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What Other Provinces Can Learn From Alberta's Liquor Store Privatization

09/26/2013 07:00 EDT | Updated 11/26/2013 05:12 EST

Twenty years ago the Alberta government swiftly and boldly threw open Alberta's markets in beer, wine and spirits. The result has been a success story of intense competition, added convenience and thousands of new jobs.

Other provincial governments have never imitated the Alberta accomplishment. But that has much to do with local politics and myth-making from vested interests, not facts.

In early September 1993, Alberta announced it would privatize its government liquor stores. It did so with remarkable speed. The province owned 202 government liquor stores on the day privatization was announced; the first store was shut just two days later. By Christmas, two-thirds of the government shops were closed or sold (in some cases, to government employees). The last Alberta government liquor store was out of business by early March 1994, just six months after the initial announcement.

The results speak for themselves. Pre-privatization, in addition to the 200-plus government liquor stores, the private sector operated 65 full-product outlets while 530 hotels offered up a limited product selection for sale. In the 20 years since the Alberta government exited the retail business, private sector retail outlets have grown to 1,982 in total. Product selection has expanded, from 2,200 in 1993 to over 19,000 varieties of beer, wine and spirits now. Employment in retail liquor stores (including the government numbers at the time of privatization) jumped from 1,300 employees to 4,000.

Alberta's privatization model has its critics. The self-labelled Consumers Association once claimed Alberta's prices were mostly higher than British Columbia. One university think tank claimed the Alberta government lost $1.5 billion in revenue since privatization.

Both claims are incorrect. The Consumers' study used median prices (not the lowest prices available in Alberta) and surveyed just 53 products. Also, the group ignored one of the cheapest sources of beer wine and spirits in Alberta: the Real Canadian Liquorstore chain (a division of the Superstore/Loblaws group).

In contrast, eleven years ago, I conducted a more comprehensive review of prices between British Columbia and Alberta using pre-tax and pre mark-up prices. I made both "deep" and "wide" comparisons and looked for the lowest available price, not some "median" measurement.

On the deep comparison, I contrasted 1,845 products available at BC government stores with two chain stores in Alberta; 83 per cent of beer, wine and spirits were cheaper in Alberta, even including much of the wine produced in British Columbia (something I still find true in personal shopping).

On the "wide" comparison, I compared 166 products available at both BC government stores and 100 Alberta stores; 90 per cent were cheaper in Alberta. On a pre-and post-privatization contrast, a 2003 study by economist Douglas West based on 100 Alberta stores found retail prices rose by four per cent in the immediate years after privatization but dropped in the last half of the 1990s, in part due to increased competition.

As for the claim of lost revenue, this is a red herring often advanced by privatization opponents, including for example government employees' unions in Ontario whose members work in government liquor stores.

In 1993, the Alberta government changed how it marked up beer, wine and spirits but continued to collect their pound of flesh. That mark-up, set by provincial governments, is what will affect revenues, not privatization.

The data shows Alberta hasn't exactly starved itself of booze revenues. Including the first fully privatized budget year (1993/94), and to the end of the last year, the Alberta government reaped $11-billion in mark-ups from beer, wine and spirits. That includes $729 million in the past year alone. Regardless, it should be remembered that such "mark-ups" are a tax and thus help gouge consumers.

Social ills that could supposedly result from liquor store privatization are often brought up by privatization opponents. But as a 2009 Frontier Centre study found, Saskatchewan, a province with a plethora of government-run liquor stores and comparatively low overall sales and alcohol consumption rates, still showed the "highest, second-highest or third-highest rates of alcohol-related harm with respect to friendships, marriage, work, studies, employment, finances, legal problems and physical violence."

Twenty years after Alberta began to dismantle and sell off government liquor stores, no other provincial governments has exited the retail side of the liquor business. The reason for that is not economic or social, but merely political: too many government employees' union have a vested interest in the status quo.

The reality, not only in Alberta in stand-alone private liquor stores--or Europe, where grabbing beer or wine off the grocery store shelf is considered a normal part of shopping, is that private retailing of beer, wine and spirits is unremarkable where it occurs.

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