Time for Ontario to bring province’s $10-billion booze business in line with the times. Unfortunately, the government is hooked on revenue
Ontario Premier Doug Ford is poised to finally eliminate The Beer Store’s monopoly on selling cases of beer, allowing other retailers in on the act. It’s a fine bit of tinkering, but the monopoly that people should really be concerned about is not The Beer Store, it’s the LCBO.
That cash cow of a Crown corporation delivered a $2.58-billion dividend to the government last year, a sum generated by a fat 33.2-per-cent profit margin. That’s a number that would make “greedy” grocers green with envy. A recent Competition Bureau report pegged their profit margin at 3.6 per cent.
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It’s not just how much money the LCBO makes that’s a problem, it’s the government corporation’s control over what Ontarians drink and how much they pay for it. The LCBO determines what is allowed on retail shelves, and government rules mandate a uniform price. As long as that regime is in place, there will be no real competition in Ontario alcohol retailing. Competition will consist of nothing more than buying the same thing at the same price at a different location.
It’s time for Ford to do something conservative for once and get the provincial government out of the booze racket. The first question to ask is, why does the government need to control the alcohol business?
Both the LCBO and The Beer Store were founded in 1927, when prohibition ended in Canada. Perhaps it made sense nearly a century ago to closely regulate the frightening liberty the public was being offered, but why is government control required today?
One could have argued that the eagle-eyed employees of the LCBO were especially skilled at spotting underage drinkers, but the expansion of alcohol sales to grocery stores and now convenience stores, as Ford intends, waters down that argument.
For the Ford government, the first argument in favour of normalizing the alcohol business ought to be simplicity. Imagine a system where retailers buy directly from producers or wholesalers of their choice. All the government has to do is tax the profits. It seems to work with just about every other kind of commercial endeavour. The Ford government says it likes to cut red tape. Eliminating it altogether is even better.
If the government wants to keep running the whole system, it faces a complex task. It will need to balance the competing needs of big brewers against small craft breweries, Ontario wineries versus bigger competitors, and small retailers versus industry giants. That’s just the big picture, but the provincial alcohol regime has a rule for everything, right down to how many retail outlets a small winery or brewery can run.
Why do all of that when it’s a perfect job for the market? Allow everyone who wants to sell beer, wine or spirits to source their own product, set their own prices, sell it the way the think best, and let drinkers determine who succeeds. Why should it be the government’s business to worry about whether every producer and retailer succeeds?
Were the government to quit the booze business, as it should, it would be able to ease the financial pain by selling the LCBO’s retail and wholesale businesses to other companies. Alternatively, the government could retain some LCBO stores to promote the province’s wineries and craft breweries. At least that would make some kind of sense, although it’s also a job the brewers and vintners could do themselves.
Whatever the Ford government does, it will set the rules for the alcohol market for years to come. That’s why it’s critical to take this one-time opportunity to normalize the alcohol business, both retail and wholesale.
If Ontarians want to see the weakness of tinkering, they need look no further than then-premier Kathleen Wynne’s timid effort to expand retailing to include grocery stores. That deal left The Beer Store, which is controlled by foreign-owned brewers, to dominate the beer market while allowing 450 grocery stores to sell beer and wine. The government limited the profit margin for those stores so severely that some have dropped out of the scheme because they can’t make money.
It’s time for Ontario to grow up and bring the province’s $10-billion booze business in line with the times. Although some misuse alcohol, for most it’s just a beverage. Let’s treat it that way.
Instead, the Ford government is almost certain to leave the government alcohol monopoly and its exorbitant profits substantially in place, while calling its small changes reform and modernization. Unfortunately, the government is hooked on booze revenue, and that trumps rationality.
Randall Denley is an Ottawa journalist and author. Contact him at randalldenley1@gmail.com
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