Liquor_Control_Board_of_Ontario

Liquor Control Board of Ontario

The Liquor Control Board of Ontario (LCBO) is a provincial Crown corporation established in 1927 by Lieutenant Governor William Donald Ross, on the advice of his Premier, Howard Ferguson, to sell liquor, wine, and beer in Ontario through a chain of retail stores. Such sales had been banned outright in 1916 thus, the creation of the LCBO marked an easing of the province's temperance regime. (see Prohibition in Canada)

LCBO stores are generally the only stores allowed to sell hard liquor in Ontario. Currently, the LCBO is one of the world's largest single purchasers 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 and licensed to sell their own brands, however the LCBO is by far the largest wine retailer in the province.

Licensed bars and restaurants may resell alcoholic beverages, but they must be consumed on the establishment's premises. The bars and restaurants themselves must buy their products from the LCBO, The Beer Store, or directly from Ontario wineries and breweries.

Pricing

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 favour) to 30% (in the independent retailers' favour). Wine Access , 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.

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.

Profits

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.. 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.

History

The LCBO was created in 1927 with the end of prohibition which had been introduced in the province in 1916. In the 1924 Ontario prohibition plebiscite Ontarians voted narrowly, by a margin of 51.5 % to 48.5%, to retain the Ontario Temperance Act. The Conservative government of Howard Ferguson ran in the 1926 provincial election on a platform of easing the temperance law and, following its re-election, introduced the Liquor Control Act as a compromise between the complete prohibition demanded by the temperance movement and the unregulated sale of alcohol. The Liquor Control Act (1927) authorized the LCBO to "control the sale, transportation and delivery" of alcoholic beverages in Ontario. Brewers Retail was created to sell beer in a controlled manner while wines and spirits (as well as beer) were sold in LCBO outlets. It would be another twenty years before the sale of alcohol in taverns was permitted with the creation of the Liquor Licensing Board of Ontario.

Until 1961, customers were required to obtain a permit to purchase alcohol and fill out applications whenever they made a purchase. The first self-serve store where customers did not have to rely on a clerk to retrieve alcohol was introduced in 1969.

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, promotion of reduced alcohol consumption, and preventing sales to minors.

The future

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's 2006-07 net income was $1.3 billion Canadian dollars (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, he found that 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.

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), 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 or public support for privatization. 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 Chair, Philip J. Olsson, a long-time Liberal supporter, was appointed by the Liberal government shortly after they took power. Previous Chair, Andy Brandt, had been a Conservative Member of Provincial Parliament. In 2007, LCBO separated the Board Chair and President/CEO functions, making the Board Chair position part-time. Olsson receives a per-diem for his work as Board Chair, which he donates to the United Way.

Recycling program

The LCBO is phasing out its plastic shopping bags, which it says are part of its efforts to become a greener organization. LCBO customers are encouraged to bring their own reusable bags, but can also request handle-less LCBO paper bags or buy reusable bags at the store. Cardboard carrying boxes for beer also are available but also are being phased out. It is unclear what options, if any, will be available for spontaneous purchases by pedestrians who do not want to buy a bag each time they shop at the LCBO. Nevertheless, the LCBO says the new limited options are expected to eliminate approximately 80 million plastic bags a year from landfill.

In September 2006, the Government of Ontario announced its recycling program[3] 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. Under the program, consumers are not able to return even their beer containers to the point of purchase, as they can in neighboring Quebec. Consumers are required to return all empty bottles, tetra paks, PET plastic and bag-in-box containers to Beer Store outlets. There are 441 Beer Store outlets in Ontario -- far fewer than the 600 LCBO outlets.

The deposit rates for the bottles are as follows:

* Large bottles (greater than 630 ml) - $0.20 each
* Small containers (equal to or less than 630 ml) - $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). For Ontarians who do not drive an automobile and do not have access to a nearby Beer Store, the program is particularly punitive.

Through its Natural Heritage Fund, LCBO and its suppliers have raised almost $2 million for projects to restore and rehabilitate Ontario wildlife habitat. This includes Bring Back the Salmon, which helps the return of Atlantic salmon to Lake Ontario after its local extinction over 100 years ago.

Notes

External links

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