The Grits at Queen’s Park are at it again. Apparently, we are about to get more access to beer and wine through Ontario supermarkets. I have long looked forward to our legislators stiffening their spines and modernizing our archaic liquor laws, which have been stuck in the 1920-1930s era for decades, but I’ll believe it only when I see it.
I thought Liberal David Peterson might keep his 1985 promise of beer and wine in corner stores, but that measure never did get passed. In 1995, Tory premier Mike Harris pledged to sell the LCBO and open up liquor sales to private enterprise, but never followed through. In 2010, Dalton McGuinty’s Liberal finance minister Dwight Duncan mused about allowing some private investment in the LCBO, but that too went nowhere.
Readers might also remember former PC leader Tim Hudak opining about it being time that the government started treating Ontarians like adults and allowing the sale of beer, wine and spirits in corner stores and supermarkets. But that too went nowhere, of course, when PCs failed to unseat the Liberals in the general election that followed.
The main issue is, as I see it, our government has no philosophical or moral basis for maintaining the status quo. Instead of laws based on principle, Ontario’s liquor laws and regulations are filled with cynical contradictions and self-interest.
In the case of beer, Martin Regg Cohn’s Dec. 2014 article in the Toronto Star entitled, How The Beer Store lobby wins friends and influences politicians, tells us “[w]hy is it so hard to shake The Beer Store’s grip on Ontario’s politicians?” And, according to Regg Cohn, the primary beneficiaries of the current system—The Beer Store, its foreign owners and the union representing beer industry employees—collectively donated more than $525,000 to the three major political parties. Need I say more?
In the case of the LCBO, it’s mainly about the Grits paying off public service unions with cushy high-paying jobs for their members. In return, these unions support the Grits at election time with millions spent on anti-Tory election ads. Otherwise, alcohol could be freed from the government’s virtual monopoly and regulated and taxed in a manner similar to tobacco products. And, of course, it’s nice to have liquor board related contracts and appointments, etc., as patronage to be handed out to political friends and exchanged for political favours.
We hear a lot of nonsense from unions and government officials about government-mandated monopoly stores and their employees being best at maintaining a high level of social responsibility in the sale of beer, wine and spirits. But that’s nonsense, because the government already sanctions hundreds of private operators to sell alcoholic beverages in communities too small for the LCBO to service.
Moreover, there are more than 100 privately operated off-premises wine stores and tens of thousands of bars and restaurants that serve alcohol in the province. In the great majority of these, neither government employees nor union members of any kind are involved and our province is none the worse for their absence.
Quasi-monopolies as exist in Ontario’s alcoholic beverage industry are the antithesis of free-enterprise and have proven to be detrimental to the long-term health of societies that have experimented with socialism. Regardless of how much monopolies return to the government or on what good cause that money is spent, monopolies are wrong and harmful to our market-based economy.
Yet Ontario governments of all stripes have insisted on perpetuating this absurd system. What we have now amounts to a not-so-hidden tax on ordinary Ontarians to pay for inefficiencies throughout the value chain: high-end headquarters, wastefully expensive marketing programs, unnecessarily high retail overhead, retail price-gouging and fat management pay checks—see the Sunshine Lists and weep—and $50,000 plus a year being paid to some unionized retail workers to put a bottle in a brown paper bag.
True, this monopoly pays an annual dividend of more than $1.5-billion to the Ontario government—which is over and above the several hundreds of millions in taxes levied on wine, beer and spirits. But much of the dividend is from the hidden tax Ontarians pay in the form of hugely inflated profit margins, which are about double what they are at a comparable retail operation in the U.S.
Here are just a few examples taken from a 2012 article in Toronto Life when the loonie was a lot closer to par with the U.S. dollar:
At Costco [U.S.], a bottle of Woodbridge sauvignon blanc costs $6.99; at the LCBO it’s $11.95. Costco sells Veuve Clicquot for $38.99 a bottle; the LCBO charges $66.30. When I [Jan Wong] asked for pricing examples for table wine, some markups were 137 per cent. For a wine that retails for $10.45 (the LCBO didn’t provide actual product names), it pays wholesalers $3.77 if it’s a U.S. or non-Ontario Canadian wine; $3.72 if it’s another imported wine; and $4.10 if it’s Ontario wine.”
And, of course, there is the muddle-headed thinking that seems to creep inevitably into too many government-run agencies. Consider this other example from the same 2012 Toronto Life article:
According to a recent report by Ontario’s Auditor General, Jim McCarter, the liquor monopoly is also minimizing profits by failing to use its enormous clout to negotiate the lowest possible wholesale prices from suppliers. Instead, the LCBO does something unique among retailers. It decides on the retail price it wants to charge for a product, and then asks suppliers to raise or lower their wholesale costs accordingly. Why? The LCBO claims it’s merely fulfilling its duty to be socially responsible—that by keeping prices high, it’s trying to discourage consumption. And yet, as McCarter reported, alcohol sales have gone up 67 per cent in the last decade.”
By all reports, we will almost certainly see the sale of beer and wine liberalized in Minister of Finance Charles Sousa’s spring budget. But increased freedom of choice will almost certainly be the sole benefit to consumers and, I bet, we’ll pay through nose for it.
To begin with, the government will likely issue costly licences to retailers—an additional hidden tax that will find its way into the prices consumers pay for these products. In other words, we may get more choice through expanded retail outlets, but the provincial government will maintain its strangle-hold on the industry, ensuring that consumers will continue to pay exorbitant prices.
The province is reported to be about to charge The Beer Store a $100-million franchise fee to keep their part of the beer duopoly so it’ll be interesting to see what that does to beer prices. And if beer prices increase at The Beer Store, count on similar (though unnecessary) price increases at the LCBO—you know, to be socially responsible, wink, wink.
Instead of limiting competition like we were some 1930s socialist state, our government could be turning the whole industry over to our robust free-enterprise system, with some reasonable regulations and taxes as is done in most parts of the modern world.