There's been a lot of discussion over the past several days in reaction to the Auditor General Jim McCarter's report, which was critical of the LCBO monopoly for its fixed-pricing system. McCarter asked why such an enormous buyer who presumably would have significant clout in getting best pricing from suppliers would not be doing so?
Licensees in our restaurant and foodservice sectors are forced to pay close to, or in some cases more than, retail prices for the wine, beer and spirits they serve in their establishments. Every other product that is purchased for resale by business owners offers wholesale pricing. Why is this not the case with the LCBO?
The Canadian Restaurant and Foodservices Association (CRFA) has long been on record opposing LCBO monopoly policies and processes that not only preclude wholesale pricing for the LCBO, but in turn embed a lack of wholesale pricing for licensed Ontario bars and restaurants.
From the restaurant perspective, it makes absolutely no sense. Customers are extremely price-sensitive to any markups on beer, wine, or spirits. It is difficult to imagine we would expect any other industry to operate without access to a wholesale pricing structure which in turns drives retail sales. The restaurant industry simply wants a fair and reasonable true wholesale pricing system.
In 2005, The Beverage Alcohol System Review Panel made a unanimous recommendation to the Government of Ontario to introduce a licensing system that would transition Ontario's beverage alcohol regime away from the LCBO's monopolistic construct towards a more consumer and customer responsive and cost effective privatized model. The Beverage Alcohol Review Panel envisioned a licensing system that would at once bring more accountability and competitiveness to Ontario's beverage alcohol system and more dollars into provincial coffers.
CRFA supports the unanimous recommendation of the expert panel review and recommends a comprehensive review of the current LCBO fixed-pricing system and implementation of a true wholesale pricing regime for Ontario's nearly 17,000 licensed bars and restaurants.
McCarter noted in his report that "[the] LCBO does not sell its products at the lowest prices possible but rather at levels aimed at encouraging responsible consumption and generating profit for the government." As to the notion of "encouraging responsible consumption," we need not look further than the LCBO produced glossy magazine Food & Drink, or LCBO partner AIR MILES customer loyalty program to dispense with this thinly veiled defense of price gouging.
How can we as consumers take this dual positioning seriously: that the government is at once advocating restraint while aggressively promoting alcohol as a key element of a sophisticated branded lifestyle in the pages of Food & Drink and enticing customers with exotic travel and consumer product rewards by racking up points under the AIR MILES loyalty program?
Is the restaurant and foodservice industry important to this government? Does it consider us as a partner in job creation, service delivery and deficit reduction?
If the answer is "Yes," then it is essential that this government make Ontario's restaurant and foodservice industry a top policy priority.
Restaurateurs put LCBO's fixed pricing on the table - The Globe and ...
Restauranteurs Want LCBO to Offer Wholesale Prices
David Menzies on the price-gouging LCBO - YouTube
Auditor General's report: LCBO colludes with suppliers to ...
and yet, in Alberta, which has raised its minimum wage by 17.5 percent in real terms between 1997 and 2011, there certainly haven't been layoffs. As much as I'd like to be able to sell a pint of beer on 75 point margin ($4 on $1) instead of 60 ($5 on $2) and reap the increase in volume, I do tend to recognize that there's something of a public interest served in having a differentiated price between home and social consumption. What next, will you argue for an excise tax on home brewing, since the 40 cents a good bottle of beer costs is far too low for the low margin (it ain't that low margin, at least on money invested, given the continual governmental pressure against entrants into the market, so says a basic understanding of economics)
So let's just admit that you're going to charge as much for alcohol and pay as little for labour as regulation and market forces will allow and then go from there. We can be adults about liquor policy. We can point out that it's a recreational drug that is an important social ritual in Western cultures, and that it's not one-fourth as fatal as tobacco, but let's not pretend that capitalists are owed any more consideration than they give their employees.
But what would this elbow-bending Red Tory know about alcohol?
I'd like to know where the CFRA was when the Alberta Government instituted a price floor for alcohol served in licensed establishments. It seemed the association was eerily quiet when it came to government intervention that decreased competition so long as it was able to reap the windfall gains from ensuring the elimination of the three-dollar pint.
The same CFRA which had this to say about food services:
"The new tax comes at the worst time for the struggling food service industry. The drop in sales resulting from a new 7 percent tax, while competitive food products in grocery stores remain completely tax-free, will have an enormous job-loss effect. Our low-margin food service industry will have to reduce work hours or lay off thousands of our 173,000 employees. This includes 80,000 young people who rely on their jobs to help pay for their education. With a youth unemployment rate of 15.8 percent, we can't afford to jeopardize the jobs of the largest employer of youth in the province."
While job creation is important, unfortunately, most restaurant jobs are McJobs while reaping profits for the owners!
So, getting rid of the LCBO and giving up the taxes that it brings in will cut the deficit? Sounds like a clear case of Republican math to me.