Congratulating Ontario Premier Kathleen Wynne last month for rethinking her province’s bizarre and sclerotic liquor retail system — i.e., allowing supermarkets to sell beer — we reserved the right to be disappointed by the details. This has proved sadly apt.
There will indeed be more places to buy beer. But the plan Wynne announced last week, as laid out in a bewildering report from a committee headed by former TD Bank CEO Ed Clark, is clinically bonkers. It reads as if its authors don’t just mistrust the free market, but may never have heard of it.
Where to begin? There will apparently be 450 beer-in-supermarket licences on offer, in a province of 14-million people, someday, but no more than 150 before May 1, 2017. For some reason only urban supermarkets need apply. The stores’ hours will be severely restricted. They will be required to charge exactly the same prices as at the provincially run LCBO and at The Beer Store (TBS), a quasi-monopoly that’s majority-owned by Molson-Coors and Anheuser Busch InBev. They’ll have to stock beer from small breweries regardless of demand.
Most infuriatingly, the newly licensed stores will not be allowed to sell beer in quantities greater than six-packs. That sacred and profitable trust will remain primarily with The Beer Store — although a “pilot project” will allow 10 (!) additional LCBO outlets to offer beer in larger package sizes.
What’s the risk? Clark’s report is at least honest: Allowing the LCBO to sell 12- and 24-packs might “significantly erode the economics of TBS.” And we can’t have that, because TBS’s owners are such lavish contributors to Ontario’s Liberal and Progressive Conservative parties — wait, what are we saying, it’s because TBS is so unimpeachably efficient and cheap!
The Clark committee’s stated purposes are, first, “to materially enhance customer convenience, choice and shopping experience, while continuing to ensure that Ontarians can buy their beer at prices below the Canadian average”; second, to establish a “level playing field” for all brewers; and third, to maintain government revenues. It does not seem to have occurred to them that simply opening up the market is all that is needed to accomplish all three. It’s not complicated: Those thirsting for 24 tins of watery stuff on the cheap go to Costco; those who want beer tastings with experts and an exotic selection go to a boutique store; and everything in between. Stores stock what they can sell; government collects taxes from all of them. This is how retail works in the non-communist world.
But not, alas, in Canada. And for reasons unknown, Clark’s committee only studied Canadian jurisdictions — concluding that “dismantling a quasi-monopoly system … provides for a small increase in convenience at either much higher prices for consumers and/or (sic) reduced revenues for government.” For example, they observe, a case of beer that costs $34-$35 in Ontario costs $40 in Alberta, where all liquor retail is privatized.
First: There has been no “small increase in convenience” in Alberta since privatization. In September 1993 there were 836 places to buy liquor. At year end 2013 there were 1,420. Second: Beer doesn’t have “a price” in Alberta, but if it’s “on average” 15% higher than in Ontario, that’s no mystery. The producers set the wholesale price; the government marks it up; and guess what? Though the gap has been eliminated, in the 15 years after privatization Alberta’s system was considerably more profitable than Ontario’s.
That’s not “because of privatization.” That’s because the government made a decision about how much it wanted to make off liquor — just like Ontario’s did. The Alberta example shows there’s no reason profits can’t be maintained or even boosted in a simpler, market-oriented system — but the architects of Ontario’s reforms never even gave it a chance.
Ontarians will thus be left with an even more absurd and needlessly complex system post-“reform” than before. A small dose of added convenience, and the hope beer in supermarkets might boost the long-term case for sanity, will have to pass for silver linings.
National Post
