No sooner had an outside panel laid out its grand plan for liberalized alcohol sales in Ontario then the government declared its “Three No’s.”
No to privatization of the LCBO.
No to breaking the foreign-owned Beer Store monopoly.
No to levelling the playing field for small Ontario wineries.
That was nearly a decade ago, when a government-appointed expert panel told the Liberal government of the day what it didn’t want to hear. And got nowhere with then-premier Dalton McGuinty.
No deal in 2005. No sale.
Now fast forward to 2014: Another expert panel, another Liberal government.
This time, heavyweight TD Bank chief Ed Clark is helming the government panel, heeding the government’s position, and hewing to the party line. Instead of the “Three No’s,” watch for the “Three Go’s” from Liberal Premier Kathleen Wynne.
Not privatization but modernization at the LCBO.
Not liberalization but commercialization at The Beer Store.
Not a level playing field but a more level-headed approach to wine sales.
The first step for Clark’s privatization panel was to take stock of previous panels that went nowhere. And to avoid following in their footsteps.
“Our bias was clearly towards the doable,” Clark said in a marathon speech outlining his approach. “We prefer a more measured approach . . . (that) actually gets things done rather than adds to the list of reports never implemented.”
Instead of biting off more than it could chew, the panel opted for bite-sized chunks. There is method to their meekness.
Clark’s panel recognized the government’s diktat that an LCBO sale was off the table. Unlike the 2005 panel, it went to work making the alcohol monopoly work better.
The plans for reforming the LCBO are ambitious and possibly transformative: dragging it into the digital age with online ordering and pick-ups at local outlets; new warehouse stores in big cities to provide the kind of scale that Costco delivers in the U.S.; and boutique locations catering to local markets or neighbourhoods.
These changes might sound incremental, but they could go a long way toward satisfying complaints from both ends of the market — wine connoisseurs who whine about the selection, and wine consumers who want their plonk priced competitively. Improved procurement practices — getting rid of the LCBO’s unwieldy, Pentagon-style “cost-plus” margins — should also deliver higher profits.
And then there is The Beer Store. Like the LCBO, it cannot be privatized, but for different reasons: It is already privately held by multinationals Anheuser-Busch Inbev, Molson Coors and Sapporo.
Now, Clark’s panel wants to remove the handcuffs imposed on the LCBO by a previous Tory government in 2000. Back then, it was directed to sign a “Framework Agreement” preventing it from selling beer in packages of 8, 10, 12 or 24 — thus limiting its selection of most craft beers and restricting its volume of big national brands.
The Beer Store pushed for the pact so as to codify past practice — reflecting its monopoly mentality that retailing should remain frozen in time. Now it’s time to get with the times.
The panel wants to reduce those restrictions, allowing the LCBO to sell up to 12-packs (yet would foolishly restrict cases of 24). More importantly, it wants to charge The Beer Store a kind of “franchise fee” for the privilege of maintaining its quasi-monopoly across Ontario — unique in the world.
The benefits of this protected, fully integrated system “partly go to the producers,” Clark concludes. “Ontario taxpayers deserve their fair cut of the profits generated from the beer producers.”
Predictably, The Beer Store reacted by fulminating like a head of foam, with dark warnings that any new “monopoly fee” would raise prices. Clark and the Liberal government counter that the brewers had better not pass the buck to consumers — perhaps ensuring compliance by forcing the privately held Beer Store to open its books for the first time.
How much does the government believe it is owed by the big breweries? Likely in the tens of millions of dollars, to start.
What happens if The Beer Store escalates the public fight (as it considered doing last week), threatening store closings and layoffs of unionized workers? At that point, the government could deploy its nuclear option, blowing up the outdated “Framework Agreement” so that other private retailers could compete on beer sales.
Clark’s panel is taking only baby steps — yet The Beer Store is crying like a baby. If the big brewers scale up their squawking, they might finally prompt the government to liberalize — and liberate — our beer sales.