Liquor Control Board of Ontario

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Liquor Control Board of Ontario

Type	Crown corporation
Founded	1927
Headquarters	Toronto, Ontario
Industry	Retail (Department & Discount)
Products	Liquor sales and distribution to both consumers and businesses
Revenue	approx: $3.6 billion CAD (fiscal 2005-2006)
Employees	3352 (2005)
Website	lcbo.ca

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 may resell alcoholic beverages, but they must be consumed on the establishment's premises. Notably, 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.

1 Pricing
2 Profits
3 History
4 The future
5 Recycling program
6 Notes
7 External links

[edit] 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 [1] in neighboring New York State can indicate price differences ranging from 10% (in LCBO's favor) to 30% (in the independent retailers' favor). Wine Access[2], 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. ^[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 by providing incentive to 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. As of April 1, 2007, this policy will change. Agents will no longer be able to utilize LCBO stores as pick up points for customer orders. Agents will have to arrange for transfer of products to licensees.(March 5 2007 memo from Mark Scobie General Manager of Specialty Services and Distribution at the L.C.B.O.)(At the same time, 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.^{[citation needed]}

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. ^[2]

[edit] 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 monopoly 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.^[3]. 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.

[edit] History

The LCBO grew out of early twentieth century prohibitionist thinking, and was 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 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 and its promotion of social responsibility in alcohol consumption.

[edit] 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 today makes about 1.2 billion Canadian dollars per year (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, 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 reduced government oversight in the sale of alcohol which is an addictive and mind-altering substance. 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.

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)^[4], 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 support for privatization. Supporters of the status quo claim that the public does not trust private shops to sell alcohol with the public interest as a priority and are content with the LCBO monopoly. ^[5]

[edit] Recycling program

In December 2006, the LCBO announced their recycling program[3] for bottles. The program, which commenced operations in February 2007 is being administered and operated by Brewers Retail Inc., and consumers are required to return the empty bottles to the Beer Store outlets rather than the LCBO. The deposit rates for the bottles are as follows: