By David Clement

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Opinion: As LCBO strike looms, Ontario needs to rethink its prohibition-era liquor sales Back to video

It wouldn’t be summer in Ontario without the threat of a strike by Liquor Control Board of Ontario (LCBO) workers. If the union doesn’t have its demands met, and a deal isn’t struck, Ontario’s 669 LCBOs could temporarily close their doors starting Friday. That would obviously be bad news for Ontario’s drinkers: the LCBO still holds a monopoly on the sale of spirits and also accounts for the vast majority of wine sales.

This latest round in a perennially recurring labour dispute is just one reason in a long list why Ontario should move away from its prohibition-era LCBO model for alcohol retail. Alcohol modernization has been a priority for the Ford government, so why not finally do away with this relic of the 1920s?

There is a widespread perception that the LCBO monopoly model is the only way the government can realize all the revenue it “needs” from alcohol sales. In fiscal year 2023, the LCBO did generate $3.72 billion for all levels of government, with 69 per cent of that going to the provincial government. Even in the inflationary 2020s, that is a lot of money. But the argument that only a state monopoly can generate such amounts is wrong.

Ontario already has a framework in place for how to generate revenue from controlled substances without actually retailing those products. Taxes on cannabis sales made the province over $500 million in 2022, and that was done without the province owning or operating a single retail storefront. The same hands-off model governs the sale and taxation of tobacco and vaping products. Ontario generates hundreds of millions of dollars despite not actually selling cigars, cigarettes or vaping products. If raising revenue is the goal, the bloated retail operations of the LCBO clearly are not necessary.

And bloated is exactly what the LCBO’s retail model is, especially when compared to private retailers elsewhere of the same approximate size. Based on the LCBO’s pre-COVID figures, the average “sales, general and administrative” (SG&A) cost per store is $1,515,000 per year. With 669 corporate stores, that is a considerable expense to taxpayers. Private alternatives, like high-inventory private retailers in Alberta, cost significantly less to operate. Based on pre-COVID data from Alcanna, a private retailer in Alberta comparable to the LCBO, the average SG&A is just $511,000 per year. If we could snap our fingers right now and fully transition the LCBO out of the government’s operating model, taxpayers would save $669 million per year. If the Ford government is looking for low-hanging fiscal fruit, this is it.

If it’s too tough politically for the province to go down the road of full privatization, Doug Ford could just stop the LCBO from building any more retail storefronts and allow private alternatives to enter the market. For every private operator that opens in place of a new LCBO, taxpayers save more than a million dollars a year in operating costs. Over time, these savings would be considerable, and they could be reaped without having to sacrifice a single LCBO job currently on the books.

What is even more important: allowing private competitors to enter the market would vastly improve consumer choice. Specialty stores could focus on niche markets. If grocery stores and convenience stores are going to be allowed to sell alcohol, which will soon be the case in Ontario, why would the province want to prohibit any and all entrepreneurs from entering the market and trying to meet consumer demand?

The Ford government has done right by consumers by finally moving beyond the “Master Framework Agreement” with The Beer Store oligopoly and expanding retail access. With that almost behind us, now would be the perfect time to re-evaluate the role of the LCBO and modernize Ontario’s alcohol market for good. That would be something worth raising a glass to.

Financial Post

David Clement is North American affairs manager with the Consumer Choice Center.