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Scotch Whisky

For Christmas, Ontarians deserve competitive liquor prices

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lcbo-scotch-gs1215

If we haven’t already, many of us will soon be trekking to our local liquor store to stock up for the holidays. The experience will be quite different, depending on where you live. Ontarians will suffer from the high prices and limited choice offered by their near-monopoly, the Liquor Control Board of Ontario (the LCBO) and their dominant beer seller, the Beer Store. (Beer, wine and cider can now be sold in some retail outlets.) Albertans, who enjoy a competitive retail market, will have a better experience — lots of variety at more reasonable prices.

My own shopping for my favourite scotch whiskies bears out this experience. In Calgary, I live close to Kensington Wine Market, which has one of the best scotch selections in the city. Given its size, it certainly does not have the reach of operating over an entire province. But when it comes to whisky choices, the LCBO seriously underperforms. Just for fun, I looked through the two retailers’ websites and compared nine of my favourite quality brands, with Alberta prices ranging from $52.99 a bottle (for Highland Park Magnus) to $159.99 (for 18-year-old Tomatin) and averaging about $100 a bottle. The results were startling. On average, Kensington Wine Market’s prices were $12.28 lower per bottle and their availability was greater. In fact, only one of the nine brands was available at an LCBO near my Toronto home — which is in the same kind of neighbourhood as my Calgary residence. Another five were available but only far from my home. And three others were not available anywhere in Ontario.

The high LCBO prices are very much affected by taxes. In fiscal year 2020/21, alcohol revenues and taxes in Ontario totalled $5.2 billon or roughly $462 per drinking-age resident. That’s equal to about 55 per cent of the revenue from alcohol sales. Despite Alberta’s less regulated market, government liquor profits and taxes are only a little less: $1.3 billion, $407 per capita and 47 per cent of sales.

The tax difference is largely due to the GST/HST, which is 13 per cent in Ontario but just five per cent in Alberta, where there is no HST. Not counting HST, federal and provincial revenues are 40 per cent of sales in Ontario. In Alberta, if you leave out the GST, the effective tax rate is actually a little higher, at 42 per cent of sales.

But taxes only explain two-thirds of the difference I found in scotch whisky prices. The other major factors explaining why Alberta’s liquor stores offer lower prices and greater variety are less regulation and more competition than in Ontario. Alberta’s publicly-owned wholesaler, the ALGC (for Alberta Gaming, Liquor and Cannabis), is open to importing wine, beer and spirits from anywhere in the world upon the request of licensed retailers (though earlier this year it did ban Russian products). It does not interfere with pricing — it only tacks on a common markup in each category before re-selling to retailers. Other than following regulations (regarding opening hours, for instance, and not selling to minors) retailers are free to compete on price and variety.

Not so in Ontario. Sure, the LCBO imports brands from abroad. But it has no retail competitors and therefore no real incentive to be consumer friendly. For example, at my local LCBO they hide 15-year-old Dalwhinnie behind lock and key even though it’s far from being extraordinary compared to better brands. Instead, like a CRTC for liquor, the LCBO promotes Ontario products by placing them on better shelf space — much to the annoyance of other provinces, not to mention many customers.

The LCBO’s flaws have been manifest for years. Back in the 1990s Premier Mike Harris’ Common Sense Revolution promised to consider privatizing the LCBO. But the government was too dependent on the LCBO’s monopoly profits to shift to a less regulated market. So long as the profits roll in and jobs are safe for unionized workers, Ontario governments have been content to maintain the status quo — even though Alberta has shown that a government can collect just as much revenue in a competitive market that provides better service to consumers.

Ontario could enjoy the benefits of competition among retailers even without privatizing the LCBO. All it has to do is allow anyone who is willing and able to sell liquor to start doing so using the Alberta regulatory approach. Once it’s clear the sky hasn’t fallen as a result, privatization might then make political sense.

My experience as a consumer in the two provinces is that Alberta’s lighter-handed alcohol regulation and taxation are far superior to Ontario’s nanny-state approach. Ontarians should ask Santa to ditch nanny.

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