Why does buying alcohol remain such a bizarre experience in this province, without parallel on the planet?
A sobering new report by the C.D. Howe Institute offers a fascinating history lesson on Ontario’s labyrinthine beer and booze distribution system, which remains frozen in time. Ever since the post-prohibition era, Ontario politicians have blended social morality with a monopoly mentality — and still can’t seem to shake their addiction.
Unsurprisingly, the report recommends liberalizing alcohol sales. Predictably, the Liberal government of the day (behaving like all major parties in power) has flatly rejected the suggestion.
Now, the last hope for change rests with Ed Clark, the outgoing TD Bank chief who is heading up a review of government assets. He is poring over the LCBO’s books to extract as much as $300 million in additional revenues from its operations.
Sources suggest those savings could come from changing the LCBO’s internal job classifications, updating its pricing structure and boosting its own beer sales (which it has foolishly limited over the years). But the best advice he could give the government would be to dismantle The Beer Store monopoly.
Barely 13 per cent of Ontarians realize The Beer Store is not government-owned — it’s controlled by three overseas multinationals that profit shamelessly from the arrangement: Anheuser-Busch InBev, Molson Coors and Sapporo
The latest C.D. Howe report makes a persuasive case that The Beer Store is scooping up hundreds of millions of dollars a year in hidden revenues: Not only can this quasi-monopoly charge higher prices than in Quebec (pre-tax), it also saves big money by cutting corners at the front counter, thanks to a lack of retail competitors.
The report calls for liberalizing beer sales so that other enterprises — not just convenience stores but supermarkets and superstores — can also get a licence. Yet Premier Kathleen Wynne continues to make excuses for The Beer Store, as does the NDP. Even the free-enterprise Tories lost their tongue during the last election, abandoning a pre-campaign plan to allow competition.
But the inertia goes beyond The Beer Store to include willful blindness at the LCBO. Under a cosy political deal cooked up between the two organizations more than a decade ago, the Crown-owned LCBO has agreed not to stock beer in sizes larger than six-packs. The effect has been to keep LCBO’s share of the beer market at just over 20 per cent, when it could be much higher if it sold 12-packs or cases of 24.
This arrangement also gives The Beer Store unfair leverage to extort higher prices from the restaurant and beverage sectors, which must pay an even higher premium than regular consumers for cases of 24. Why is the LCBO complicit in this unjustifiable arrangement?
Beyond beer, there is another anachronism that afflicts Ontarians: Thanks to consolidation and globalization in the wine industry, those privately run wine boutiques you see in many supermarkets are dominated by two foreign-owned operations — Vincor Canada (taken over by Constellation Brands) runs more than 160 retail Wine Rack stores, and Andrew Peller Ltd. operates about 100 Wine Shop outlets.
When these outlets were “grandfathered” by the Canada-U.S. Free Trade pact in 1987, they were locally owned — and the idea was to protect the market share of Ontario vintners. Now the arrangement has been turned on its head, with massive U.S. operations enjoying an unfair advantage over local wineries who cannot sell their wares outside the LCBO.
There is no easy remedy to this anomaly without violating the free trade deal. The C.D. Howe’s report suggests — wrongly, in my view — throwing wine sales open to everyone. This seems akin to throwing our nascent wineries out with the bathwater — or blended foreign plonk.
It’s too soon to dilute or dismantle the LCBO. A free-for-all would only deprive the provincial treasury (that’s us) of monopoly muscle in terms of purchasing power and retail control. But for the LCBO to remain in business, it must raise its game — and reduce the handicaps faced by Ontario wineries.
As for The Beer Store’s bizarre multinational monopoly, it’s time to liberate Ontarians from their foreign brew masters. Beer drinkers should be able to raise their glasses without emptying their wallets.