Three strikes against privatizing the LCBO

I’ve worked for the LCBO for just over two years. This upcoming strike deadline is the first I’ve ever looked at being personally involved in, as LCBO workers are automatically enrolled in their local chapter of OPSEU (Ontario Public Service Employees Union).

And unfortunately, what I’ve found from this side of things is just more of what I’ve experienced being married to a teacher and seeing her union membership demonized for the better part of two decades: What the public is fed by the government during disputes with unions, which the media duly reports on having been said, largely overlooks or avoids some of the real issues at hand. It’s the same problem here.

This potential LCBO workers’ strike is about the union wanting provincial government, the owners and operators of the LCBO (Liquor Control Board of Ontario) to remove any wording in the new contract that references privatizing.

This is in part about union member jobs, and there’s no ambiguity about that. But it’s also about far more, which is the part that doesn’t seem to get nearly as much attention or consideration.

The Ontario government buys and imports all the beer and wine and hard liquor the LCBO sells — they are, in fact, one of the largest single purchasers (I’ve heard a couple of times that it’s the single largest purchaser) of such on the planet — and then distributes it to all LCBO branches and private sales outlets like grocery store chains, all with an increased price attached to it all in order to make a tidy profit of billions of dollars a year.

The government thinking in this dispute with the union seems to be that if they can get to the point of only privatized sale of beer and wine and liquor, getting all categories of those items sold by independently operated gas stations and convenience stores and grocery chains, the government will effectively be able to dissolve their own brick and mortar LCBO stores. Key here is that this arrangement nicely keeps the government in control of the purchase, distribution and base price of alcohol, while also removing significant overhead of owning and maintaining those buildings and, of course, paying the several thousand in-store employees for their work.

On paper, it’s an interesting idea as far as a business model goes. Big money coming in and then more kept by cutting a lot of money going out? Winning.

And this seems to be what a fair number of the public have bought into as well. Why not, after all, have beer and wine and liquor available at more places instead of just at the LCBO?

But that position by government and some of the public ignores a lot of counterpoints, including three big ones I’ll touch on here: If LCBO stores are eliminated, there will a) be far less selection of products b) in places farther away that c) will be more expensive.

Let’s take a closer look at each of those three points.

Less selection
LCBO stores are custom-made exclusively to receive, house, display, and sell a lot of a wide range of alcoholic products. No privately owned stores that currently exist, even big chains with some enormous stores, have the physical ability to do the same because they, too, were made to suit the sales of whatever they already sell. Accommodating everything that the LCBO carries as well is simply an impossibility for any privately owned stores.
Instead, what would happen, at least until larger stores were designed and contracted and built, would be that some stores and some chains take on the sale of some of the products that LCBO branches currently offer.
In other words, it won’t be (as some people seem to think) like you would be able to walk to a nearby convenience store or a grocery store or drive to a gas station and get your beer or wine or liquor of choice. If they even carry such categories of booze, it’s going to be extremely limited to just the products that sell well, because they’ll of course want to get the product in and sold for a profit ASAP.
So, don’t want a top 5 selling beer brand? Or top half dozen selling brands of wine? Or maybe, maybe, a high sales brand of liquor? Sorry to hear that, because finding anything beyond that handful of items will be way harder.

Farther away
If LCBO stores were eliminated, there would be specialty stores popping up, I would think, that would offer the likes of particular high end whiskies and tequilas and vodkas. But they of course won’t be at the now-defunct LCBO branch that used to be in the area. They’d be in small boutique shops maybe downtown. Or maybe even in the next town over.
And unless the new places are sizeable, they still won’t be able to offer the breadth of high end items that the LCBO carries right now.

More expensive
This may be the most misunderstood point of those arguing pro-privatization. More places offering the same thing will mean more competition which means better prices, some people think.
But the reality is that multiple stores offering beer and wine and liquor will not — in fact, simply can’t — lower the prices of those items in any significant way than what they currently sell for.
When is the last time a convenience store or gas station, both common around all cities, sold cheaper chocolate bars or gum than other locations?
As mentioned above, if the LCBO as sales locations cease to exist, the Ontario government will still be the entity in control of the buying, distribution and base price of all of the items that independent stores and chains were able to carry.
Consider what that means. If you currently pay $15 for a six-pack of beer at the LCBO, that’s what it costs right now for the government to obtain it plus add profit and taxes to it. Whether a current LCBO store sells you that item or the LCBO sales locations are dissolved and instead you get that six-pack from… let’s say… Dwayne’s Beer And Such, that base price of $15 won’t go down. In fact, it will almost certainly go up.
Because $15 is what the government is selling it for. But ol’ Dwayne, he’s running a business, after all, and needs to make a profit from selling you that six-pack as well. So the $15 he’s forking out to the government to just get that six-pack to his store shelf is going to have more added to it so he can wet his beak on the sale, too.
This example is oversimplified, of course. But even in situations where, for instance, big chains can get a price break on bulk orders of things like beer, that saving may not be passed on to the customer (meaning more profit for the business, never a bad thing for the owners), and it probably won’t be a huge price difference if it is less.

Three big issues of public interest, and three big strikes against what the Ontario government is trying to do.

There’s way more to this issue, suffice to say. But putting aside for a moment people hoping for job security (itself made out to be a bad thing to some), fact after fact of the issue — the above are just three big ones — demonstrate that anyone who currently buys from the LCBO will be better served if LCBO stores stay open and operated by the government, than if any of it gets privatized.

It seems I have misunderstood some key aspects of this issue.
Looking into it, it turns out that at least some of the alternative places for people to buy alcohol — the likes of The Wine Rack and Loblaws, for instance — do not, in fact, buy their alcohol from the LCBO. While their entire processes aren’t clear nor wholly public, it seems that at least those examples (so one assumes likely others as well) that they have privately held, independent departments that source and transport and price their products.
That’s a big, fundamental flaw in my understanding of how this all operates.
It does, however, raise some new questions, not the least of which is, If the Ontario government isn’t even still making the money from the import and distribution and pricing of alcohol sold in third party companies as I had thought, why are they seemingly so willing to give up the monopoly of a multi-billion-dollar cash cow?
For decades, the LCBO was the only game in town to buy alcoholic products. That’s expanded to some degree (beer and wine) in more recent years to the likes of grocery store chains. And the Ontario government is actively expanding that reach, and the breadth of items sold, even further. But if the provincial government isn’t still making a profit from those third party sales (aside from taxation, which of course comes nowhere near the sum collected by the sale of an entire item), what’s the upside for them?

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