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Benjamin Dachis

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A Win(e)-Win(e) Solution for the LCBO

Posted: 12/21/2012 11:54 am

As Ontarians wait in line at the LCBO this holiday season they will be pondering whether they'll go through the same drudgery of choosing among a limited range of products at cookie-cutter stores this time next year, or the year after that.

Political leaders are again debating what to do with the LCBO. Some want to privatize it. Some want to retain the status quo. There is a win-win for both sides: the government auctioning the right for businesses to operate LCBO franchises, rather than full privatization.

Most retail alcohol in Ontario is sold at the provincially-owned LCBO, the Beer Store -- owned by three multinational beer companies-- and brewery- and winery-owned retail stores. The LCBO also authorizes a number of privately-operated agency LCBO stores in rural communities.

The LCBO returns a sizeable profit to the provincial government: $1.63 billion in 2011-12, according to the LCBO.

Those opposed to selling the LCBO argue that selling it would reduce provincial profits -- something a government with a yawning deficit would never consider. The province could exact this profit whatever the configuration of the distribution system, such as through higher taxes in a more efficient, private system.
However, leaving taxes aside, the provincial government can get out of the day-to-day business of selling alcohol to consumers while increasing revenues. What should an overhauled system look like?

Rather than rely on the yearly profits from a single corporation, the government should auction off the right to operate alcohol wholesale operations and retail stores to the highest bidder. This would not be a full privatization, but effectively a franchising. The government should hold these auctions every five to 10 years, requiring that franchisees re-bid to hold onto the licences. This will keep the money rolling in for the future.

Retailers would have the flexibility to offer a range of products and set prices -- subject to price minimums -- to meet the demand of their local clientele, rather than the current one-size-fits-all model. Indeed, some would choose to focus on cut-price options. Alternatively, Ontario beer, wine and liquor connoisseurs would be able to seek out stores that specialize in top-end products. The argument that the LCBO generates savings for consumers through its massive buying power -- which the Auditor General refuted in his 2011 report -- likely does not apply to these niche products.

As it is, Ontario consumers are being left out of the worldwide renaissance in niche alcohol products. To take one example, Total Wine, a U.S.-based liquor retailing superstore, claims that its typical store carries 8,000 different types of wine, 2,500 beers and 3,000 different spirits. Giving Ontario retailers the flexibility to buy on their own stock could result in similar such stores here.

The government could auction off the licences of agency stores with sales above a certain threshold, as well as those of the Beer Store and other private retailers, with auction revenues compensating the current occupants. The government could also limit the percentage of outlets a buyer could own -- provincially and locally -- to prevent another monopoly system from replacing the current one.

As well, Queen's Park could limit the number of retail outlets province-wide and locally and regulate their operating hours. While there is a link between price and ease of store access and consumption amounts, there is no conclusive link between consumption and type of control.

Sound like a good system? The irony is that this is nothing new. This is exactly the model for reform a government-appointed panel recommended. The Report of the Beverage Alcohol System Review Panel from 2005 lays out the above plan for LCBO reform that would eventually make the province $200-million more per year than it currently collects from the LCBO.

The government should get this report off the shelf. Otherwise, the government will continue leaving sizeable revenues on the table and Ontarians will continue waiting in line at LCBOs with limited choices.

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  • Vineland Estates Semi-Dry Riesling VQA

    This riesling offers a hint of sweetness, lively acidity and peach, apple, pear and citrus flavours that are natural partners to most appetizers and lighter meat dishes like turkey or ham. The fruity nature of this wine will temper the heat in spicier dishes but feel right at home with the whole range of traditional Thanksgiving fare. <em>Product Info: $13.95, 750 mL bottle</em>

  • Malivoire Chardonnay VQA

    A chardonnay offering a creamy-textured palate, balanced acidity and notes of citrus and ripe apple fruit that will easily deal with the deep flavours and textures of most dishes. The pleasant layer of oak also matches nicely to any smoky flavours originating from roasting or grilling and will stand up to any sauce or gravy. <em>Product Info: $17.95, 750 mL bottle</em>

  • Angels Gate Archangel Chardonnay Brut VQA

    Made from 100 per cent chardonnay in the Traditional Method, the toasty notes from sur lie bottle aging are magnificent with the roasted flavours of turkey and the smoky flavours of ham. Citrus, apple and peach flavours will complement all the fixings, while the sparkle refreshes the palate with each bite. <em>Product Info: $18.95, 750 mL bottle</em>

  • Cave Springs Indian Summer Select Late Harvest Riesling VQA

    This local favourite offers a luscious palate, with lingering flavours of mango, pear, caramel apples and spice. The best of both worlds, it is balanced enough to drink on its own, yet offers enough intensity and rich, sweet flavours to match any dessert. <em>Product Info: $24.95, 375 mL bottle</em>

  • Henry Of Pelham Cuvee Catharine Brut Rose VQA

    The beautiful pink colour and dancing bubbles of this Traditional Method sparkling rosé will add a buzz to the holiday festivities. Crisp and elegant, this versatile partner will greet you at the door, stay with you for appetizers, and enhance the dinner whether its roasted turkey or scalloped potatoes. <em>Product Info: $29.95, 750 mL bottle</em>

  • Eastdell Estates Rose VQA

    The bright pink hue and flavours of cherry and red berries in this lively rosé complements turkey the same way that cranberries are a classic match; the herbal notes in the wine pair wonderfully with traditional sage stuffing. <em>Product Info: $11.95, 750 mL bottle</em>

  • Creekside Cabarnet Shiraz VQA

    Flavours of blackberry, black cherry, cocoa and spice are the perfect complement for a prime rib roast. Salt in the meat’s seasonings and pan gravy will accentuate the fruit in the wine and act to soften its moderately firm texture. <em>Product Info: $16.95, 750 mL bottle</em>

  • Cave Spring Pinot Noir VQA

    Pinot noir’s cranberry, cherry, earth and spicy notes enhance lighter meats like pork, or roasted turkey without overpowering. Cave Spring pinot is dry, with a structure and elegance that reflects Ontario terroir. <em>Product Info: $17.95, 750 mL bottle</em>

  • Malivoire Gamay VQA

    The black cherry and earthy notes of this gamay meld wonderfully with duck, and mirror the tangy, fruity flavours of the accompanying cherry chutney. Always a classic for traditional Thanksgiving dinner, this is one of the best examples of Ontario gamay which shows poise and depth. <em>Product Info: $17.95, 750 mL bottle</em>

  • Staff Baco Noir VQA

    The wild, dark berry fruit flavours of baco noir are underscored with herbal, smoky and earthy notes. Baco has the intensity to stand up to the characteristic gaminess of lamb or dark turkey meat and has a good seam of acidity which cleanses the palate. <em>Product Info: $14.95, 750 mL bottle</em>