The (LCBO) is a provincial
Crown Corporation established in 1927 by
Premier Howard Ferguson to sell
Liquor ,
Wine , and
Beer in
Ontario through a chain of retail stores. LCBO stores are virtually the only stores allowed to sell hard
Liquor in Ontario. Currently, the LCBO is the world’s largest single purchaser of beverage alcohol products. Beer is also sold by the (
Molson Coors ,
InBev and
Sapporo Brewery owned)
Brewers Retail Inc., which goes by the name
The Beer Store . Wine can also be found in a number of stores operated by wineries that sell their own brands.
Licensed
Bar s and
Restaurant s may resell alcoholic beverages, but they must be consumed on the establishment's premises. Notably, Ontario is the only jurisdiction in North America where
Off-sale s are forbidden. The bars and restaurants themselves must buy their products from the LCBO, The Beer Store, or directly from Ontario wineries and breweries.
While it is impossible to generalize comparative pricing for the thousands of different alcoholic beverages available through LCBO, the stores have acquired a reputation for high prices. Online price comparisons with independent wine retailers such as Sherry-Lehman
in neighboring New York State can indicate price differences ranging from 10% (in LCBO's favor) to 30% (in the independent retailers' favor). Wine Access[http://www.wineaccess.ca , a Canadian food and wine magazine, has claimed that high-end luxury brands sell in Ontario for up to 60% more than in New York State. Thurlow, S.
"Controlling the Flow of Wine from Coast to Coast" ''Wine Access'', 2006.
The LCBO pricing policies are designed to control alcohol consumption, generate revenue for the provincial and federal governments, and to support the domestic alcohol beverage industry, especially by providing incentive to purchase Ontario wine. Within this framework, the prices of LCBO products are subject to three policy constraints:
- All prices are uniform throughout the province, despite inevitable differential costs incurred by transportation and distribution. This policy effectively subsidizes the transportation of goods into the rural parts of the province. However, store managers have the right to reduce prices of 'bin-end' items at their discretion.
- The LCBO uses a system of "floor pricing", or minimum selling prices, using price control as part of its Social Responsibility mandate to discourage excessive alcohol consumption. This has been criticized as being a legally sanctioned Price Fixing mechanism to guarantee profits and discourage price competition, thus protecting established major producers.
- Less-intoxicating beverages such as light wines and beer are in effect sold by the LCBO at reduced prices, again with the stated object of influencing consumption patterns as part of the Board's social responsibility mandate. "The Impact of Privatizing the Liquor Control Board of Ontario" (Jazairi, Nuri T., 1994).
The company is considered profitable for the provincial government, returning $1.2 billion to the Ontario government in its most recent fiscal year. Some critics claim it is not profitable enough, especially considering the large market share it retains. As a point of reference, Ontario's net income from the LCBO and other alcoholic beverage outlets was $1.637 billion in 2005, or 25.6% of the total alcoholic beverage sales of $6.388 billion, while in Alberta, where the liquor retailing has been privatized, the government still earned 34.9% of the alcoholic beverage revenues.
"Control and sale of alcoholic beverages" Statistics Canada, 13 September 2006. However, the figures are not entirely comparable as the Ontario government's tax income on a percentage basis is significantly lower on the Beer Stores' and independent wine stores' sales than the margins LCBO produces.
The LCBO grew out of early twentieth century
Prohibitionist thinking, and was designed to allow the government to better enforce the legal drinking age. For many years the stores remained deliberately uninviting, with customers forced to apply in paper for what they wanted and having it then fetched by surly staff members after the customer's age was carefully checked.
In the 1970s the stores changed to become more inviting with decorative displays of alcohol, and in the 2000s many of the stores were renovated and enlarged to provide larger product selection. Most current stores have Vintages sections with rotating selections of vintage wines and premium spirits. Today the LCBO is known for good customer service, wide selection and its promotion of
Social Responsibility in alcohol consumption and preventing sales to minors.
There have been numerous discussions about whether the province should sell, or privatize, the LCBO. It has been argued that the main benefit would be the billions of dollars that would be the immediate windfall from any sale. However, this sale would only deliver a one-time profit, and the province would lose out on a source of steady yearly income. It has also been argued that the government could actually earn more money by dismantling the high-margin retail stores while keeping the lucrative wholesale business as
Alberta 's privatization of the liquor business suggests. The LCBO today makes about 1.2 billion
Canadian Dollar s per year (excluding tax revenues generated by Brewers Retail and the independent wine stores), and a sale has been estimated to reap about six billion dollars. Former Premier
Ernie Eves stated that when he investigated this possibility, a 100 per cent sale through an
Income Trust would generate 16 billion dollars.
The main benefits of privatization to the consumer, as seen by comparisons with other provinces, would be more stores, greater convenience, more discount sales, lower prices for popular and bulk items, and longer store hours. The claimed disadvantages would be reduced selection at smaller, less central locations and higher prices for some items, and potentially reduced government oversight in the sale of alcohol which is an addictive and mind-altering substance.
If one scales the Albertan privatization model to Ontario's population, such a privatized system would likely employ more than 15,000 people compared to approximately 5,000 full-time, part-time and casual LCBO employees (which does not include employees of The Beer Store and independent wine stores). Depending on the exact model chosen, that may benefit the convenience and grocery store sectors in Ontario. However, there would likely be a greater proportion of
Part-time jobs in the system. Though there potentially may be more jobs created, they would be low-wage non-unionized jobs that (at least in the view of
Organized Labour ) would not offset the job losses of the better paid unionized staff they would replace. Also, it has been argued that many of the supposed 15,000 potentially employed in the privatization model would have already been employed at a convenience store anyway - note that this is impossible under the Albertan system which mandates that private liquor stores must be physically separate operations, rather it means that under a system similar to that of one of the more liberalized U.S. states (where liquor is available at convenience stores) the number of new jobs would likely be close to the current 5,000 the LCBO employs now.
In an attempt to find more revenue for the government within the current system, former Ontario Finance Minister
Greg Sorbara ordered a review of the province's liquor distribution methods, under the supervision of John Lacey, a former LCBO board member and grocery executive. Sorbara had stated that any option, other than the complete privatization of the LCBO, would be open for discussion. Subsequent to the release of the report, known as the Beverage Alcohol System Review (BASR)
"Beverage Alcohol System Review" (Lacey, John (chair), 2005)., Sorbara rejected the report's recommendations and argued for the continued public ownership of the LCBO.
As it stands currently, there seems to be little governmental support for privatization. Supporters of the status quo claim that the public does not trust private shops to sell alcohol with the public interest as a priority and are content with the LCBO monopoly.
"The Impact of Privatizing the Liquor Control Board of Ontario" (Jazairi, Nuri T., 1994). There may be political motivations to keep alcohol sales public as well, as the LCBO is an excellent source of sinecures for the sitting government. Current LCBO Board Chariman, Philip J. Olsson, a long-time Liberal supporter, was appointed by the Liberal government shortly after they took power, while previous Chairman,
Andy Brandt , had been a Conservative Member of Provincial Parliament.
In September 2006, the Government of Ontario announced its recycling program
{Link without Title} for LCBO and winery store beverage alcohol containers. The program, which commenced operations in February 2007 is being administered and operated by
Brewers Retail Inc. , and consumers are required to return the empty bottles, tetra paks, PET plastic and bag-in-box containers to the Beer Store outlets rather than the LCBO. The deposit rates for the bottles are as follows:
- Large containers (glass, aluminum, tetra paks, etc.) - $0.20 each
- Small containers - $0.10 each
Critics of the program, including some media pundits, have charged that the recycling program is simply another tax on alcohol consumption. They contend that many consumers may not have the transportation means or go to the bother of returning bottles to a Beer Store (which may not be located anywhere near the LCBO at which the original purchase was made).
