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48 Comments

cityscape

Public Works: Selling the LCBO

Lots of other places have abandoned government liquor monopolies without descending into drunken chaos. Should we make the leap?

Public Works looks at public space, urban design, and city-building innovations from around the world, and considers what Toronto might learn from them.

Photo by DdotG from the Torontoist Flickr Pool.

This week, Tory leader Tim Hudak promised that if he were premier, liquor sales in Ontario would be privatized. The idea has been floating around for decades, of course, and is often trotted out when a politician wants to assert their non-socialism or is just suffering from a lack of attention.

The government booze monopoly has been abandoned in many North American jurisdictions—to say nothing of Europe, where baby formula and table wine are pretty much equally available. Should we do it here?

Change can be good. Ontarians of a certain age may remember a time when LCBO stores were cheerless Soviet-style warehouses where customers reviewed short lists of options before completing application forms for their purchases. The documents were reviewed by grim-faced apparatchiks with facial expressions that conveyed appropriate amounts of disapproval for customers’ moral turpitude. These clerks would disappear into the back, eventually returning with the booze.

We’ve come a long way since then, not just in terms of product variety and access, but also in terms of customer experience. Modern LCBO outlets have bright lights, Vivaldi on the PA system, and cheery Aussies pitching kangaroo-flavoured Chardonnay samples. Would privatization serve us better?

Well, let’s consider what a liquor distribution system needs to accomplish.

PR flacking about “social responsibility” notwithstanding, the main job of the LCBO is to raise money for the government. If the industry were opened up to competition, prices could drop, sales could increase, and more tax dollars could flow to government coffers. However, a 2011 report from the Parkland Institute says that the per-capita government revenues from alcohol sales in Alberta have dropped steadily since liquor sales were privatized in 1993, and that those revenues were lower than in both B.C. and Saskatchewan (where some and all liquor stores, respectively, are government operated).

We also want to provide buyers with decent price, convenience, and selection. LCBO stores today are able to offer a broad array of product, from fancy gift liquors, to imported wines and beers, to the full panoply of “Hold-Ashley’s-hair-back-while-she-pukes” coolers.

This is possible in part because the LCBO has the resources to deal with a variety of vendors, both large and small. But it’s also because, unlike private enterprise, the organization isn’t driven entirely by profit. Where a private operator might stock shelves with cheap, high-margin beers and sweet, disgusting wine-based product, the LCBO can afford to take risks on unusual items. (If you doubt this characterization of private alcohol sales, visit the liquor section at Walmart next time you’re in Buffalo.)

Price-wise, the conventional wisdom is that we pay too much for our alcohol here in Ontario, and that we could do better if we had less monopoly. But in 2004, when the B.C. government first allowed private liquor sales, the predicted price drop didn’t materialize. A study [PDF] from the Consumers’ Association of Canada only two years later found that despite the rapid proliferation of private liquor retailers, prices were higher than in the remaining government-run stores (although it should be noted that all stores still have to buy their product from the government, with large markups). The Parkland study referenced above arrived at similar conclusions.

Finally, the goal of a government booze monopoly is to better protect us from ourselves—to keep us away from the silly sauce when we’re underage, or when we’ve already reached the government-approved level of boozy dementia. While private retailers may comply with the law for fear of punishment, a greater number of stores would increase the probability of there being a few opportunistic owners willing to take a chance and sell illegally.

This isn’t just an assumption. A study this year from the Canadian Centre for Policy Alternatives found that public liquor stores in B.C. are twice as likely to turn away kids and drunks as private stores. So this category is definitely a win for Big Bartender.

In any case, telling us what to do is what government excels at. The LCBO, in particular, does it well (apart from their controversial policy of selling booze to underage teens in burkas).

And everything else notwithstanding, Ontario has never demonstrated all that much enthusiasm for dismantling the LCBO. Even Mike Harris couldn’t get six-packs into his corner store.

So why change? We have a system that does more or less what it’s supposed to do, and to which the population is basically indifferent. Not a ringing endorsement, but that’s how we roll here in Ontario.

Comments

  • Gabe

    I care more about opening up the private Beer Store monopoly. At least the LCBO contributes a chunk of change to the public purse. The Beer Store is state-sanctioned private monopoly. Take that on first.

    • https://paul.kishimoto.name/ Paul Kishimoto

      To paraphrase the article, “Hudak’s flacking about ‘choice’ notwithstanding, the main idea behind privatizing the LCBO is to chop revenue from the government.”

      If he actually had the concerns he professes to have, he’d do as you say, and also allow private sales. The extra step of jettisoning the LCBO in a fire sale would be a generous gift to a private buyer (like ORNGE?), but certainly not fiscally conservative.

      • Anonymous

        I’m pretty sure Hudak’s main idea behind privatizing the LCBO is “how can I get some media attention?”.

    • Anonymous

      Worse than that, it’s a state-sanctioned foreign-owned private monopoly.

    • Anonymous

      Doesn’t the Beer Store generate revenue through alcohol tax?

      • Anonymous

        Yes, and so does the LCBO. The difference is that the LCBO’s retail profits also go to the government, while the Beer Store’s profits go to its foreign owners.

        • Anonymous

          …. so the Beer Store does contribute a (somewhat smaller) chunk of change to the public purse.

          • Eric S. Smith

            …and beer sales would continue to do so, regardless of the ownership or monopoly status of the seller. Unless we think that Brewer’s Retail collects more tax per unit sold than Joe’s Beer Hut would.

    • http://www.johnoriordan.ie/ John Ó’Ríordán

      But wouldn’t the province still make money from the tax on alcohol? Privatising it would cause competition which would lower the price but the province could set a flat duty, as opposed to a percentage, on all alcohol. They still make their money, we get a wider choice and more convenient locations.

  • Anonymous

    Especially since the LCBO has really increased selection in liquors. More whiskies, gins, vodkas, and various cocktail necessities. They seem to be listening to bartenders and consumers about what’s in demand. They may not be as fast as some would like, but they’re far better than even a few years ago.

    • Anonymous

      I’ll drink to that!

    • http://www.facebook.com/people/Ryan-Smith/517957122 Ryan Smith

      And a beer fanatic like me weeps in frustration (ok, slight exagerration) with the knowledge that a convenience store in the converted bottom floor of a residential house in Syracuse, NY carries over 350 different varieties of beer. The overwhelming majority of it craft. That’s in a city with just over one-third the population of London, Ontario and only ten thousand more citizens than Barrie. You’d think a place like that could at least exist in a major urban centre like Toronto.

      • Astin44

        Then fight to get The Beer Store shut down and beer sales to open up. The Beer Store serves NO purpose – it’s owned by foreign companies, provides no revenue (beyond tax) to the government, and keeps the local craft business from flourishing as much as it could. The LCBO isn’t the problem when it comes to beer.

  • SoAngryIHadToStopLurking

    Ok. I the yanks get on my tits as much as the next guy, but to suggest they have a worse liquor selection in (NY State at least) is just flat out wrong. For gawd’s sake, there are various alcohol enthusiast groups in Toronto that take group trips to Buffalo to buy just because the selection is better. Saying the LCBO’s selection is anything but awful, just because it compares favourably with WallyWorld is a horrible straw man.

    • Anonymous

      I agree. If you’re daft enough to shop at a Wal-Mart in Buffalo, you deserve the kind of beer they sell there.

    • Anonymous

      The LCBO does have an amazing selection though and will order in what you want if that store doesn’t stock it all the time. I can maybe booze group trips to Buffalo to save money on their booze but not for better selection, unless your talking beer which is different from the LCBO.

  • Anonymous

    A huge downside of the monopoly is that the government acts as the gatekeeper for local craft brewers and wineries, and can set whatever terms it likes. If there are more purchasers, these small businesses have more ways to get their product to market.

    • Anonymous

      Hmm… there’s an idea: any store can sell booze from Ontario-owned-and-operated breweries/wineries/distilleries. I wonder how that would work…

      • Anonymous

        I like it!

      • Anonymous

        Yay for provincial protectionism!

        The arguments about the LCBO revolve around government income and morals. I don’t see anything in those arguments that mean Ontario businesses should get special treatment over those in other provinces.

        • Anonymous

          I’m sure it would be all shades of illegal under interprovincial trade rules, NAFTA, etc, but think of how the Ontario-based booze industry would explode.

          • http://www.facebook.com/people/Ryan-Smith/517957122 Ryan Smith

            NAFTA is the gorilla in the room when it comes to opening OCB stores or more off-site winery stores. Current Wine Rack locations only exist because they were grandfathered when NAFTA passed. If Constellation Brands, or whoever it is owns them now, wants to put a location in a new Loblaws store they have to close an existing location in an old store to do it.

  • SailorFuckYeah

    I’d be happy if they just increased the hours so they closed later. They way I could pick up drinks on my way to a party at 11 or 12 and not have to pre-plan so much. It’s a small thing, but it would make a huge difference in terms of convenience, and I would think they’d only stand to make more money (especially on weekends).

  • https://paul.kishimoto.name/ Paul Kishimoto

    Meanwhile, in San Francisco:
    https://swig.wufoo.com/forms/swig-order-now

  • Hoovy

    And what about the empties? It’s bad enough now buying at the LCBO and having to return them to the Beer stores where I never frequent! I feel you should return them where you buy them if they want to recycle in good faith. So how would these wise ones handle that with all their new great ideas?

  • Jonathan McKinnell

    I don’t know, I think we have a good thing here. Great selection of stuff, support of local ontario breweries and wineries and a location within spitting distance of wherever you are. Not to mention that they’re actually working hard to make sure that more and more rural area stores have better selection.

    With Privatization we’re at the whim of the corporate mandate to make profit.

    • Anonymous

      Because giving people what they want is the opposite of what the private sector does?

      • Anonymous

        “Giving people what they want” is an overly generous description of what the private sector does.

        • http://www.facebook.com/people/Ryan-Smith/517957122 Ryan Smith

          If 90 percent of the population wants fizzy yellow beer with a kidney-filtred cold flavour, then it makes sense that most businesses would cater to that majority. It also makes sense that some businesses, seeing that the other 10 percent of the population want something with more character, would open specialty shops catering to that niche. Sure, in Edmonton the majority of stores sell nothing but swill. But in Edmonton you also have places like Sherbrooke Liquor that cater to people who want something other than Coors Light Iced Tea, or whatever the latest big brewer fad product of the month might be.

          http://www.sherbrookeliquor.com/all-stock.html

          They even carry entire product lines from great breweries like Orkney, Ommegang, Liefmans, and Mikkeler. Not to mention much better selections of Unibroue and McAuslan products. Sherbrooke even gets occasional shipments of Cantillion.

          Then there’s a gem of a store like this in Syracuse, NY, a city with one-third the population of London, Ontario.

          http://www.brilbecks.com/

          I used to date a woman who lived down there, and that was one of the shops I would pick up beer in to bring back to Canada. Over 350 different varieties of beer, most of it craft and quality imports. And if I didn’t stop in there, I was more than happy with the selection at decent grocery chains like Wegmans. Hell, even the crappiest grocery stores carry Sam Adams, Sierra Nevada, and Saranac.

  • Marv

    Two of you major arguments fall flat: 1. Selection: despite your Walmart based protestations, selection in stores in NY state is way better than here. The LCBO has a nasty habit of having 10 different brands where they have shelf space for 40! A private liquor store half the size of an LCBO will often have a twice the selection. 2. Price: so yes, if the government remains the distributor and charges high prices, there is not a lot of room for a price drop. So get rid of the govt distributor.
    And no mention of convenience. I have an inkling that a private store will be open later than 6 pm on New Year’s Eve (surely the most absurd day for a liquor store to close early).

  • http://twitter.com/MarkJull Mark Jull

    The LCBO already has a ‘licencee’ system – it’s how bars and restaurants buy. They get a discount and it provides a system of oversight. I think they should extend this to convenience and grocery retailers, who could buy at a discount and retail for roughly the same price as the LCBO. So, unless a store decided to have some product as a loss-leader, then prices would roughly be the same. But these stores would make it closer to people’s houses and stay open later. This isn’t a perfect system, but it would begin to open things up and the LCBO would still collect lots of tax revenue.

    I’m curious to know why Quebec was left out of the article. It appears they have both an “LCBO” (the SAQ) and booze is available in various stores – yet the prices there are considerably lower than Ontario’s. A couple years ago I remember buying 12 bottles of Stella for $17 ($25+ here) and Quebec-based beer would sell for about $15-16 for 12 bottles. It also seemed that the convenience and grocery stores would carry the basics, and if you wanted something fancy, then you go to the SAQ.

    • Anonymous

      “I think they should extend this to convenience and grocery retailers, who could buy at a discount and retail for roughly the same price as the LCBO.

      I said something similar the other day.”

      Alcohol is cheaper in Quebec because of retail sales tax: 10% on alcohol in Ontario, 6.5% in Quebec. (I’m not clear if the 10% rate increased when we switched to HST.)

  • -d.

    My favourite thing in THE WORLD is going to the LCBO in the holiday season!
    CAT-SHAPED WINE BOTTLES!
    BEER SAMPLER PACKS WITH GLASSES!
    SHINY THINGS!

  • http://twitter.com/JteaV James Taylor

    I think you Ontarians don’t know what you’re missing! I just moved back to the UK from TO. I always found it frustrating having to *plan* to buy alcohol. Over here, you’re shopping in a supermarket and you think “I fancy a bottle of wine tonight”, and you just buy it there and then. Sorted.

    And you guys DO pay a lot more for alcohol than we do over here, both over-the-counter and in bars/restaurants.

    Allow people to make a choice, always the best bet in my book…

    • http://www.johnoriordan.ie/ John Ó’Ríordán

      Same goes for Ireland. I moved to TO form Ireland over a year ago and the LCBO thing makes little sense to me.

    • Anonymous

      The UK also has a massive alcohol problem from high alcoholism rates to high rates of alcohol fueled violence both of which they pay for dearly in terms of human lives and costs to health care and policing. The UK is the last place we should be copying alcohol policy from.

  • Anonymous

    Something not mentioned in the article: The LCBO is unionized (OPSEU). What wrenches might that throw into an attempt to privatize? Assuming a private LCBO doesn’t have a union and pays its employees significantly less, isn’t that a net loss to the province by way of decreased income tax and consumer activity?

    • Testu

      Whoa there! What are you, some kinda commie? If we don’t pay the absolute minimum anyone will work for it’s inefficient, why do you think we’re trying to privatize this in the first place? And don’t go telling me that paying people well has a positive effect on the economy!

      Seriously though, assuming any of the current staff were retained in a wholesale privatization of the LCBO, they’d likely have to form a new union or join another existing one. I don’t think they could remain in OPSEU at that point.

      So assuming they managed to unionize again without their stores being closed they would likely have a much weaker union (and worse compensation).

      Basically it’s completely consistent with OPC philosophy.

  • James

    I think they’re a few things to take a part here.

    Price is a function of taxes and of ‘minimum price’ policies, rather than private vs public.

    I would contend that prices on both wine and beer could be somewhat lower; but that’s a separate from a pro or anti privatization argument.

    The arguments specifically on the LCBO revolve largely around convenience, in both hours and locations; as well as selection.

    Hours are certainly something that could be addressed within the existing retail form of ownership.

    I think weekday hours Monday-Thursday are largely fine for most people.

    But the total absence of Sunday evening hours; and later service on the weekends, say till midnight, can be a source of aggravation. Its certainly not the end of the world and shouldn’t be played up as such; but it is a completely unnecessary hassle.

    My understanding from talking to front-line LCBO staff is that there is still a shift-premium for Sunday work; and that there are regulations prohibiting the retail sale of alcohol after 6pm on Sundays and 11pm all other days.

    Any such regulation should clearly be relaxed and/or repealed and the shift premium should be ‘bought out’ or mooted in a modest raise for ‘normal’ pay, rather than a disincentive to good service as is the case currently.

    ***

    When it comes to locations, the LCBO can address this in-house by adding more locations, however, it might seem reasonable to allow more ‘winery’ stores or VQA stores as BC does with the general goal of putting one in every major supermarket. That would add a great deal of convenience at modest cost. This is particularly important for ‘urban’ consumers who don’t shop by car, and don’t want to lug heavy product 2km home by foot or transit.

    ****

    I think product selection is more difficult to address in house as more product depth actually would affect profits in the current business model. Still, if ‘VQA’ wine stores were allowed; and greater beer selection offered (even through ‘Ontario Craft Beer’ stores or more widely through other channels, that would probably address most consumers needs.

    The LCBO could also limit ‘advanced selections’ to a few select larger stores, so that it doesn’t affect their business model; but would provide most consumers near big cities with some additional variety.

    *****

    The Beer Store is its own debate; but given that is not nearly as pleasant an experience to shop in as the LCBO, and its both privately owned, and foreign-owned, the basis for retaining its monopoly seems weak.

    The government has several ways to both restrict access to inappropriate alcohol consumption and ensure other public ‘goods’ are retained.

    Ie. Only beer at or under 6.0% in regular stores. Any store selling beer must be able to accept returns. Either beer is sold in a dedicated space, and sold only those w smart-serve training, or in small corner stores, might be sold from behind the counter.

    You could require such stores to have licenses, which could be revoked for repeated sales to minors.

    ****

    Price is its own debate; but I have 2 price reforms I think should happen. One, taxes should be shown separately (HST portion) as that would provide a fairer price comparison, and two, lose the commodity taxes (flat charge per litre) as they are small, but have the effect of inflating low-cost products disproportionately.

  • ashleigh

    Mike Harris government’s first legislation was liquor act changes allowing golf courses to sell booze, the old golf pro that he was, then they announced privatization. Back then the LCBO retail outlets were forgettable bunkers with cardboard on the floors, bad lighting, no product information, ignorant staff and banker’s hours. Under serious threat of privatization the LCBO opened extended hours, started renovating stores, hired product specialists with actual booze training, and they started the large specialty stores. The Bayview Village mall store was big news at the time it opened.

    The LCBO is very much an easy target but they don’t represent any problem for the sitting government, only lots of cash. Mike Harris’ threat effect has been extremely positive, a rare enough thing.

    Other provinces different retail sales models really do show different and I must say not very positive examples to emulate, except for the prairies’ off-sale til 3AM locations. Alberta and Saskatchewan’s private stores are often astronomically expensive. Sure there may be 3 booze stores per block, but the above critique of limited, market specific product selection is very true. There are bottle recycling drop off points: truly an experience battling the phalanx of bottle pickers, think squeegee kids assault tactics of a few years back.

    • http://www.facebook.com/people/Ryan-Smith/517957122 Ryan Smith

      That critique of limited selection is true in the sense that the typical corner store will carry a limited selection. It’s also less true when you consider the existence of specialty stores that cater to the needs of consumers who can’t find what they want at the typical convenience store.

  • George

    “Lots of other places have abandoned government liquor monopolies without descending into drunken chaos.”

    Name one!

    • San Diego Dave

      California. Where I live.

      • Raymond Babbit

        And, how is the sale in bum wines working out with the homeless population(s) and young people of most cities and towns in California?

        • San Diego Dave

          Beats Aqua Velva.

          • http://www.facebook.com/people/Neville-Ross/100002343524258 Neville Ross

            Does it beat malt liquor?

  • Anonymous

    More drinks, more pee – open public toilets for God’s sake, like they have them in every large city in Europe.

  • Anonymous

    This a classic case of a necessary and overdue conversation unfortunately initiated by a political leader whose relevance (if ever he had that) is on the wane. It’s a good time to talk about the LCBO, but it’s being championed (if that’s not too strong a word considering it hasn’t been written out as a cohesive policy measure in a future platform) by someone who, quite simply, wants to get elected. And like most people who want to get elected, they will say a lot of attractive things to get votes.

    That said, I agree with those who say that opening up to the idea of private liquor sales should go hand-in-hand with opening up to the idea of private sales of beer. We have two monopolies controlling public alcohol sale in Ontario: the provincially-operated LCBO and the 100% foreign-owned “The Beer Store”. Two change the constitution of one type of alcohol-sales and not another is a half-measure.