Status of Ontario wine distribution

Detox Ontario The same tired arguments are heard every time someone suggests privatizing the LCBO. Thankfully, all four are easy to debunk Mark Milke Financial Post

Wednesday, January 14, 2004 To balance the budget, Ontario Premier Dalton McGuinty is considering privatizing the Liquor Control Board of Ontario, a market giant with

45% of Ontario's alcohol sales. He can expect the following disinformation campaign from the usual suspects.

- Claim #1: "Ontario has the second lowest prices in the country after New Brunswick." The LCBO made this claim vis-a-vis Alberta in a March,

2002, letter to the National Post based on a 2001 study. At the time, I (and colleagues at the Canadian Taxpayers Federation where I worked) requested this report on at least three occasions; the LCBO refused to release it and as of this week still won't release its latest full survey of cross-country prices. The LCBO spokesperson informed me that such studies are not "publicly published documents." So, a government Crown makes an empirical claim but is unwilling to allow consumers -- the people who own and patronize the chain -- to fact-check the study's data and assumptions themselves. That's revealing.

Regardless, much of the price in booze is tax. Once it's taken out of the equation, I bet many stores in Alberta undercut LCBO stores on many products. From the bare-bones comparison the LCBO gave me, I can report (based on personal buying experience) that some items the LCBO claims are a better buy in Ontario are in fact cheaper in Alberta. Ironically, one of the best price competitors in Alberta is Ontario-owned Loblaws, which operates retail liquor stores in Alberta (under a different name) but cannot yet do so in its home province.

- Claim #2: "Ontario has better product selection than private sector Alberta."

Wrong again. Alberta has 18,800 listings in total (11,300 active with another 7,500 available on short notice) compared to Ontario with

13,600 in total (6,600 active with another 7,000 quickly available). Also, here's a critical difference for entrepreneurs: In Alberta, an enterprising business can import any product, stock it in the wholesale warehouse, pay a monthly fee and then hawk it to the province's 1,000 private stores. In Ontario, importers must apply to the LCBO. If LCBO buyers agree to stock it, great; if not, those who want to crack Ontario's retail market are out of luck.

A related Ontario claim is that LCBO stores, including in smaller cities, stock many more products on average than a private Alberta store. This argument is not exactly helpful to the advocates of government-owned stores; it's hardly the responsibility of government to ensure a similarly wide variety of spirits, beer and wine in every store in every hamlet. Sensibly, a private liquor store in an Italian neighbourhood in Edmonton will have a vastly different and specialized selection of wine compared to a beer depot in a blue-collar suburb. In the private sector, over-stocking is not a virtue; it is money that sits on the shelf and is costly for the owner, or in the case of government stores, to taxpayers.

- Claim #3: "Crime has increased at liquor stores in Alberta."

Calgary police statistics are clear on this point: The chances of seeing a crime, or being a victim of one at a liquor store, was greater before privatization than since. While the number of crimes at liquor stores has risen since privatization -- hardly surprising given that there eight times the number of stores in Calgary now compared to pre-privatization -- in every year except 1999, the rate of crime (i.e., the number of offences per store) -- has dropped.

- Claim #4: "Privatize the LCBO and the Ontario government will lose $975-million transferred to it annually from LCBO profits."

This is perhaps the most alluring argument given for governments to keep their state-owned booze outlets. It is repeated by government unions that staff the liquor stores and by left-wing politicians who want the state to keep ownership of whatever; it is also nonsense.

In Alberta, the government received $402-million from government liquor stores in the year before privatization; this year, the government will reap $545-million. Since privatization 10 years ago, private liquor stores have paid almost $4.6-billion in liquor mark-up taxes to the Alberta treasury. That money didn't flow to government because private stores felt charitable towards the provincial treasury. The government continued to impose its liquor mark-ups on beer wine and spirits; the only difference is that it no longer operates retail stores.

When German Chancellor Otto von Bismarck came up with the idea of the welfare state in the late 19th century, it was for sensible items such as old-age pensions and welfare for the poor. Now, defenders of the government-must-run-everything-it-currently-does school argue government should stay in the business of selling Miller's and Merlot. The Ontario premier should indeed consider exiting the booze business.

Reply to
Peter Miller
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You have buried a lot of conservative right wing political rhetoric in that diatribe. Too bad the voters got sick of the managerial incompetence of political ideologues and threw them out.

I do not want the liquor distribution situation in Ontario to follow the great "privatization" movement that allowed U.S. banks to enter Canada and cherry pick prime branches in Toronto, Montreal and Vancouver and ignore the rest of Canada. In Ontario, the former right wing government also thought it would be a good idea to loosen regulations in licensing inter city bus lines that required them to serivce small towns if they wanted to service the heavily used and highly profitable Windsor - Toronto - Ottawa routes on the major expressways. The private businesses promptly gave notice that they would abandon all the small town routes and the meagre, if any, profits with them. Outside of the major cities, most of Ontario is spread out like Texas. One school district in Northern Ontario is the size of Scotland, and you could drop kick Texas into the unoccupied parts of Ontario and not even notice it. Since there were not even any train services to most of these towns, the politicians finally came to their senses and backed off.

My experience has been that private business is only interested in pushing the most volume at the most profit a la Walmart or any other big retailer. They are not going to bother bringing variety or quiality into smaller towns. This is a political argument, and like religious arguments, best left to fanatics. Leave the wine to people who enjoy it.

Besides, those idiots in Alberta still call a 12 pack of beer a full case! ;-))

Dennis Windsor, Ontario

Reply to
Dennis Rekuta

Certainly that is the most visible and stereotypical outcome. Though Wal-mart's margins are rather thin.

Private Enterprise will also support a few stores of the boutique variety - the kind that people from this NG would patronize. Here in Upstate NY, there are a number of great wine shops of various sizes. Because of regulations, though, I can't ring up a winery and have a bottle of something mailed to me without committing a felony. That is where regulation makes me angry.

I am not sure they will or won't - are you saying that smaller townsfolk are not likely to want to buy a variety or quality wines? In the times where I have lived in small towns the local shop has usually been more than happy to special order stuff for me.

I am not sure that government or big retail will appear to be much different in the final analysis. I think it is the smaller shop with a knowledgeable owner that we would most like to encourage!

Reply to
Bromo

Well for one I didn't write the article, I just posted it. However I did happily vote Liberal in the last election, and I'm still glad I did.

This is not a right/left wing issue. It's a question of not cutting social services in my province, and if getting government out of the monopoly retail business helps, than so be it.

Good point, so let's do what Alberta did. Right now, only Canadian companies have licenses to sell retial alcohol in the province, no need to change that rule for Ontario.

You are however comparing retail to roads, banks and essential services which I think is really unfair, please do not disrespect our fine social workers.

At Wal-mart, yes, it's profit profit profit, which is why they should not be allowed to sell alcohol in Ontario. As for bringing variety or selection to smaller towns in Ontario...have you BEEN to a small city store? The new mandate at the LCBO is "Reduce selection by carring less brands", ask a manager, they will not list your fav wine in the store just because you ask. They only way new brands come in is when they are forced, and then they have to remove another brand from the shelf. At least in a private system the manager has say in what is being carried, unlike today's LCBO.

You live in Windsor? That city and surrounding area just last year pushed through the new mandate. Wonder why there are 5 cases of Piat D'or on the shelf?

Here's another Gem for you....the LCBO is NOT considering ANY new Vintage listings until 2005. None. Not one. If it wasn't already ordered last year, it's not coming in at all.

Heard of any new and exciting wines that are up and coming? Too bad if you live in Ontario, try getting Willow Park in Calgary, AB to ship it to you.

There is no reason why a grain farmer in Alberta should have a better selection than someone visiting Toronto from Hollywood.

Lucky farmer, lucky indeed.

Reply to
Peter Miller

Buffalo. Perfect example. Drive to Buffalo from Toronto, and you will see how wine retailing SHOULD be done.

Hear that? Consumers of fine wine in Buffalo have a better selection than Toronto consumers. (Not meant as a slap to Buffalo, more of a compliment)

Reply to
Peter Miller

I am located in Rochester, haven't been to the Buffalo shops - sounds like I should check it out.

Also, don't leave out NYC.

Reply to
Bromo

What is this new Windsor mandate?

Reply to
Joe Bidwell

Carry less brands on the shelf, that way the store has less bottles to count.

Reduced selection is the end result. Can't find the product you want, well too bad, drive 100Km to the next town, maybe they have it.

And it's not just Windsor, it's the whole province.

Reply to
Peter Miller

That's a load of bull. All you have to do is ask and they will get whatever you want. *ANY* liquor store in Ontario will get you *ANY* product in the LCBO's regular listings on a few days notice. No charge, and no minimum order quantity. Vintages items can also be order on the same basis, but not until 7 days after release. I have found it is quicker if another local store has stock (usually next day) rather than coming from the warehouse (closer to a week).

You can do stock inquiries on any item (regular listing or Vintages) on the LCBO website. Once you find an item, you can find out which, if any, stores have stock in any particular city.

Reply to
Al Rudderham

Al,

I want my wine NOW. Anything else is not acceptable. I want my wine sold at the 24-7 grocery store down the street from my house, and I want a selection of a couple thousand different varieties of wine to choose from. Anything else is not good enough. This is how it is done in Detroit. This is how it is done in every other country in the world, excluding scandinavia (but they sell beer in the grocery stores in scandinavia). I want better service. The LCBO is pretty but the service, selection, location, and of course price sucks ass. The LCBO is just not good enough. I can do better personally. I would mortgage my house and open up a store if I could, but I am not allowed to. Ontario is so Low Self Esteem WASP Protestant its a 2nd rate laughing stock.

Reply to
Joe Bidwell

The stuff I want NOW comes usually from my cellar, not the store. The liquor store is for restocking the cellar.

My experience shopping for wine in 24/7 grocery stores in the US is that the selection is poor, and the prices in general aren't any lower than they are in Ontario. I think the grocery store model sucks.

I *can* see an argument for the "specialty shop" model. But they won't be on every corner. Look back a few posts at what "Bromo" said. He lives in Rochester and said he should check out the shops in Buffalo!

I can shop the LCBO and Vintages websites, check stock online, and then go to the closest store with the CSPC (stock) number and say get me some. Who has to travel 100KM?

I don't know where you live, but the stores in Kitchener/Waterloo that I frequent have bend over backwards service. Of all of the large retail places I shop I'd rate the LCBO right at the top in customer service.

Reply to
Al Rudderham

I can give to addresses of five grocery stores and supermarkets in Metro Detroit that have better selection than the LCBO superstore in Downtown Toronto. I'm serious. And the prices are MUCH better too. There is no reason why mostAustralian wine should cost more than $10.

Reply to
Joe Bidwell

Glad you have a system to cope with it! :-)

Are you saying the state stores in Ontario are every bit as good a a grocery store that stocks wine in the US? Have you seen California stores, or the store in MO that I worked in as a teenager? How about a wine store in the US?

I mean, I can chime in that I would like wine to be able to be stocked wherever someone wants to stock it - because more availability is better, generally.

In the US the wine and other alcohol trade is fraught with a thicket of local and state laws and taxes, so it can hardly be seen as free and unfettered. Still, when I was living in California, there was an excellent selection of wines at the grocery store, as well are the more rare ones in liquor stores that specialized in wine.

I did not mean that in the way you painted it AT ALL!! The stores in Rochester are excellent, BUT, one can never have too many wine shops - hence, my desire to check them out (is only 1 hour away from me). Not because "free enterprise" is falling short in Rochester (it isn't: We have

2 giant wine stores, and 2 smaller good ones, and at least 2-3 ones I haven't visited yet), just that I am perfectly willing to drive an hour for exploring another wine shop!.

Wonderful - I am glad the service works well for you - it had better work for someone given the complaints many have made about it!

Reply to
Bromo

In your previous post you said "I want my wine sold at the 24-7 grocery store down the street from my house". Five grocery stores in Detroit does NOT put one on every corner. If you want to argue that there will be a few stores *somewhere* with better selection, I'll give you that. I just doubt they will be the ones "down the street".

How about exchange? How about taxes? Neither of those will change if the LCBO is privatized.

Reply to
Al Rudderham

Unless you are very, very lucky or the stores can spot a "mark" from a mile away! :-)

Reply to
Bromo

In a monopolized system such as we have in Ontario, where does an Ontario Winery or Import agent sell his wine when the LCBO does want to list it, or when it becomes de-listed by the LCBO??

Reply to
Dave Gimbel

Fine, let's settle the argument.

LCBO -

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(paste into browser) Total brands in stock across province - 5,000 (Average is 1,000 per store and falling)

One Calgary Private store -

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Total brands in this ONE store - 7,000

As for your "Who has to travel 100km?" This private store delivers all it's products, and they don't have a monopoly.

Reply to
Peter Miller

Since their website doesn't return the correct info perhaps you can tell us whether they charge for delivery, and whether they deliver anywhere in Alberta? If they do charge, how much?

Also do their prices include ALL taxes (including GST) or are they added at the register.

Their website seems substantially broken, so it is hard to tell what they really have to offer. I tried to search for Wolf Blass under wines (which claims to be the biggest selling brand in Ontario) but it does not show prices, and shows 0ml (a new economy size? ;-) for many of the wines it returned. I couldn't find a single wine that it returned prices for. Tried Lindemans, Wolf Blass, Gallo Sonoma, Concha y Toro, and Miguel Torres among others. Prices on a few spirits I found seem generally to be lower than Ontario by amount of GST, which is why I ask if they add tax at register. Some spirits were higher priced than LCBO.

Perhaps the in-store experience is better, but their website doesn't offer enough info to let you shop online. I'm underwhelmed.

Those numbers don't match what the LCBO claims in their most recent (albeit stale) annual report available on their website. They claim

12,000 "products available", 78 stores offering 2500 or more brands, 196 stores offering 1500 to 2000, and 165 stores offering 1000 to 1500 brands.

I guess the issue here is "available" vs. "in stock". I don't see the big attraction of "in stock". It's not like I'm going to browse thousands (or even hundreds) of products when I'm in the store anyway. As long as stuff is available on short notice that's good enough for me.

So the answer is that nobody has to travel 100km. I agree. It was the comment that somebody in Windsor had to travel 100KM to get wine I disageed with. The person in Windsor just has to place an order and wait a few days. Glad that is settled anyway.

I suspect the bottom line here is that it is at least partially a "Toronto" vs. "rest of Ontario" issue. I wonder how well Willow Park serves places like Lethbridge, Cardston, and Medicine Hat. I don't doubt that if the LCBO was privatized folks in Toronto would gain, but folks (like me) who live in smaller centers would lose.

I'm NOT in favour of changing the LCBO to provide better service/selection in Toronto and other large centers at the expense of what the LCBO provides today in smaller places.

Reply to
Al Rudderham

Assuming you meant LCBO does *not* want to list... AFAIK, agencies wouldn't import a wine if the LCBO won't list....if they did, it would be small amounts, directly consigned to restaurants or private order (which is a fairly recent development)

As far as de-listing, it's their worst nightmare....they would probably do everything in their power to keep a product from being de-listed. If it was de-listed, it would probably happen in a phase-out so the importer would stop importing more of the wine and hopefully not get burned too much.

As for the Ontario wineries, they're a little safer; the LCBO guarantees them (officially or unofficially, not sure) a certain amount of listings. One of the big advantages that has helped (but probably now hurts) the Ontario wine industry. The worst thing for them is for something to go from general list to Vintages or more likely the LCBO waiting a long time to offer the wine, forcing the winery to hold back a lot in stock.

Reply to
Peter Muto

Excellent store by any standard!

Reply to
Bromo

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