On March 12th, Doug Ford and the Ontario Public Service Employees Union (OPSEU) made headlines over differing views on the LCBO. OPSEU, who represents LCBO workers, has been in contract negotiations with the province. In the wake of resistance to a deal, OPSEU decided to organize an ‘LCBO Day of Action’. This was done to protest what it sees as the Ford government’s slow and steady move towards increased privatization of the liquor industry. According to OPSEU, this process includes:
Privatizing Liquor Retail Sales
In 2016, Kathleen Wynne’s Liberal government expanded beer, cider, and wine sales to nearly 130 grocery stores across the province. Doug Ford’s Conservative administration has increased this number to a maximum of 450 by 2025, and has called for a removal of all caps on the number of grocery stores that can sell alcohol.
Privatizing Online Order Fulfillment
LCBO staff were previously responsible for filling online orders, packing them, and shipping them. This is now contracted out to a private facility at a higher cost.
Privatizing LCBO Warehouses
There are now multiple third-party warehouses where products are stored. In fact, in the Fall of 2023, 1.2 million cases of new release vintages were transferred from the LCBO’S Durham warehouse to private warehouses.
Privatizing Specialty Orders
When a customer wants a product not normally carried by the LCBO, they can make a special order for it. While these orders were fulfilled by LCBO staff in the past, they have now been contracted out to a third party.
Doug Ford has vehemently denied that he plans to sell off the LCBO. However, as conservative news outlets continue to call for Ontario to lift the LCBO’s monopoly, it’s worth looking at the implications of any form of privatization, be that a full-on sale or a simple move towards weakened protections for the LCBO.
Proponents for continued public ownership contend that the LCBO is one of Ontario’s most important sources of revenue; in fact, it brings in about $2.5 billion in pure profit per year (with this figure not including provincial alcohol and federal excise taxes). It is also one of the largest alcohol buyers on the planet; as a result, it is able to buy alcohol in incredible bulk and then sell it to consumers at lower prices than they would otherwise pay at a smaller shop. Furthermore, the LCBO provides approximately 8,000 high paying, unionized jobs to Ontarians; if alcohol were to be privatized, the workers who would be displaced in the sell-off could easily find themselves in a far more precarious, non-unionized employment situation.
Proponents for privatization contend that privatizing the LCBO would necessarily allow more retailers to sell alcohol. This could in turn drive up competition, increase consumer choice, and provide better coverage for rural areas that are relatively underserved by the LCBO. Columnist Michael Taube points to Alberta as an example. While he somewhat mischaracterizes the data, the Fraser Report study he cites seems to indicate that after Alberta ended the public monopoly on alcohol in 1992, overall product selection increased, accessibility to liquor increased, and retail liquor prices decreased on average.
This leaves us with the obvious question; what is the best way forward?
When looking at the totality of factors, increased public ownership is the clear choice.
Perhaps the strongest argument for public ownership is privatization’s dismal risk-reward ratio in an Ontario context. Given Ontario’s size, the LCBO is a massive company; however, unlike privately owned companies, which work to maximize shareholder value, the LCBO works to make a profit in order to fund Ontario’s public services and programs. If shifted to private ownership, the province would maintain alcohol taxes but lose all profits; these would instead go into the pockets of retailers. While an argument could be made that increased tax revenue could make up for lost revenue, the figure would have to be enormous; that is, the $2.5 billion in pure profit being lost out on. If we run the numbers, that would necessitate an increase in tax revenue of $196 per Ontario adult per year.
In Ontario, tax revenue for alcohol is not uniform; it varies from as little as 6.1% for Ontario wine to as high as 61.5% for spirits. This makes it virtually impossible to calculate how much more alcohol an Ontario adult would have to buy to create $196 in tax revenue. However, for the sake of argument, if we assume an average tax that splits these two figures in half (33.8%), an Ontario adult would have to spend $580 more than they already do on alcohol per year on average to make up the difference. Even if there is increased choice and selection, it’s hard to see how such a dramatic increase is realistic. Therefore, given the LCBO’s status as a profitable and reliable public asset, denigrating its profitability by slowly chipping away at its monopoly is extremely risky.
It’s also worth noting that privatization would disproportionately benefit big box retailers. Canada is a country with a tendency towards monopoly, and there are few sectors where this is quite as apparent as in grocery. In fact, as of 2021, the top five Canadian grocers; Loblaws, Sobeys, Metro, Costco, and Walmart; held a combined market share of nearly 76% of the grocery sector. Given this predominance, it’s hard to see how small businesses will compete with the liquor prices provided by big grocers; as a result, the lion’s share of the profits that once went to public services will now go not to small businesses, but to large corporations.
To make matters worse, the LCBO workers that would be displaced by such a move would have their standard of living massively decrease. With the exception of Costco, all of the grocers mentioned are notorious for underpaying their workers; after all, while the maximum compensation for an LCBO cashier currently sits at $30.57 per hour, at Sobeys, that figure is $26.28 per hour, and at Loblaws, a mere $21.60 per hour. Therefore, profits would both shift away from the public benefit while forcing displaced workers to take a massive pay cut at other industry players.
To conclude, it is of great importance that the integrity of the LCBO is maintained. It may very well be the case that Doug Ford will never outright sell the LCBO; after all, the political consequences of such a move would be enormous. However, this doesn’t mean that he won’t slowly chip away at the substance of the monopoly to benefit big box retailers. Be it increasing alcohol availability in grocery stores or privatizing aspects of the LCBO operations that used to be under the purview of unionized LCBO workers, his government has diminished the LCBO’s effectiveness as a source of public funding. If not stopped, it is the Ontario big box grocer that stands to gain and the citizen that stands to pay the price.
-CD
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