Liquor Control Board of Ontario

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Liquor Control Board of Ontario

Type of Company	Crown corporation
Founded	1927
Headquarters	Toronto, Ontario
Industry	Retail (Department & Discount)
Products	Liquor sales and distribution to both consumers and businesses
Revenue	approx: $3.5 billion CAD (fiscal 2004-2005)
Employees	3352 (2005)
Website	LCBO site

The Liquor Control Board of Ontario (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 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 Sleeman 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 bars and restaurants can also sell alcoholic beverages, but they must be consumed on their premises (Ontario is the only jurisdiction in North America where off-sales are forbidden). The bars and restaurants themselves must buy their drinks from the LCBO, which makes it the world's largest purchaser of liquor and spirits.

Due to retail markups and provincial taxation (especially for on-site consumption), many of the wines (especially high-end luxury brands) sold in Ontario are, often to the dismay of consumers, around 60% more than those sold in neighboring New York State. ^[1]

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 providing incentive to Ontario wine. Within this framework, the prices of LCBO products are set subject to three major policy constraints. First, all product prices are uniform throughout the province, despite inevitable differential costs such as transportation and distribution costs - this effectively subsidizes the transportation of goods into the rural parts of the province (at the same time, however, store managers have the right to reduce prices of 'bin-end' items at their discretion). More controversially, the LCBO has a system of "floor pricing", which is a minimum selling price set for each product 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. Third, less-intoxicating beverages such as light wines and beer are in effect sold by the LCBO at reduced prices, again the stated object of the exercise is to influence consumption patterns as part of the Board's social responsibility mandate. ^[2]

[edit] History

The publicly owned corporation grew out of early twentieth century prohibitionist thinking and were 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 a staff member after the customer's age was carefully checked.

In the 1970s the stores changed to become far more open and inviting with decorative displays of alcohol. Today the LCBO is known for good customer service, wide selection and social responsibility. The company is also very profitable for the provincial government, but some critics claim it is not profitable enough, especially considering the monopoly it retains.

[edit] The future

Every couple of years there is discussion about whether the province should sell the LCBO. The main benefit would be the billions of dollars that would be the immediate windfall from any sale. 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 a billion Canadian dollars per year, and a sale is 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, are more stores, greater convenience, more discount sales, lower prices for popular and bulk items, and longer hours. The disadvantages would be reduced selection at smaller less central locations and higher prices for some items. If one scales the Albertan privatization model to Ontario's population, a privatized system would likely employ more than 15,000 people compared to approximately 3,350 LCBO employees and, depending on the exact model chosen, 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, furthermore most smaller stores are not unionized and even in those that are, the average wage for employees is usually lower although the aggregate amount of wages paid out would be higher.

In an attempt to find more revenue for the government within the current system, 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. Following the release of the report, known as the Beverage Alcohol System Review (BASR), Sorbara rejected the reports 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 and are content with the LCBO monopoly. ^[3]

In December 2006, the LCBO introduced their recycling program for bottles. The program is being administered by Brewers Retail Inc.. The deposit for the bottles are as follows: