Braised Blue Gets Political: Dismantling The LCBO

It seems that the LCBO may be seeing a change of directive in the future, but it the Albertan model the best way to move forward?

In the past month or two there has been rumblings about the privatization of the Ontario liquor industry. Between conservative leader Tim Hudak nonsensical bashing of the LCBO’s lack of revenue generation and Liberal Finance minister Dwight Duncan’s* new edict on the expansion of the LCBO to major grocery locations, we are seeing a new paradigm emerge in Ontario.

As someone who spent about four years working in the Alberta liquor industry in different positions and areas, I feel as though I can dispel some of the blatant mistruths that are being used by politicians, journalists and news paper article commenters. As well, I want to lay out a few ideas for the province** in case they do decide to go to a private liquor system.

Misconceptions:

The arguments that I am hearing from those who are against the existence of the LCBO   come from two places.

First, there are those who believe that anything that is under government purview is badly run and clearly not optimally profitable. They see the LCBO as part of the nanny state, bureaucracy on top of bureaucracy that pays their under skilled employees too much for such as easy job. They talk about the LCBO’s limited hours, their high prices, poor customer service, and lack of convenient locations.

Second, there are those who look at the Albertan privatized liquor system as the paragon of what a provincial liquor board should be. They talk about the lower prices that Alberta offers, the numerous locations of Albertan stores and the long convenient hours the stores normally keep. They talk about all the jobs a private liquor system would create and the level playing field Canadian wines, beers and spirits would receive from a system with more freedom to bring in what people want.

Now when you look at both of these view points you begin to see they are really the same argument framed in different ways. So let me dispel some blatantly misleading arguments that you will hear.

Alberta is a privatized liquor system: Not quite, Alberta has allowed for private liquor retailers to own and operate liquor stores. All alcohol coming into the province is first processed through the Alberta Gaming and Liquor Commission(AGLC). The AGLC farms out this administrative work to a corporation called Connect Logistics who are in charge of distribution on the behalf of the commission. Private retailers must work with a single central distributor who essentially holds all of the cards for the government.  Along with that, there are no grocery stores or corner stores in Alberta who sell liquor on their grocery floor. They must open separate liquor stores adjacent to their grocery locations and in these separate liquor stores grocery items are banned from being sold(minus soft drinks).

Liquor is cheaper in Alberta because it is privatized: Untrue on a couple counts, True in some ways. First, liquor is not cheaper in Alberta.  Regular retail prices of normal premium and sub premium products(Ie the vast majority of what is sold) are on par with or more expensive than in Ontario***. Beer is Alberta is more expensive, and at the lower price point wine is more expensive in Alberta. For most consumers the prices in Alberta are actually higher than in Ontario. What is cheaper is more expensive products. High end wine and spirits are considerably cheaper but it’s not because of the private retailers. Alberta actually uses a different tax structure on alcohol brought into the province. Instead of taxing the wholesale price of the bottle, they tax the alcohol per volume in the bottle. So a bottle of Grey Goose is taxed at the same rate as a bottle of Prince Igor.****

Albertan liquor retailer have longer hours, better selection and better customer service than the LCBO: Tru-ish, True, Maybe. There are many retailers in Alberta who are open from 10 am to 2 am every day of the week***** and if you can avoid being stabbed to death by a methed out native panhandling for change outside of the door at 2am you are golden. The selection in Alberta liquor stores can be brilliant. I worked in a large boutique retail store that had over 4500 skus and one of the largest scotch and fine wine selections in Canada. It was an amazing place to shop, as well as a great place to work and learn when it came to developing a vast product knowledge. That is one side of things. The other, is the vast majority of stores who have a smaller selection than the most paltry LCBO outlet. As a wine rep, I had to dig through these wastelands of stale dated wine, and beer to get my product to sell. They may be making money but they are by no means what people would hold up as a “good model” for a retailer.

Private retailers will feature more wines from Ontario: No one has done more to prop up the Ontario wine industry than the LCBO. The reality is that Canada’s consumption of domestic wine is lower on a percentage basis than any other wine producing country in the world. There are lots of reasons for this but when it comes down to it, value is the biggest issue. The only Canadian wines that sell are cheap Canadian wines. Why would a private retailer who doesn’t have as much buying power as the LCBO stock a bunch of wine which will not sell because it costs too much in the consumer’s eyes? As a someone who ran a retail liquor store, I would limit my Canadian selection to only wines I feel can be profitable, I would never bring in more for the sake of having a bunch of Canadian wines.

Ideas:

1. The LCBO allows for private boutique retailers to fill the niche market in selected locations: The LCBO does a great business when it comes to fulfilling your normal every day consumer wine, beer and spirits needs, but what they miss the boat on is people who really care about what they are buying. In the past five years the LCBO has made some pretty significant leaps when it comes to being more customer focused with their Vintages locations and programs but there are those who could deliver a better boutique experience. If the LCBO opened up licensed boutique stores who could do their own ordering and importing they would be great revenue generators while filling a niche that ontario has yet to tap into.

2. Scrap Brewers Retail: People bash the living shit out of the LCBO when the biggest dinosaur in the booze game in Ontario is Brewers Retail. It’s an entity owned by a few multinational conglomerates who have bought the large Canadian brewers. It’s prices are insane, the shopping experience is abysmal, the selection is a fucking atrocity and we see, as tax payers, a fraction of the revenue we see from the LCBO? Why does Brewers Retail exist? And why doesn’t Mr. Hudak take a shot at them? Well that is an easy answer, there multinationals(Miller SAB, Imbev, Sapporo Strohs) give our politicians tons of money to keep their bullshit monopolies in place. if the LCBO is so bad at what they do then why do they curb-stomp Brewers Retail in their beer selection and product knowledge?

3. Convert the Wine Rack stores to LCBO Outlets: In Ontario we do have privately owned Wine Retailers, over 160 of them to be exact, called The Wine Rack. They are owned by Vincor Canada, which is owned by Constellation Brands International. These stores located in grocery stores and offer Vincor’s Canadian products. Why are we allowing one company sell their Canadian wine and not allow those who want to open their own boutique shop? Again we see lobby money standing in the way of a free market. And why not use those locations as LCBO outlets and cut the pretence?

Conclusions:

Overall, I see this recent movement against the current state of the LCBO as neither good nor bad. I think it’s mostly stupid ideas from Tim Hudak being quickly legitimized by Dwight Duncan’s less stupid ideas. Had Duncan waited a few months and people forgot Hudak’s craziness he could have taken credit for this instead of legitimizing the leader of the opposition’s ideas.

I think Alberta’s system is not a good example of how a province should run it’s liquor board. There is huge problems with widespread corruption in the Alberta industry that are essentially left alone because the government has pretty much gone hands off on the retailers. Instead of 1 large entity controlling the liquor Alberta has 3 large entities controlling most of the market. The average wage of a liquor store manager in Alberta is below the poverty line(around 35k a year) while in Ontario LCBO employees are paid a living wage. Also because of the later hours some liquor stores in Alberta choose to keep it is not a safe workplace for those who work in the industry******.

I feel like there is a middle ground where the LCBO and smaller retailers could find. To hear the politicians talk in absolutes and the uneducated misrepresent the truth about Alberta’s liquor market is just noise that jumbles the proactive and intelligent things we could do to serve Ontario’s liquor market better.

*And who would know better than a member of the lollypop guild. Did that joke not hit home? Ok he looks like a weeble, how does that one work?

**Because politicians read blogs that pretty much dismiss them as liars and whores in every breath.

***What is different is the sale prices of items which are create when a supplier files for a Limited Time Offer(LTO) with the AGLC. These Limited Time Offers cost the supplier money to file and are usually done months in advance as to maximize volume before quarter and year ends. These LTOs for large consumer products are pretty common but only some retailers take advantage of these LTOs and even fewer pass the LTO savings on to the consumer. Long story short, you will only see sale prices on a chosen few products or loss leaders(if you need me to explain loss leaders go google it)

****I really do like this system in practice because I like to drink nice things and I like to not pay as much for those nice things. And in theory, I don’t think someone who chooses to drink better should have to carry those who drink the cheapest stuff in the store’s tax burden.

*****Pretty much if you are someone who likes clean stores, with good selection and friendly staff you won’t find that experience anywhere in Alberta after midnight.

******Nobody who is buying alcohol after midnight at a liquor store has good intentions or is enjoyable to deal with. Ask me about my St. Patrick’s Night brawl with customers. Or the numerous altercations I had with intoxicated customers while working late at a high end Calgary liquor store. Now imagine working in a shit hole and the kind of human excrement you would encounter late at night.