Prohibition-era liquor policies continue in Ontario and B.C.

By Mark Milke, senior fellow, Fraser Institute

If Canadians ever needed proof that narrow politicking interferes with sensible consumer choice, they need look no further than the byzantine “reforms” on the sale of beer, wine and spirits proposed by Ontario, and one restrictive “reform” recently enacted in British Columbia.

Some background: In Ontario, the provincial government-owned Liquor Control Board of Ontario (LCBO) ran 639 government stores as of 2014. And the province has long protected a near-monopoly on beer sales with an exclusive arrangement with The Beer Store, which has 448 outlets.

By volume, Ontario’s LCBO stores sell 85 per cent of all wine in the province with the rest mainly sold by wineries and private wine stores.

The Beer Store accounts for 70.4 per cent of all beer sales while the LCBO’s share is 22.5 per cent. Between them, by volume, the private and government chains account for 93 per cent of all beer sales (according to 2012 figures, the latest available).

Some have called for the privatization of government liquor stores in Ontario, and for opening up the beer sector to more retail competition.

In response, Ontario Premier Kathleen Wynne mused about allowing a limited selection of beer and wine into grocery stores.

Meanwhile, in B.C., in response to a 2013 government-commissioned panel, the B.C. government changed its policy to allow beer and wine to be sold in grocery stores as of April 1.

On the surface, both the Ontario’s premier’s speculative thoughts and B.C.’s policy change look positive for consumers. But both are a mirage.

Ontario’s premier has said privatization of her government’s 639 government liquor stores won’t happen. In B.C., the provincial government will retain its 196 government-owned liquor stores. It also won’t grant new private liquor store licences; it will merely allow existing licences to be bought and sold while retaining the moratorium on new licences.

The Ontario and B.C. approaches guarantee their anti-competition models will continue. That means the anti-consumer status quo will be fiercely defended by government employee unions who represent staff in government liquor stores and who like their guaranteed piece of the market. Meanwhile, behind a government-granted moat, private store liquor store owners in both provinces (and Ontario’s The Beer Store) will continue to benefit from and defend that protected turf.

Are there better models? Sure, from Europe to the United States to South America, most places allow grocery and corner stores to sell beer, wine and spirits. And in Canada, the closest thing to full-out competition exists in Alberta.

Here’s Alberta history on the file and why it serves competition, choice and thus consumers.

First, Alberta privatized its last government liquor store 21 years ago.

Second, Alberta also privatized the wholesale side of the business. That meant private liquor stores no longer had to buy product, wholesale, from a government that also owned liquor stores that were competing with those same private retailers.

Alberta’s privatization of warehousing and distribution also meant that civil servants no longer decided what products could enter the province. Instead, for the last 21 years, such decisions have been up to entrepreneurs who risk their own money betting on the preferences of Alberta consumers. As a result, product selection in Alberta rose from 2,200 varieties of beer, wine and spirits pre-privatization to more than 20,000 now. 

Third, Alberta allowed (and still allows) new entrants into the marketplace, spurring robust competition. Pre-privatization, in 1993, there were 208 government liquor stores and 65 private liquor stores in the province. As of 2015, Albertans can choose between 1,558 private types of liquor stores, rural grocery stores allowed to sell such beverages, and other liquor retailers (such as delivery services).

Liquor policies in Ontario and B.C. continue to foster duopolies, where existing government and private-sector interests oppose new entrants and full competition in the market. Unlike Alberta, chatter about choice in both Ontario and B.C. has yet to be followed up by substantive, pro-competition, consumer-friendly policy.