according to Sebastian Prins, director of government relations for the Retail Council of Canada. He notes the cost is tightening already slim margins and retailers simply want to “compete on a level playing field.”
While the Alcohol and Gaming Commission of Ontario (AGCO) has begun sending “compliance letters” to non-compliant grocers, the industry describes the language as relatively soft at this time. Grocer representatives suggest the government could explore alternative models, such as moving beer cans to the existing blue box system, or at least convene discussions between grocers and The Beer Store to find a more cost-effective solution.
Government Agreements and Financial Implications
Premier Ford’s initial plan was to have beer, wine, and ready-to-drink cocktails widely available in convenience stores and all grocery stores by 2026. However, this timeline was accelerated in May 2024.
As part of an “early implementation agreement,” the province plans to pay The Beer Store up to $225 million. This payment is intended to help the company keep stores open and workers employed temporarily. Under the agreement, The Beer Store must maintain at least 300 locations until the end of 2025, but there is no minimum requirement starting in 2026.
The province’s Financial Accountability Officer (FAO) has highlighted the significant financial implications of the new alcohol retail system. The FAO projects a $215 million cost resulting from lower tax revenues, as grocery, big box, and convenience stores are not subject to the same tax structures as the LCBO.
Additionally, the FAO forecasts a $172 million reduction in the LCBO’s net income. While the LCBO is expected to see a $1.1 billion increase in wholesale revenue, this is offset by an estimated $812 million decline in retail revenue, $192 million in wholesale discounts to new retailers, $150 million in service rebates to brewers, $105 million in higher operating expenses, and $22 million in increased recycling fees.
Visual representation of financial figures related to Ontario government payments to The Beer Store and alcohol revenue changes.
Ozzie Ahmed, vice-president of retail for The Beer Store, emphasized the company’s ongoing role in container stewardship, noting they process about 1.6 billion containers annually, diverting waste from landfills and providing a convenient return method.
Outlook and Next Steps
The current standoff between the Ontario government and grocery retailers over the deposit return program poses a significant threat to the established system for recycling alcohol containers. With minimal compliance from mandated stores and the prospect of widespread Beer Store closures coinciding with a broad grocery mandate in 2026, consumers could face significant inconvenience in returning empties, potentially leading to a decline in returns and increased waste.
Industry groups are calling for urgent changes to make the return-to-retail system economically viable for grocers. The province faces the challenge of ensuring convenient consumer access to bottle returns while addressing the legitimate cost and logistical concerns of retailers before the 2026 deadline fundamentally alters the landscape of alcohol sales and returns in Ontario. The outcome will significantly impact waste diversion efforts and the competitive dynamics of alcohol retail.
