This question needs to be done with the help of case study below:

Dealing in a Duopoly

A smartly dressed young Collingwood professional exits his Subaru, having pulled into the parking lot at Side Launch Brewing Company. All signs indicate an active type of individual. The mud-encrusted tires of both his car and the mountain bike perched on its rooftop, and a variety of active brand stickers adorning the rear window, would suggest he's more than just a weekend warrior. Upon entry to the brewery, he waves familiarly to Laura, who's hosting the retail outlet in the building, and Laura waves back like a good neighbour would. The young man makes a beeline to the well-stocked Side Launch refrigerator and pulls out a box of the bright yellow Wheat beer cans. Laura and the man exchange pleasantries as the transaction is carried out, and he's on his way out the door in moments. If all Side Launch sales could be so easy, so frictionless ... so autonomous. But, alas, neither Side Launch nor any brewery can have total control of every sale of its product and still reach any level of scale.

Alcoholic beverage producers have two distinct retail channelson-premises, the sale of product through bars, pubs, restaurants, and the like; and off-premises, the sale of product through liquor stores and vendors. As mentioned in the previous chapter, the thousands of licensees (bars, restaurants, and pubs) scattered around its geographical reach provide Side Launch with enormous opportunity to sell cans and kegs where people gather to enjoy a cold one outside of the home (on-premises). But for the other segment of the market (off-premises), Side Launch and all other brewers in Ontario have minimal choice. "It's a duopoly," states Chuck Galea, VP Sales and Marketing. "You have LCBO [Liquor Control Board of Ontario] primarily, and the Beer Store." The irony is that the Ontario government regulates the production and distribution of beer and operates the 660-plus LCBO stores in the province, but The Beer Store is a privately owned retailer that operates 450-plus storesandserves as distributor to LCBO and 20,000 licensees in the province.

The relationship between a small private craft brewer like Side Launch and a massively powerful entity that is both the regulator and retailer, LCBO, is predictably complicated. "The LCBO, on the one hand, is great for craft in that they do promote us, and they are the major retailer in the province, but they have a bit of hard row to hoe in that craft beer is their fastest-growing segment but it is their lowest margin," explains Garnet Pratt, CEO. "So when it comes to allocating shelf space they've got a bit of a battle: their customers want more craft, but every inch of shelf space they give to craft, they have to take away from something that is more profitable."

Recently grocery stores have been allowed to enter the beer-selling picture, and the government has mandated 450 licences can be granted in Ontario by 2018. "Loblaws will get some of those licences and yes, we'll have three of our styles of beer in every single Loblaws store with a licence," claims Garnet confidently. However, in defence of her craft beer brethren (she sits on the board of Ontario Craft Brewers), she says, "A lot of the small breweries, they could never supply all Loblaws stores, they just don't have enough beer."

For Side Launch, the relationship with retail is bittersweet as it finds itself benefiting from a standardized and consistent retail channel for its growing brand but is still somewhat encumbered by the regulator, which ultimately plays a role in influencing that demand.

1. Does the increase in number of retail categories where beer can be sold help or hinder Side Launch?