Liquor Privatization In Ontario
Why The Province Needs Change
By: David McDonald
It’s a brisk summer night in southern Ontario. A group of men decide they want to purchase a 24-pack of Molson to watch the hockey game. They proceed to head to the Beer Store and when they arrive at 10:05 p.m. the store is closed. With nowhere else to go, the men’s hopes of purchasing alcohol have diminished.
Welcome to Ontario’s liquor industry.
Since the prohibition in 1927, Ontario’s liquor industry has acted under the same structure. Two monopolists control the market: The LCBO and the Beer Store. The LCBO is controlled by the government and regulates sales of spirits, wine, liquor, and small quantities of beer. LaBatt, Molson Coors, and partly Sapporo privately own the Beer Store, in which they regulate the sales of beer in Ontario.
The two monopolists don’t compete against each other, meaning they can both charge a premium for their alcohol. Furthermore, with no other options for Ontario citizens, they have limited options to purchase their liquor.
Ontario citizens are tired of having limited access to alcohol. Ontarians want change; and Privatization will give them change.
The people pushing for privatization aren’t concerned so much about the prices, but more about the convenience of buying alcohol. In fact, when asked by Angus Reid, one of many advocating options for privatization “50% of Ontarians said convenience was the biggest benefit” (freeourbeer.ca) from privatization. The Ontario Government needs to understand that “Competition to the Beer Store is not about prices – markets will determine those – It’s about what consumers want – more convenience and choice” (freeourbeer.ca)
Well if convenience is what Ontario alcohol consumers want, then privatization is the way to go.
Take Alberta for example: the province privatized liquor in September of 1993, and has since seen “a rush of new private liquor stores, both mass market and specialty, along with a larger selection of products and longer store hours.” (macleans.ca)
Sounds intriguing, doesn’t it?
Firstly, the number of stores per 100,000 inhabitants is five times higher in Alberta (42.1) than in Ontario (7.7) (iedm.org) Alberta also beats out Ontario in the number of overall stores with their 1087 compared to Ontario’s 779. (iedm.org)
Given that Alberta’s population is 4.1 million, compared to Ontario’s 13.6 million, anyone can see that privatizing liquor has meant more accessibility to alcohol for citizens of Alberta.
Along with a greater number of retailers, Alberta also managed to expand their product selection by ten times the amount they had before privatization.
As shown in the graph below, Alberta went from 2,200 products available in 1993 to a staggering 22,121 products available in 2014. (aglc.gov.ab.ca) Conversely, Ontario only has 11,326 products to choose from (10,926 for the LCBO and 400 beers for the Beer Store).
That means Alberta has 10,795 more products available than Ontario, but less consumers to reap the benefits from this massive product selection.
On top of the great product selection in Alberta, they also have 2,037 liquor retailers (1,234 more than they had before privatization). (aglc.gov.ab.ca) Comparatively, Ontario boasts a total of 1300 alcohol retailers (860 LCBO and 440 Beer Store retailers). (Thebeerstore.ca / lcbo.com) That’s 737 less locations than Alberta.
To put things into perspective, Ontario has 9.5 million more people than Alberta, but 737 less retailers to offer alcohol. On top of that, Ontarians are limited to buying liquor before 10p.m. due to the Beer Store and LCBO’s early closing times.
Privatization of liquor worked for Alberta, and it can work for Ontario too.
With all of these statistics glorifying privatization of alcohol, one would wonder, why hasn’t it been more of a focus in Ontario?
Mainly, because the government is reeling in billions of tax money from their monopoly, and the rich owners of the Beer Store are becoming even wealthier.
Yes, government revenues from the liquor industry are important because it funds areas such as education and health care. However, what most people don’t know is that Beer Store revenues don’t transition into helpful sectors of the province, but rather into the hands of the rich elite.
Consider the fact that “The Beer Store is reaping $700 million annually in incremental profits” (cbc.ca) and none of it is being taxed in order to benefit the province.
Now it becomes clear as to why the liquor industry has remained a monopoly. Basically, the Beer Store owners don’t want privatization because shipping their products to smaller locations all over the province would be unprofitable, and they clearly don’t want their products to be taxed in order to benefit the province of Ontario.
It’s clear the Ontario government isn’t operating this industry in favor of the consumer, but rather protecting the monopoly that exists between the Beer Store and LCBO. This monopoly ensures that the three owners (LaBatt, Molson, and Sapporo) continue to make astronomical profits off of Ontario alcohol consumers, and it’s time for it to end.
The government will argue that the monopoly of alcohol is necessary so that Ontario maintains strong tax revenues from liquor sales.
However, privatization doesn’t have to mean less tax revenue for the province.
The Ontario government can maintain strong revenues by keeping LCBO stores, and taxing sales of private liquor sales. This doesn’t mean increasing the percentage of the tax amount, but just making sure privatized liquor is wheeling in revenue for the province.
By doing so, the LCBO still regulates a large portion of the liquor sales in the province, but more tax revenue will be generated for the government because people will be purchasing alcohol at all hours of the day, as opposed to being limited to purchasing it before 10:00 p.m.
Additionally, thousands of workers maintain their careers at the LCBO and Beer Stores because privatization doesn’t mean less LCBO stores, but rather more independent sellers of alcoholic products.
Now people may argue that twenty-four hour distribution of alcohol can lead to more DUI’s. However, studies at the medical journals Addiction and the British journal of addiction have shown that “increasing retail locations has no correlation with traffic accidents or lasting increases in consumptions of alcohol.”(Freeourbeer.ca)
Furthermore, despite “fewer restrictions on alcohol sales in recent years, impaired driving rates in Ontario have continued to fall”(Freeourbeer.ca) Thus, staying on the same track regardless of twenty-four hour distribution of liquor.
People will try to argue against privatization, but the facts speak loudly.
Although the concept has its flaws, it would be a massive step forward for Ontario’s liquor industry. Not only would consumers gain the benefits from more product selection and an increased number of retailers, but the Ontario government would also collect millions in sales taxes from the alcohol sold.
No, privatization will not lower prices, but it will allow for a more consumer friendly market, and isn’t that what Ontario citizens are after?
Basically, it comes down to what’s more important: consumer satisfaction, or government revenue.
If it’s a matter of being able to purchase a 24-pack of Molson at 10:05 p.m. on a Saturday night, then privatization may just be the future for Ontario’s liquor industry.