How Doug Ford can modernize Ontario’s alcohol market

Doug Ford has built his brand on putting the people, who are ultimately consumers, first.

Refining Ontario’s alcohol market was a priority for Doug Ford on the campaign trail. He proudly proclaimed that convenience stores provincewide should be able to sell beer and wine. Since taking office, he’s reduced minimum pricing on beer, cancelled an incoming provincial beer tax increase, and recently expanded hours for retail sale. Despite these positive steps forward, there is still much that Premier Ford can do to further modernize Ontario’s alcohol market.

Ultimately, any changes that the government makes will require them to end the 10-year agreement that Kathleen Wynne signed with The Beer Store in 2015. The agreement allows the government to open up beer and wine sales to 400 grocery stores, but prohibits any other reforms until 2025. Ford has promised to tear up this deal, and doing so will have to be his first step toward reform.

After that, the government will have to sort out the process by which expanded private retail will take place, and who can qualify to sell alcohol. This process should include different options for retail sale. Specifically, the Ford government should allow for private sale at Ontario convenience stores, grocery stores, standalone private stores that exclusively sell alcohol, or any store, for that matter, that can meet the licensing requirements. Incorporating store variety into the modernization process ensures that the market is as open and consumer-friendly as possible.

With all shapes and sizes of stores qualifying for a licence, the next major question is the amount of stores that the province will distribute licenses to. Many will call for a cap on the amount for stores that can qualify for private alcohol sale. A cap of any sort would be a huge mistake, and wildly inconsistent given that the province will eventually have no cap for private cannabis retail sale. As Ontario Attorney General Caroline Mulroney said publicly, the benefit to uncapping retail outlets means that the amount of retail outlets is set by market demand, and not by government decree.

In terms of licensing qualifications, the Ontario government should follow Ford’s anti-red tape mantra. The process for licensing these stores should be as simple, and consistent, as possible. One important note here is that the province of Ontario already has a process for private retailers to sell age-prohibited goods (tobacco and gambling). If these stores can be trusted to sell those age-restricted goods, then there is no justification to not extend their license to the sale of alcohol. Simply put, if we allow for private retailers to sell tobacco products, which are exponentially more risky and dangerous than alcohol, then there is no reason not to trust these outlets to sell alcohol.

Once qualifications and the licensing process are established, the next major hurdle is what these outlets will be allowed to sell. Right now the LCBO has a near monopoly on the sale of spirits. Because of this, when Ontarians stroll down the alcohol section at their local grocery store, spirits are noticeably absent from store shelves. In order to truly modernize retail sale in Ontario, the government should get rid of the monopoly the LCBO has on the sale of spirits. Doing so would allow for retail outlets to offer consumers a full product range on their shelves, which would be exponentially more convenient than today’s system. Having outlets that are permitted to offer a full product range means that consumers can do all of their shopping in one place. This not only increases consumer choice, but also creates a more level playing field for the various producers of alcohol beverages. If the government were to proceed with allowing only beer and wine into private stores, it would disadvantage spirits producers who would unfairly be left with only a single retail option: the LCBO. If beer and wine producers are afforded the ability to sell their products to consumers in private retail stores, the same should be allowed for spirits.

Finally, the Ford government must overhaul Ontario’s antiquated pricing and distribution systems for alcoholic beverages. Currently, prices are set by producers and are mandated to be fixed across all retailers. This policy eliminates price competition, which artificially keeps prices high and hurts consumers. Simply put — Ontarians will never see lower prices for beer, wine, and spirits as long as this rule exists. With regards to distribution, the province should amend legislation so that retailers can purchase their products directly from producers and allow for retailers to bypass the LCBO as the perpetual middle man.

These simple changes would go a long way toward creating a truly modern, and consumer friendly model for alcohol sales. That being said, there are numerous critics of the policies just outlined. For example, Ontario’s Public Sector Union (OPSEU) has argued that increasing the amount of retail outlets for alcohol sale will cause an increase in instances of impaired driving. If we look at the example provided by OPSEU, which is Alberta alcohol privatization, retail outlets after privatization increased from 208 in 1993 to over 1400 in 2017. Products available to consumers over that same time period increased from 2200 in 1993, to nearly 23,000 in 2017. Despite the drastic increase in access, research from economist Heather Bone shows that instances of impaired driving did not actually increase. In fact, instances of impaired driving decreased in response to alcohol privatization at a rate that is statistically significant. This means that increased access had the opposite impact OPSEU is claiming.

Other critics will argue that private retail outlets can’t be trusted to sell alcohol products, and that such products will end up in the hands of minors. We know from secret shopper programs that private retailers are more likely to ID than government stores. In 2016, only 67 per cent of “secret shoppers” were properly asked for ID at the LCBO. In comparison, recent program numbers show that Ontario convenience stores have a compliance rate of nearly 96 per cent. Furthermore, this argument ignores the fact that 212 ‘LCBO Agency Stores’ — privately owned convenience stores in rural Ontario, currently sell a full range of alcoholic beverages including beer, wine, and spirits.

The last foreseeable critique is the end of the LCBO’s monopoly on the sale of spirits. Critics will state that because spirits are of a higher alcohol percentage, that they should be more strictly controlled, and thus only sold via government retail outlets. This argument doesn’t hold a glass of water when you consider that government stores are less likely to sell responsibly. That said, it is true that spirits generally have a higher alcohol percentage when compared to beer and wine. Although that is true, it misses the key fact that an ounce of a liquor has the same impact as a bottle of beer. When looked at through the lens of that reality, a bottle of spirits (750 ml) is comparable to purchasing a 24 pack of beer. Simply put, a drink is a drink, and there isn’t a good justification to treat products differently based on their percentage. In fact, this is exactly what was stated in the government of Ontario’s own Beverage Alcohol System Review from 2005. When the province sought advice on how to modernize alcohol sales, getting rid of the monopoly on spirits sales was on the list of recommendations.

Doug Ford has built his brand on putting the people, who are ultimately consumers, first. Adopting these simple changes will go a long way toward eroding Ontario’s prohibition style retail market, and putting consumers front and centre when it comes to government policy.

David Clement is the North American Affairs Manager for the Consumer Choice Center. Follow him on Twitter at @ClementLiberty

David Clement is the North American Affairs Manager for the Consumer Choice Center. Follow him on Twitter at @ClementLiberty

Originally published at https://www.thespec.com/opinion-story/9102325-how-doug-ford-can-modernize-ontario-s-alcohol-market/

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