Make it closing time for Ontario's beer monopoly

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 that legislatures to rewrite 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 research from 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.

Bizarrely, Mr. Moroz has also claimed that opening up retail access would actually increase the prices Ontario beer consumers pay. It's hard to see a scenario where increased retail competition actually raises prices, a basic principle of economics being that competition drives prices downward. This is especially true if Premier Doug Ford continues on his path of pro-consumer alcohol policies such as reducing minimum pricing.

Better pricing obviously benefits consumers. But expanded retail sales would also generate more revenue for the province. As reported by the C.D. Howe Institute, provinces with deregulated alcohol retail have higher per capita government revenue from alcohol sales than those without it, which suggests consumers can in fact have their cake and eat it, too.

As for public health, labour representatives have argued against opening retail sales on the grounds that liberalization will increase incidents of impaired driving. But evidence from Alberta suggests otherwise. Since that province's privatization of retail sales in 1993, point-of-sale access has improved dramatically and there has been an 800 per cent increase in product variety but also a statistically significant decline in impaired driving. Additional research has shown that opening retail access did not result in an increase in traffic injuries, fatalities, or crime.

The Beer Store is an institution built on a toxic mix of prohibition and cronyism. A majority of Ontarians want it to face competition. They should get their wish.

EXPANDED RETAIL SALES WOULD ALSO GENERATE MORE REVENUE FOR THE PROVINCE.