LCBO / The Beer Store

[TOareaFan]

Sure, the LCBO would still exist in some capacity in terms of setting regulations on the sale of alcohol, determining rate of taxation and collecting tax revenue from alcohol sales. But as W.K. Lis suggested above, it's pretty clear where the entirety of the profits go.

I am about as far from a "union man" as you will find.....but only the most ardent/dogmatic anti-union person would accept/believe that the entirety of the profits from the sale of liquor in Ontario go to the unions and their workers. In fiscal year 2013/2014 the LCBO paid dividends from their operations (excluding the taxes generated from liquor...so just the retailers profits) of $1.74B to the province.

So, if you privatized the LCBO...sure you would continue to get the tax revenue....but that profit (which has been constant and steadily growing) would now be in the hands of the private retailers....yes, you would tax that so, I guess, you would still get 11.5% of that $1.74B but the other 88.5% would vanish from the provincial treasury.

 

[Skeezix]

Yeah, I have to agree with TOareaFan. While I support private alcohol sales in this province (e.g. open the floodgates to beer and wine in any grocery store), the entirety of the LCBO profits most certainly do not go to staff costs and the Province quite evidently makes a lot of money well beyond the tax revenue.

 

[gabe]

Allowing beer sales in certain grocery stores got me thinking: if beer and alcohol is already heavily taxed, why does Ontario need the LCBO and Beer Store to sell alcohol when taxes from sales in grocery or corner stores would go to provincial coffers anyways?

I'm anticipating some sort of response of "maximizing sales for the province" but certainly grocery retailers could do the job just as well.

The Beer Store and LCBO is the only thing standing between us and total anarchy. How will civilization survive without them?

i can't see anyone standing up to the Beer Store cartel anytime soon. The big three political parties receive generous campaign donations from the Beer Store.
This has been posted before just in case anyone has missed it.

How The Beer Store lobby wins friends and influences politicians: Cohn
The privately-owned Beer Store is a case study in high-powered lobbying in Ontario, the Wild West of political fundraising.
http://www.thestar.com/news/canada/..._friends_and_influences_politicians_cohn.html

 

[Translude15]

I am about as far from a "union man" as you will find.....but only the most ardent/dogmatic anti-union person would accept/believe that the entirety of the profits from the sale of liquor in Ontario go to the unions and their workers. In fiscal year 2013/2014 the LCBO paid dividends from their operations (excluding the taxes generated from liquor...so just the retailers profits) of $1.74B to the province.

So, if you privatized the LCBO...sure you would continue to get the tax revenue....but that profit (which has been constant and steadily growing) would now be in the hands of the private retailers....yes, you would tax that so, I guess, you would still get 11.5% of that $1.74B but the other 88.5% would vanish from the provincial treasury.

Well, can't really argue with that dividend. Guess we're better off keeping the system as is while allowing grocers and other retailers some beer and wine sales.

Just to clarify, does that dividend includes taxes on beer and wine, or is it entirely separate from the taxes generated?

 

[TOareaFan]

Well, can't really argue with that dividend. Guess we're better off keeping the system as is while allowing grocers and other retailers some beer and wine sales.

Just to clarify, does that dividend includes taxes on beer and wine, or is it entirely separate from the taxes generated?

Does not include taxes...just the profit from LCBO operations....mostly retail markups but other things generate profits (they act as a wholesaler and a retailer as well as selling event licences and the like)....but the taxes on booze are a separate remittance.

EDIT: here is the last financial summary from the LCBO

http://www.lcbo.com/content/lcbo/en/corporate-pages/about/media-centre/news/2015-06-05.html

 

[W. K. Lis]

If the LCBO is privatized, what would prevent the CPP from investing in them. The CPP already owns shares in Loblaws, for example, who are already selling beer. See link.

 

[TOareaFan]

If the LCBO is privatized, what would prevent the CPP from investing in them. The CPP already owns shares in Loblaws, for example, who are already selling beer. See link.

aboslutely nothing would stop CPP...or any other pension fund or any other investor/retailer.....from investing in it.....but it would still leave an over $1.5B hole in the province's budget every year....now, presumably, a sale of the LCBO would (just as sale of Hydro did/will) provide a short term/one time boost to the coffers.....if you don't find another way to, either, generate that $1.5B or reduce costs by that $1.5B it leaves a shortfall in your finances.

 

[Translude15]

aboslutely nothing would stop CPP...or any other pension fund or any other investor/retailer.....from investing in it.....but it would still leave an over $1.5B hole in the province's budget every year....now, presumably, a sale of the LCBO would (just as sale of Hydro did/will) provide a short term/one time boost to the coffers.....if you don't find another way to, either, generate that $1.5B or reduce costs by that $1.5B it leaves a shortfall in your finances.

I remember reading an article in the Star about the LCBO not purchasing its inventory at the lowest possible wholesale cost from suppliers. The suggestion was that doing so would increase the dividend paid out to the province but the LCBO used the whole public good argument as a retort to such a suggestion.

Evidently the current system works, but surely could private retailers not have the ability to a) purchase alcohol at the lowest possible cost and b) sell alcohol at a lower operational cost than the LCBO/Beer Store?

 

[TOareaFan]

I remember reading an article in the Star about the LCBO not purchasing its inventory at the lowest possible wholesale cost from suppliers. The suggestion was that doing so would increase the dividend paid out to the province but the LCBO used the whole public good argument as a retort to such a suggestion.

Evidently the current system works, but surely could private retailers not have the ability to a) purchase alcohol at the lowest possible cost and b) sell alcohol at a lower operational cost than the LCBO/Beer Store?

I believe, in the Western world, Ontario is the largest jurisdiction with a single outlet for alcohol......so the LCBO, as the buyer for 13 million people would have more leverage with suppliers than anyone else. Hard to see how a bunch of individual buyers representing a bunch of smaller retailers would have more leverage to drive down the price of alcohol. You also can have no guarantee that if the LCBO (or a private retailer) drove down the cost of their product from suppliers that it would, necessarily, make its way to lower pricing on the retail side....it could just end up being higher profits on the corporate side.....since the price of oil dropped from $100+/bbl I have not noticed a significant decline in, for example, the price of an airline ticket.

It is always easy to look at them and say "you could have driven the price down lower" but the fact is they are doing pretty well by the province......generating profits of $1.8B on sales of $5.2B is pretty good going.

I should say, I am not at all opposed to privatization.......but those that are pushing for it really have to come up with an answer to how the province moves forward without that annual dividend....it is not an insignificant number.

 

[Translude15]

I believe, in the Western world, Ontario is the largest jurisdiction with a single outlet for alcohol......so the LCBO, as the buyer for 13 million people would have more leverage with suppliers than anyone else. Hard to see how a bunch of individual buyers representing a bunch of smaller retailers would have more leverage to drive down the price of alcohol. You also can have no guarantee that if the LCBO (or a private retailer) drove down the cost of their product from suppliers that it would, necessarily, make its way to lower pricing on the retail side....it could just end up being higher profits on the corporate side.....since the price of oil dropped from $100+/bbl I have not noticed a significant decline in, for example, the price of an airline ticket.

It is always easy to look at them and say "you could have driven the price down lower" but the fact is they are doing pretty well by the province......generating profits of $1.8B on sales of $5.2B is pretty good going.

I should say, I am not at all opposed to privatization.......but those that are pushing for it really have to come up with an answer to how the province moves forward without that annual dividend....it is not an insignificant number.

Yeah it's definitely a case of "easier said than done." The LCBO link you posted earlier: the figures said private sales and direct delivery were included. Does that include sales made to bars and restaurants?

 

[TOareaFan]

Yeah it's definitely a case of "easier said than done." The LCBO link you posted earlier: the figures said private sales and direct delivery were included. Does that include sales made to bars and restaurants?

I would not suspect that was the bar figure...the total "other" seems very low to be the bar sales.

 

[Tewder]

I believe, in the Western world, Ontario is the largest jurisdiction with a single outlet for alcohol......so the LCBO, as the buyer for 13 million people would have more leverage with suppliers than anyone else. Hard to see how a bunch of individual buyers representing a bunch of smaller retailers would have more leverage to drive down the price of alcohol. You also can have no guarantee that if the LCBO (or a private retailer) drove down the cost of their product from suppliers that it would, necessarily, make its way to lower pricing on the retail side....it could just end up being higher profits on the corporate side.

A novel concept I know but how about some 'competition'?

The artificially inflated price of alcohol in Ontario is a direct result of the LCBO monopoly. They can name their price and what choice do you have? This hypothetic buying power you tell of isn't helping anyone. In fact, this government monopoly hurts our wine, liquor and craft beer industries. It hurts our bars and restaurants and it crushes the myriad market possibilities there would be for alcohol retail, small businesses etc..

It is always easy to look at them and say "you could have driven the price down lower" but the fact is they are doing pretty well by the province......generating profits of $1.8B on sales of $5.2B is pretty good going.

A profit in a government monopoly is really just a tax. It's an added tax on an already highly taxed product.... and these dollar amounts you cite are meaningless as they are not market prices. They are artificial constructs.

II should say, I am not at all opposed to privatization.......but those that are pushing for it really have to come up with an answer to how the province moves forward without that annual dividend....it is not an insignificant number.

We shouldn't have to push for privatization. Monopolies are illegal. They are harmful to the Ontario consumer. Ever wonder why Ontario is the only jurisdiction with a single outlet? It's because this wouldn't be tolerated anywhere else... and I'm sorry, no amount of tax revenue is warranted if it's unethical. Opening up the market would help many industries and would stimulate all kinds of economic activity which in turn would generate tax revenues ethically. Apparently Ontario is the only place that doesn't get this??

 

[TOareaFan]

@Tewder I would not disagree with anything you say really....but the pragmatist in me just realizes that this province already spends way more than it takes in in revenue.....and, as I said earlier, if the suggestion is we break up this monopoly then we have to figure out what expenditures we cut or, alternatively, come up with a viable plan to replace the revenue.

Simply saying that competition would generate economic activity that would replace the revenue (even in the face price lowering competition) is simply overstating the impact. At a corporate tax rate of 11.5%, privatization of alcohol sales would have generate taxable activity/profit of some $15B to replace the lost profit from LCBO ....that is just not in the cards.

 

[Videodrome]

As an aside, I was taking the subway home today and every ad was for types of cognac at the LCBO.

 

[ShonTron]

We shouldn't have to push for privatization. Monopolies are illegal. They are harmful to the Ontario consumer. Ever wonder why Ontario is the only jurisdiction with a single outlet? It's because this wouldn't be tolerated anywhere else... and I'm sorry, no amount of tax revenue is warranted if it's unethical. Opening up the market would help many industries and would stimulate all kinds of economic activity which in turn would generate tax revenues ethically. Apparently Ontario is the only place that doesn't get this??

Uh, monopolies are not illegal in many industries. And we tolerate monopolies in many cases, like public services like transit and police. Want to buy electricity? You almost always only have one choice, whether you have a public or private system. And Ontario is not the only jurisdiction with a single outlet for liquor. Ever been to Quebec or Manitoba? Or Pennsylvania?

There are competing delivery systems for alcohol. You can choose between taking it home or consuming on site. You can get alcohol at the restaurant, bar or pub of your choice.