LCBO’S monopoly

Time for a debate in the legislature

Considering the prices that Ontarians already pay at LCBO outlets, the recent increases implemented by the provincially owned monopoly are admittedly quite small. For example, as of March 1, about 10 per cent of spirits and three to four per cent of beers saw prices go up five to 50 cents per bottle or case of beer.

For its part, the government-controlled agency says the increases were necessary to set what it calls minimum prices that must be established under its commitment to a “social responsibility mandate.”

But there’s scant evidence that the increases will result in anyone drinking less. Instead, most people will agree with local consumer Richard White, who recently told The Windsor Star the increases are “a lot more like an absolute tax grab if anything.”

Certainly, the LCBO likes to boast about its earnings and ever-increasing contributions to the provincial treasury. For example, on Dec. 23, the LCBO established a oneday record for sales of $51 million at the province’s 622 liquor stores. That was an increase of $3 million from the previous record of $48 million on Dec. 23, 2010, which was up from $42.5 million on the same day in 2009.

In the most recent fiscal year, the LCBO contributed $1.55 billion to provincial coffers — up $140 million, or 9.9 per cent, from the previous year, on record net sales of $4.55 billion.

What’s interesting, however, is that the LCBO’S record earnings come on the heels of a report from Ontario auditor general Jim Mccarter that concluded prices are higher than they should be at the Crown corporation.

Unlike private-sector retailers, who try to find the lowest wholesale prices, Mccarter said the LCBO focuses on the price it wants to charge in its stores and then “works backwards.” Then suppliers raise or lower the wholesale cost to suit the government-controlled agency.

“Sometimes if suppliers submit significantly lower quotes than the LCBO expects, the LCBO will ask them to raise their wholesale price,” according to the auditor general’s report.

As Mccarter pointed out, this isn’t the way the real business world works.

Mccarter says the LCBO should be looking at negotiating the best — lowest — price possible with its suppliers. He said this “could result in higher profits for the province while still encouraging responsible consumption.”

As we’ve suggested in the past, it’s time for a real discussion in the Ontario legislature about the LCBO’S business model and the merits of privatizing sales. There’s certainly evidence that a move to privatization would neither reduce government revenues nor encourage excessive drinking.

NDP Leader Andrea Horwath and Conservative Leader Tim Hudak have both expressed concerns about the LCBO stranglehold on sales — particularly its policies that work against Ontario wines.

In a minority legislature, they have an opportunity to put the LCBO under a microscope.

The monopoly was a response to the end of the Prohibition, and the belief that only government was in a position to control the flow and distribution of alcohol. This is another time and place.