ontario

Ending liquor monopoly in Ontario would be win-win-win

Rethinking the LCBO could save taxpayers a tremendous amount of money

Ontario is teetering on the edge of a fiscal cliff. Under its previous Liberal government, the province became the most indebted sub-sovereign unit in the world. Unfortunately, poor policy-making and the COVID-19 pandemic have only worsened its situation. Ontario’s debt is now over $404 billion, which means each Ontarian’s share of that debt is a whopping $27,000.

As the pandemic ends, Ontario will need bold policy-making to dig itself out of the hole it’s in. One bold policy that would help is privatizing the LCBO (Liquor Control Board of Ontario), or at a minimum capping its expansion and ending its monopoly status.

Scrapping the LCBO and shifting to a private, preferably uncapped, retail model would benefit consumers by offering them more choice and convenience. Ontario currently has the worst alcohol retail density in Canada, mostly because the combination of a government monopoly (LCBO), with a government-sanctioned private monopoly (The Beer Store) has limited the scalability of retail access. As a result, Ontario has only one alcohol retail outlet for every 4,480 residents. In comparison, British Columbia has one store for every 2,741 residents, Alberta one for every 1,897 residents, and Quebec one store for every 1,047 residents. Ending the LCBO’s monopoly would help bring Ontario onto a par with other provinces.

More importantly, rethinking the LCBO could save taxpayers a tremendous amount of money. The LCBO’s operating costs are bloated. Based on its 2019 annual financial statement, the average sales, general and administrative (SG&A) cost per store is $1,515,000 per year. With 666 corporate stores, that is a considerable expense to taxpayers. Private alternatives, like high-inventory private retailers in Alberta, cost significantly less to operate. Based on Alcanna’s 2019 annual financial report, the average SG&A for a private outlet comparable to an LCBO, is just $676,000 per year. If we could snap our fingers right now and fully transition the LCBO out of the government’s operating model, taxpayers would save an astounding $559 million per year. If the Ford government is looking for low-hanging fiscal fruit, this is it.

Labour unions and other supporters of nationalized alcohol distribution would obviously have an issue with the complete elimination of the LCBO. They will argue that privatization would threaten the well-paying jobs of the thousands of Ontarians who work for the LCBO. This could be true, as it’s unlikely that private retailers would require their workers to be members of OPSEU, the Ontario Public Service Employees Union, which has negotiated wages well above the market rates for comparable jobs. That said, there is a compromise solution that both expands consumer choice, maintains those LCBO jobs, and saves taxpayers millions of dollars. It is to stop the LCBO from expanding its operations and let the private sector fill the void.

Each year, on average, the LCBO, makes a net addition of seven new stores in Ontario. If the province were to simply stop the LCBO’s expansion, and have the private sector fill the gap, taxpayers would cumulatively save $88 million after five years. At the 10-year mark that figure would be $323 million. And these savings are only the ongoing operational savings and don’t include the tens of millions of dollars the LCBO spends to acquire storefronts for expansion.

This compromise solution would allow the LCBO’s existing outlets to remain operational, while also allowing for more retail access and a hybrid model moving forward. On top of the cost savings, there might well be revenue gains. Hybrid and private retail models for alcohol sale (as in B.C. and Alberta) actually generate more alcohol tax revenue per capita, a further benefit for the public purse. Politically, this compromise solution is a no-brainer. Increasing access, fuelling private business opportunities, generating more revenue, and all the while maintaining current LCBO employment would be a win-win-win.

The Ford government has already laid the groundwork for such an approach. Buried in the licences and permits schedule in the 2019 budget, the province effectively cleared the way for a truly free and open alcohol market in Ontario. The bill states that “A person may apply to the Registrar for a licence to operate a retail alcohol store, operate as a wholesaler, or deliver alcohol.”

Ontario has opened the door for a consumer-friendly retail model for alcohol that would finally end the LCBO’s monopoly. Full privatization would be best but if that is too great a stretch politically, a free-entry compromise would still benefit all Ontarians. The government has created the possibility of such a change. For the sake of consumers and taxpayers, it should now follow through.

Originally published here.

Make it closing time for Ontario’s beer monopoly

The Beer Store is an institution built on a toxic mix of prohibition and cronyism

News broke this month that The Beer Store (TBS), Ontario’s monopoly beer-seller, is losing money and lots of it. According to its annual financial statement, TBS operated at a $50.7 million loss in 2020. While some of that can be chalked up to the pandemic decimating the demand for kegs, TBS has been in rough shape for some time. In fact, it hasn’t turned a profit since 2017, well before the pandemic upended the economy.

The Beer Store’s poor performance should lead Ontario consumers to ask the age-old question: why do we tolerate any entity having a virtual monopoly on the retail sale of beer? Even worse, why is its near-monopoly status protected by law?

For those who don’t know, which is approximately 68 per cent of Ontarians, TBS is a privately owned, government-protected monopoly first established on the heels of Prohibition. Its original purpose in 1927 was to create strict access points for beer retail, appeasing prohibitionists by supposedly protecting society from the evils of alcohol consumption.

Though the prohibition mentality is long gone its disappearance still hasn’t resulted in the liberalization of where Ontarians can buy beer. Right now, Ontarians only have limited options: The Beer Store, the LCBO (Liquor Control Board of Ontario), on-site sales at breweries, and a select number of grocery stores, 450 to be exact. Because of these limited choices, Ontario has the lowest alcohol retail density in all of Canada. Now would be a perfect time to liberalize the retail market for beer, specifically by granting convenience stores and any grocery store that wants to entry to the retail space.

The Beer Store naturally will fight tooth and nail to preserve its protected status but its arguments are not convincing.

Its first defence is legal — that it is protected under the Master Framework Agreement (MFA), signed under the Wynne government, which isn’t set to expire until 2025. But it is not unknown in Canadian history for legislatures to re-write agreements. Re-writing contracts does have its downsides but in this case revoking the agreement would serve competition and consumer choice, two very good causes.

The Beer Store also defends its protection under the banner of preserving jobs, keeping prices low, collecting revenues for the province, and protecting Ontarians from poor health outcomes. All these claims are bogus.

On job losses, TBS president Ted Moroz claimed in 2019 that alcohol liberalization would put the jobs of its 7,000 employees at risk. And well it might: competition usually doesn’t help protected incumbents. But researchfrom the Retail Council of Canada shows that expanding retail sales would actually create 9,500 new jobs in Ontario and boost GDP by $3.5 billion a year. Given Ontario’s financial position, any such boost is badly needed.

Originally published here.

Ontario to allow cannabis retailers to sell online and over the phone

Cannabis retailers will soon be able to sell products online or over the phone for in-store pick-up as the Ontario government adopts a “click-and-connect” sales model to expand access to legal marijuana.

Finance Minister Rod Phillips announced the proposed changes in the government’s fall economic statement Wednesday, saying they will decrease waits for cannabis and help combat the black market.

The shift comes as the Progressive Conservative government pledges to lift a cap it imposed on the number of cannabis stores in Ontario.

“All of the provincial jurisdictions are learning and trying to make sure that we take the best approach,” Phillips said. “Our priorities are getting rid of black market cannabis and safety in our communities.”

The government had initially said there would be no cap on the number of retail pot shops after cannabis was legalized. That decision marked a change of course from the previous Liberal government, which created the Ontario Cannabis Store and had planned to tightly control cannabis sales through government-owned stores similar to the LCBO.

But a supply shortage prompted the Tory government last December to cap the initial number of pot retail licences to just 25 so operators would be able to open.

The number of legal pot outlets in Ontario is increasing from 25 to 75 this fall.

The government also said Wednesday it will allow licensed producers to have retail stores on each of their production sites to further increase access.

The Tories had planned to allow that after coming to power in 2018 but did not enact the necessary regulations when the supply shortage caused them to cap the number of retail stores.

The government said Wednesday it will amend legislation and provincial regulations to make the changes but has given no immediate timeline when they will take effect.

Omar Yar Khan, a vice president at strategy firm Hill+Knowlton who advises cannabis sector clients, said the changes will help encourage customers to move from the black market to legal retailers.

“In an era where customers are used to an Amazon Prime experience … anything the government can do to allow these legal markets to reach consumers on channels they’re already on is a step in the right direction,” he said.

Khan said the government needs to uncap the retail market if it wants to continue to fight the illicit market.

“They need to move fast on that, and I think they will,” he said.

One consumer advocacy group praised the move towards “click-and-connect” sales but said the government could have gone further.

“It makes the legal market more consumer-friendly by increasing access and allowing consumers to place orders and pick them up … but it would be that much better if they coupled that with the ability for stores to provide deliver services,” said David Clement, manager of North American affairs for the Consumer Choice Center.

Clement said the changes that allow pot producers to open retail space could create a tourism industry around cannabis.

“If you go to brewery or a distillery, often you can take a tour or talk to the master brewer,” he said. “That on-site selling opportunity has been used to provide consumers with other experiences they otherwise wouldn’t have.”

This report by The Canadian Press was first published on Nov, 6th. I was posted on Yahoo Finance here.


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The Consumer Choice Center is the consumer advocacy group supporting lifestyle freedom, innovation, privacy, science, and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle & consumer goods, and health & science.

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at 
consumerchoicecenter.org

Two big victories for consumer choice and modernized alcohol policy

The warm months are delivering some great news when it comes to increased consumer choice and modernized alcohol policy across North America.

ONTARIO

The first success story comes from the Canadian province of Ontario, where Premier Doug Ford has announced the end of the province’s exclusive contract with The Beer Store, the beer monopoly.

When announcing the policy, Ontario Finance Minister Victor Fedeli quoted the words of Consumer Choice Center North American Affairs Manager David Clement, who has contributed to the debate to open up beer sales across the province.

This positive move comes on the same day the government announced it would be expanding alcohol sales in LCBO stores across the province, after which Clement says “consumers across the province would appreciate more access to alcoholic drinks over the summer months.

The Consumer Choice Center played a pivotal role is shaping the policy debate in favor of modernized alcohol policy and consumer choice, and will continue to do so across the country.

“Today’s alcohol announcement is a step in the right direction,” said David Clement. “The move helps underserved regions, while maxing out the amount of grocery stores allowed under the Master Framework Agreement (MFA). It is positive to see these changes while the province undergoes the process of scrapping the MFA and allowing for alcohol sales in convenience stores.”

“We are hopeful that the announcement could increase access over the summer months, which would definitely be appreciated by consumers province-wide.” said Clement.

NORTH CAROLINA

Following the positive vibes from the Great White North, the state of North Carolina also had a major alcohol policy modernization pass.

Last Thursday Gov. Roy Cooper signed House Bill 363, the Craft Beer Distribution and Modernization Act. The law will allow craft brewers to self-distribute more than twice was allowed previously without a wholesaler.

That measure will allow breweries to expand and ship more product across the state, giving North Carolina consumers greater access to their favorite craft brews.

I have written about this topic for the Charlotte Observer (here and here) and been interviewed about it on the radio on the Joe Catenacci Show and the Chad Adams Show.

Much like above, there is still a lot that needs to be done to have a true modern alcohol policy in the Tar Heel State. Ending the state’s monopoly of ABC stores (that sell liquor) would be prime, and the next would be allowing distilleries to offer and sell their products on site and for delivery.

Regardless, these are two big victories for consumer choice and modernized alcohol policy, giving consumers more of a say, more choice, and better options!

Don’t blame Doug Ford for the costs of breaking unfair beer retailing contracts

Opinion: We should blame politicians who set up and maintained a system that has both inconvenienced and overcharged consumers for nearly a century.

A lot has changed in the last 92 years, but Ontario’s alcohol policy is one thing that has remained largely the same. Following the repeal of alcohol prohibition in 1927, the province granted Brewers Warehousing Co. (later Brewers Retail/The Beer Store) a monopoly over beer sales, to appease prohibitionists. Now Prohibition’s legacy lives on through The Beer Store’s near monopoly on beer sales today, and Ontario Premier Doug Ford is facing both political heat and legal threats by trying to challenge it.

If the Ford government follows its plan, beer and wine will be available in corner and big box stores by Christmas. Evidence suggests this policy will enhance consumer choice by expanding variety, increasing convenience, and lowering prices. Anindya Sen, an economist at the University of Waterloo, estimated that roughly $700 million in annual revenue earned by The Beer Store is incremental profit earned because of its monopoly status and ability to charge higher prices. Additionally, The Beer Store’s roots in Prohibition demonstrate that lack of access is a feature, not a bug, of the current retail system. This inconvenience may be why 54 per cent of Ontarians support allowing more privately owned stores to sell alcohol.

Modernizing alcohol sales is good public policy. While the LCBO’s earnings serve as a cash cow for the province, The Beer Store’s profits primarily go into the hands of large multinational brewers — Anheuser Busch-InBev, through its Labatt subsidiary; Colorado-based Molson-Coors; and Japan’s Sapporo, through its Sleeman subsidiary. Additionally, retail monopolies do little to promote social responsibility. As one of the authors’ research has shown, privatization of alcohol sales in Alberta was associated with a lower rate of impaired driving.

The precedent for this change exists, as convenience stores already sell lottery tickets and cigarettes, and face hefty penalties for selling to minors. Furthermore, alcohol liberalization isn’t only good for consumers, it’s good for the economy. By studying similar reforms in British Columbia, a new report from the Retail Council of Canada predicts that Ford’s proposed reforms would result in 9,100 new jobs and a $3.5-billion dollar increase in GDP.

We should not blame the Ford government for pursuing alcohol modernization

However, pursuing this change has had its own set of challenges. The Beer Store has threatened legal action against the province if it moves forward with its plan, citing its agreement with the previous Liberal government that limits the number and type of beer-retailing outlets in Ontario until 2025. Beer-industry insiders claim a breach of contract could cost Ontario up to $1 billion. While there are reasons to doubt this figure, including that estimates have rapidly grown from a previous estimate of $100 million in the short time since the story about the Ontario government’s plans broke, it has proven to be politically challenging for the Ford government. Critics have claimed that moving forward would be irresponsible due to the financial risk, with Ford being directly responsible for the potential losses.

There are two important lessons to take from these exorbitant claims. The first is that the figures that opponents of the plan are claiming are entirely unsubstantiated. They are simply the figures they claim. In order for them to have any legal weight whatsoever, they would have to be proven in court, which would require The Beer Store to open its books. Given the grandiose figures being tossed around, it is entirely possible that The Beer Store is bluffing in an attempt to maintain its privileged treatment. The second important lesson here is the price of cronyism overall. The government over-regulating and picking winners and losers in the market hurts consumers twice over. First through inflated prices and poor customer service, and again as taxpayers via legal challenges. Setting a precedent that the Ford government stands with consumers over special interests would clearly show that it stands for the people.

When it comes to placing blame, there is a lot to go around. We should blame the politicians who set up and maintained a retail system that has both inconvenienced and overcharged Ontario consumers for nearly a century. We should blame the previous government for attempting to tie the hands of subsequent leaders by signing the latest contract with The Beer Store. However, regardless of the outcome of the legal challenge, we should not blame the Ford government for pursuing alcohol modernization. While this move may be costly, it is necessary to right past wrongs and end Ontario’s Prohibition-era alcohol framework. Ford has lots to answer for, but not this.

Heather Bone is a research fellow at the Consumer Choice Center and an economics PhD student at the University of Toronto. David Clement is the North American affairs manager of the Consumer Choice Center.

Read more here

Is Moral Panic Justified? The Effect of Alcohol Privatization on Impaired Driving in Alberta

By Heather Bone, Research Fellow, Consumer Choice Center Nearly every time the prospect of privatizing alcohol sales in Ontario is debated, there is a moral panic. If alcohol sales are privatized, the argument goes, alcohol will be more easily accessible, and there will be an increase in alcohol-related crime. In this research brief, I investigate […]

Wynne Says Private Cannabis Sales Are Reckless: Consumers Disagree

CONTACT: David Clement North American Affairs Manager Consumer Choice Center david@consumerchoicecenter.org Wynne Says Private Cannabis Sales Are Reckless: Consumers Disagree Toronto, ON – Today, Ontario Premier Kathleen Wynne stated that having legal cannabis sold anywhere other than government stores would be “reckless”. Wynne was responding to PC Leader Doug Ford’s suggestion that legal cannabis be privately sold. Wynne […]

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