Costco jumps into beer and wine as retail booze sales expand in Ontario

It’s more like a stream than a flood.
The latest expansion of retail alcohol sales in Ontario kicks off Thursday, and it’s probably not quite as big as the provincial government had hoped — with one exception.
Fewer than 15 per cent of grocery stores eligible for a new alcohol sales license have applied for one, thanks largely to a dispute over recycling requirements. American big-box giant Costco, however, has leapt in with both feet, with all 31 of their Ontario stores getting licenses, along with a 32nd store opening in late November.
A spokesperson for Ontario finance minister Peter Bethlenfalvy said the government is happy with the numbers so far. 
“With the next market expansion this week, we are pleased that over 400 grocery stores are already gearing up to provide people with more choice,” said Colin Blachar.
Just 405 stores have been granted one of the new grocery store licenses, according to figures from the Alcohol and Gaming Commission of Ontario. According to estimates from the Retail Council of Canada, there are just over 5,900 stores in Ontario which would be eligible to get one.
Another 450 grocery stores across the province were already selling beer and wine under the Master Framework Agreement, a 10-year deal with The Beer Store set to expire at the end of 2025.
In late August, the provincial government announced an agreement with The Beer Store to get an early jump on wide-open alcohol retailing that would otherwise have had to wait until the beginning of 2026, after the official end of the MFA. On Sept. 5, more than 4,000 convenience stores began selling alcohol. To date, more than 4,700 convenience stores in the province now have alcohol licenses, more than half of the 8,500.
It’s no coincidence that a big box retailer like Costco is already fully committed, said retail analyst Lisa Hutcheson.
“They’ve got a lot more space for rotating products, and a lot of their product is in cases on pallets,” said Hutcheson, managing partner at retail consultancy J.C. Williams Group.
Hutcheson doesn’t expect grocery chains like Loblaws, Sobey’s or Metro to dive in quite as quickly as convenience stores have.
“If you’re a bigger grocery chain, you want to get some data before rolling it out more widely. So you take a few stores, and figure out what works, and whether it actually changes foot traffic or not,” said Hutcheson, adding that a requirement to handle empty bottles and cans has also made some retailers leery of signing up.
“The recycling piece added a dimension to what was originally a slam-dunk decision for retailers,” said Hutcheson. “There’s potential for cross-contamination, especially with the fresh foods. And that could create issues for health inspectors.”
That’s exactly what Mike Sharpe, who runs a grocery store in Campbellford, Ont., was worried about. Sharpe applied for and received one of the new grocery licenses, but has decided he won’t be selling alcohol after all, at least for now.
“We’ve got meat, we’ve got fresh produce, we’ve got a packed storeroom in the back,” said Sharpe. “I’m all in favour of recycling. But this just wouldn’t be practical for us.”
At first, Sharpe had been eagerly looking forward to selling beer, wine and ready-to-drink cocktails like hard seltzers to the cottage country crowd coming into his store. But after realizing that he’d need to accept empty bottles and cans, then sort them so they could be picked up by The Beer Store, he took a pass.
“We were all excited, but it just wasn’t going to be worth it,” said Sharpe.
As part of the agreement announced in August to speed up the opening of the alcohol market, the government gave The Beer Store a mandate to run the Ontario Deposit Return Program, with oversight from the LCBO.
While retailers can sign an “alternative agreement” with The Beer Store which allows them to modify some aspects of their recycling duties, including pairing up with other companies for off-site drop-off and pickup, the recycling requirement has still kept many stores from applying for a license, said Sebastian Prins, director of Ontario government relations for the Retail Council of Canada.
Sorting and cleaning would be a logistical nightmare that would require expensive renovations and would present a very real danger of contaminating other products in the store, Prins said.
“We would be much more supportive of a depot-based system,” Prins said, “simplifying many of the concerns related to operations, space, cleaning and pest control.” 
Still, the finance minister’s spokesperson argued the ODRP has been a success story, and expanding it from its current base at The Beer Store gives consumers more options.
“By opting into the recycling program, grocery stores will join a safe and successful program that has been used not only by the Beer Store but other jurisdictions,” said Blachar.  “Consumers will have even more access to convenient return locations in communities across the province.”