David’s Take on Private Wine Retailing in Ontario: Getting Beyond the Vested Interests

It could have turned into a bun fight.

David Lawrason

David Lawrason

On Thursday, May 9 the vested interests in Ontario’s beverage alcohol industry gathered at an Economic Club of Canada luncheon at Toronto’s Delta Chelsea Hotel to hear why the province should move to a mixed public/private retail model of selling wine, beer and spirits.

Speaker Ian Baillie, executive director of ABLE, an association and lobbyist for private beverage alcohol retailers in British Columbia, delivered a vision based on the B.C. model, where about two-thirds of the 1,400 beverage alcohol retail outlets are now in private hands.

He was sponsored by the Wine Council of Ontario, an association of smaller Ontario wineries that is lobbying for private wine stores through a website called www.mywineshop.ca. The wineries are needing new retail outlets for their growing number of products, which the one-stop LCBO is not able to handle effectively, despite recently announced initiatives that are too little, too late.

There were many Ontario winemakers in the audience, but virtually all other vested interests were in the room as well – importers, beer and spirits reps, hoteliers and restaurateurs, MPPs and the LCBO itself. No party leaders.

I will get to some of Ian Baillie’s key points in a moment, but first an observation based on audience reaction during a question and answer session. If the Q&A had not been shut down by the Economic Club’s moderator it could have turned into something nasty.

There is a cauldron of pent-up passion around this issue – so many different viewpoints, truths, and ways to interpret facts and figures. It is very complex. And the feelings have been entrenched for years, decades – virtually since the LCBO was established at the end of Prohibition. I just don’t see how these parties will ever come to a consensus. If it is left to the vested interests it won’t get done.

Supermarket wine section; Wellington, New Zealand

Ontario one day? Supermarket wine section,
Wellington, New Zealand

The solution needs to come from the will of consumers. The Wine Council says 70% of Ontario favour some level of privatization. That needs to be expressed through an election of a party that presents a clear and balanced, consumer-based vision and has the courage to act. The Conservatives seem closest now, but at one point under Premier David Peterson it was the Liberals.

The benefits of privatization were made plainly evident to the current Liberal government in a 2005 beverage alcohol review they themselves commissioned, then shelved. They turtled in the face of protest by the vested interests – the union, the LCBO bureaucracy, and the largest financial stakeholders who prosper handsomely under the LCBO monopoly.

There are clarion benefits to privatization – primarily vastly increased selection and improved service guided by the forces of open competition. There would be growth in production, distribution, retailing revenue, job and government revenues. It is also clear that the government can increase revenues without running the stores, and they can regulate the industry as they please to serve social responsibility concerns.

Baillie’s Key Points

Public/Private Retailing? Mr. Baillie was promoting B.C.’s politically expedient, mixed public/private retailing model – not the Alberta model wherein all retail is in private hands, with government’s role moved to wholesaling, distribution and regulation. The B.C. compromise is most likely what will happen in Ontario.

I prefer Alberta’s model. I don’t believe government should be in competition with the private sector, or that government can do it as well as private enterprise.

Either way, I strongly believe that it is government’s responsibility to properly regulate and license beverage alcohol; to test product safety and to educate the public about its hazards, especially if government is paying the medical costs of alcohol abuse. But let’s not confuse this responsibility with the need for government to be a retailer.

Government Revenue – Ian Baillie made the startling assertion – oft Tweeted in recent days – that if Ontario, with roughly three times the population of B.C., were to adopt the B.C. model, it would deliver 1.1 billion dollars more per year to provincial coffers than it is doing now – 2.7 billion as opposed to 1.6 billion.

The formula and figures were vehemently debated on the floor, but two things were clear. First, the province will not lose revenue by introducing privatization (B.C. has not, in fact its revenues are growing annually under the public/private model). Second government still has the ability to raise taxes as it sees fits to ensure that revenues would not be lost. I for one would not be totally against this as the price of privatization.

Social Responsibility – Mr. Baillie went to great lengths to promote the idea that social responsibility is also a business responsibility of private retailers. He emphasised that all the provincial rules apply in terms of not serving those under 19, and that retailers are trained to enforce them.

He also described a B.C. regulation that new private stores must be built a minimum of 1km from the nearest store, to prevent certain neighbourhoods having too many stores or “liquor stores on every corner”.

Corner Stores – It is very interesting that Ontario’s historical alternative vision to the LCBO is “corner store wine and beer sales”, perhaps a model assumed due to the nearness of Quebec’s ‘dépanneurs’.  Baillie dismissed allowing alcohol sales by convenience stores as socially irresponsible because it would be almost impossible and very costly to monitor 10,000 stores in the province.

Corner stores as the only alternative for Ontario would, in my opinion, be the worst possible option for a different reason. I want to see wine sold in responsibly run convenience stores, in grocery stores and supermarkets, and in fine wine shops – and I want to see the entire range of price and quality that would ensue, with retailers free to serve their constituents as they see fit, and consumers free to shop how and where and for what they want.

How Many Stores? –  Baillie mentioned that B.C. has recently capped the opening of new stores beyond the 1,400 store level. The government has deemed that level adequate for B.C.’s population of 4.4 million people, or one store for every 3,100 people. By contrast, Ontario currently has roughly 1,200 LCBO, Beer Stores and winery stores serving 13.3 million people, one store for 11,000 people. So it is a no brainer that the LCBO is under-serving us, and that privatization in Ontario would see a boom in store creation and employment.

So how do we get government to brave this debate and make the right choice – a choice that people the world over have already made, or never even felt it necessary to make in the first place? Closer to home, if this idea is right works in Vancouver, Victoria, Vernon, Edmonton, Calgary, Lethbridge, Peace River, Winnipeg, Brandon and Halifax – why on earth will it not work in Toronto, Ottawa, Windsor and Thunder Bay? Even Pennsylvania, a bastion of Dutch protestant conservatism in the U.S. made the move most recently.

Successful precedent alone should be all the political fodder our legislators require.

But to nudge them along consumers need to organize and get vocal, as do media editorialists who claim to represent “the people”. Major papers have actually begun writing about this more frequently. And it could be fanned by an LCBO employees strike that could come on May 17. But beyond that consumers need to organize themselves and petition their MPPs.

And if possible Ontario’s cooler-headed vested interests could try to form an organization, like B.C.’s ABLE, to carry a unified voice to Queens Park. ABLE represents private wine store owners, hotels, restaurants and pubs – any business in the business of selling beverage alcohol. Based on what I heard in reaction to Baillie’s speech I am not sure this is possible in Ontario, but there must be some reasonable, willing and articulate people willing to step forward under common cause from all these camps.

Good luck to us all.

David Lawrason
VP of Wine

A downloadable copy of his Mr. Baillie’s speech is available here.