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The paradox of drink


 

From Reason:

To the extent that the state systems resist privatization by becoming more customer-friendly, they undermine their reason for existing, which is to deter alcohol consumption by making it more expensive, less appealing, and less convenient.

 


 
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The paradox of drink

  1. This is not the "paradox of drink." It is the paradox of government retail outlets.

    Regulation, enforcement, taxation: roles of government.
    Distribution & retail? NOT roles of government.

    Can we make posters and distribute to the offices of MPs, MLAs, MPPs, MNAs…?

    • NOT roles of government.

      The role of government is whatever we, the voters, say it is.

      • no no no! We must blindly apply idepolgoy as we see it as if it were the only possible way to run a country, even if means a country which controls almost all of a valuable resource will be in big trouble if it holds 10% back for its own purposes.

      • I must have slept through the referendum on provincial liquor store monopolies.

        • I must have slept through the referendum on provincial liquor store monopolies.…and right through the civics lesson on representational democracy.

  2. I think the article is based on a flawed assumption: "These systems, established after the repeal of Prohibition, are expressly designed to make alcohol less accessible—not just to minors but to adults who might drink too much."

    That may have been the case in the past, but my experience with Ontario's system is that LCBO stores are pretty good retail outlets with respectable selection and staff product knowledge. They focus on responsible liquor sales (preventing minors and people already drunk from buying) but to say they prevent sales to people who "might drink too much" doesn't make sense at all.

    The LCBO also provides good coverage – even tiny cottage communities have a well-run, well-stocked outlet.

    The article may apply to PA, but I don't think it makes sense in Ontario.

    • I agree. LCBO stores have ads, recipes, shopping carts, music, sales, tastings….

    • The article may apply to PA, but I don't think it makes sense in Ontario.

      But the the more a government monopoly starts to act like a competitive commercial enterprise, the more that government monopoly should cease to exist.

      • Why so?

        • Because this is Canada.

          Because this is (allegedly) a free marketplace.

          Because REAL competition leads to better prices, better efficiencies, satisfied customers, improved access…

          Because just about every other place where the government has monopolized great swaths of commercial activity, the people have successfully thrown that concept out on its sclerotic posterior. Where they have failed to do so, it has been the oppressive and violent power of the elite winning over the freedom aspirations of the citizens.

          • But there hasn't been a hue and cry for change. I'm pretty sure different gov'ts have looked at it, actively. Yet it remains the same. Lots of factors as to why, but the key one is that there has not been the action of the people you describe. Maybe because they have applied market principles to the degree possible, without crossing the line with respect o under age sales they woudl argue might be the case in a more privatized system.

          • You're right that there's no action (in Ontario anyway) because people don't really care and feel they're already getting a good service (in many ways a much better service than people are getting in provinces with no monopoly). However, the KEY reason it doesn't change is the gobs and gobs of money that the government gets from the LCBO.

          • I'm sure that the Ontario government could get out of the retail and even distribution portion of alcohol sales and still stay "involved" just enough to still collect the same amount of revenue or even more. After all, a privatized retail system is likely to lead to lower employee costs, which, if the system is structured correctly, could all flow to the Ontario government.

          • If private businesses had lower employee costs (which I concede is possible, though they'd also likely have higher supply costs, since they wouldn't be buying in bulk on behalf of every liquor store in the province anymore, so they'd have less purchasing leverage) how would those savings flow to the government? Wouldn't those savings flow into the increased profits of the private business owners?

          • If private businesses had lower employee costs I'm sorry, did you say IF?

            they'd also likely have higher supply costs, since they wouldn't be buying in bulk on behalf of every liquor store in the province anymore That's their problem, not ours. But what they would also have is far more incentive to innovate and develop efficiencies (in ordering from suppliers, in transport / distribution, or whatever), compete for customer satisfaction, etc.

            how would those savings flow to the government? Why does THIS particular retail section of the marketplace have to feed the government beast more generously than any other? Shall we nationalize grocery distribution and retail next? Children's Clothing? Plumbers? Accountants? Movie production? Doctors? Intercity passenger transport by rail? Oh, wait, I am detecting a troublesome trend here…

            Wouldn't those savings flow into the increased profits of the private business owners? Yeah? So?

          • I agree with your economic balance sheet considerations, and there is their conceit that they are more likely or able to withstand the temptation of selling to minors than a private operator. I honestly don't know how vigilant they are on that one. Anecdotally, back in the bad old days, when they were supposedly more restrictive and less client service oriented – remember filling out order cards and handing it to the scary old dude behind the counter? – I was able to get liquor and beer underage quite easily. The other day, I watched a checkout clerk refuse service to a guy I figure was easily mid twenties who didn't have ID. He was abusive and insistent in reply but she stood her ground.

          • Regarding preventing sales to underage folks, it's not so hard for the private sector to do this, especially with the right regulations (and inspectons, or threat of) in place. If businesses realize that they WILL lose their licence for 1 or 2 or 3 months if they are caught selling to underage people, they will make sure that employees are checking.

            This is how Alberta handles it, and signs promoting this initiative are ALL over the place in any liquor outlet.

          • I agree, EeeOar, that it is possible for the private sector to do, IF they are properly regulated and properly policed. But doesn't that put us in the position of a net loss of government income as well as an increased level of expenditure. Moreover, the proponents of private enterprise tend not to be lovers of regualtion and government policing of their businesses – I know it's a generalization, but indulge me. As I asked MYL above, what are we trying to fix?

          • I'm not 100% sure about the Alberta experience, but I would be very surprised to learn that they made the transition AND lost any net revenue. I did a quick google, but didn't find anything yet.

            On the basis that there is no (significant) change to money flowing into government coffers that can then be used to fund whatever, it does seem to me that the main reason to make the change is, exactly as has been hinted at elsewhere, philosophical.

            So if you are someone who attaches a lot of significance to philosophical issues then you will tend to be driven to want to privatize liquor retailing. OTOH, if you tend to look to bottom line results you will tend to be unimpressed (not disappointed, just unimpressed) with the move to privatized retailing.

          • Well put.

          • I'm not 100% sure but I believe that Alberta "solved" the buying in bulk "dilema" by staying involved with that end of things…IIRC there is a HUGE warehouse just outside of Edmonton to which is still run by what's left of the old ALCB. Again, IIRC, the ALCB still buys all (most?) of what will be sold in the province and then the private stores receive their deliveries from there.

            As to how would the government "capture" the savings from decreased employee costs, by raising sin taxes by an amount that could be calculated fairly easily.

          • My own experience – and I admit this is anecdotal – is that in Alberta, where there is no monopoly, there are higher prices, and less choice. Improved access, yes, but often access to stuff I didn't want to buy. Meanwhile, my local LCBO usually has what I want, and if I ask for something they don't usually carry, they have it for me in a day or two.

            I think the LCBO is an example of a very rare creature – a responsible monopoly.

          • I've heard that sort of thing a lot, and I think it's a big factor why there's so little push to get rid of the LCBO. Most examples people tend to point to of the service in places where there's no government monopoly are services no one would trade the LCBO for.

          • My own experience – and I admit this is anecdotal – is that in Alberta, where there is no monopoly, there are higher prices, and less choice. Improved access, yes, but often access to stuff I didn't want to buy… I think the LCBO is an example of a very rare creature – a responsible monopoly.

            The government owes you specialized access to your preferred booze… why, exactly?

            Do you really think that a properly regulated market of private suppliers would FAIL to find a mechanism to get that oddball bottle of hooch to willing-consumer you, say, through Amazon or some other hyper-efficient supplier?

  3. I just wish they would get rid of the law on importing alcohol across borders. That bugs me more than the LCBO or any other provincially run liquor store.

    • Here here!

  4. I find it quite deplorable that you can bring beer to the beach or bring a bottle of wine to a picnic in the park…

  5. We tell our representatives what to do. Well, at least in theory. But now you're just splitting hairs to deflect attention from my quite correct point that the government's role is whatever we the people ultimately decide it will be.

  6. That does depend on how benefit is defined….if you place a high level of importance on being able to get "timely" access to alcohol (as John K, above indicated) then Albertans are better served today compared to 20 years ago.

    If you place more value on price and selection, then today's system does not fare quite as well.

    • Just out of curiosity, how are Albertans better served in terms of timeliness today than under the old system (honest question, I just don't know). Did you used to have to wait a long time for shipments of vodka to come in 20 years ago?

      ETA: Or, is it that private stores have much longer hours of operation or something?

      • Yeah, sorry for the unintended vagueness.

        There are more stores (although recently there does seem to have been some consolidation going on) and they are open quite a bit later into the evening – and possibly even earlier in the morning, although I've not had a reason to confirm that.

        If memory serves, in the "bad old days" the ALCB closed up at 1800 hours on Friday and Saturday and wasn't open at all on Sunday. Nowadays I think I might be able to reload the wine cellar as late as 0100 hours on some evenings, but maybe that's only 2300 hours.

        Once in the store I haven't really noticed any difference in terms of timeliness of service.

        Personally I was happy enough with the old system, but the new way is basically also meeting my beverage needs.

        • Thanks!

          This again is why I think there's much less push to privatize the LCBO. Good selection, good prices, not bad service (all imho of course) and pretty good hours. Plus they contribute over a billion dollars a year to the government coffers in dividends (that's above and beyond the tax revenue they contribute).

          FYI for those wondering, most LCBO stores are open 9:30-22:00 Monday to Saturday, and 12:00-6:00 on Sundays. Of course we can also get beer and wine at other locations, some of which I believe are open later.

    • Just out of curiosity, how has the "timely" access to alcohol been improved through privatization? Did it take a longer time for shipments to come in under the monopoly or something, or do you mean that private stores have longer hours, or some such?

  7. How does this apply to the CBC??

    • I will have to respond to my own question since the quote is obviously presented as metaphorical.
      When the CBC seeks popularity with the general population, seeks ratings in other words, and no longer tries to appeal to various niche elites, it becomes much easier to sell off to the private sector.

  8. And here I thought the "paradox of drink" was identified by Shakespeare in Macbeth—"it provokes the desire, but it takes away the performance."

  9. Well, actually, I'd like to get rid of ALL protected monopolies in the commercial sector. That includes many more things than people around here would like, but so be it.

    • And fair enough, by all means. I do think it's possible however that privatizing liquor sales, in Ontario anyway, could very well lead to higher prices, less selection, and less customer satisfaction. These are not necessarily concerns in the face of a broader desire to privatize as much as possible, but I do think these concerns are a factor in the lack of appetite among the Ontario public for privatizing the LCBO. As long as the government's getting around a billion dollars a year in profits and taxes from the LCBO, and I can get a decent selection of single malts at reasonable prices, I'm going to save my energy for other battles.

      • higher prices, less selection, and less customer satisfaction.

        Sounds like a magnificent opening for you and me to start a competing chain of liquor stores to beat 'em all on price, selection and customer service. Which the market manages to pull off just fine about everywhere else.

        • As much as we are whipping the cellphone companies at the moment, just imagine if "cellular telephonic voice communication services" was a government-protected crown corporation monopoly. The wireless spectrum, after all, is a public good. Do you think Canada would be as well served, in either price or packages, as it is now with wireless voice and data service coverage? Do you think the government would be reaping in profits (ha!) that would exceed its passive collection of sales and corporate profits taxes, and wireless spectrum licensing / royalties?

          (DISCLAIMER: Rogers Publishing — publisher of Macleans and proprieter of this website — is within the Rogers family of companies, including cellphone service under various brand names. Rogers kindly hosts my anonymous commenting but has had no role in the production of the content of this, or any other, post. The opinions expressed here may not reflect any actual policy or position of any of the Rogers group of companies. I am not a present or former subscriber, satisfied or otherwise, to any Rogers communication service.)

          • Never kill the goose that lays the golden egg, lol!!!

            There was an article a few weeks ago regarding U.S. telecomes coveting the Canadian telecomes ability to charge such huge monthly fees and debating if they should re-evaluate their business models.

          • Do you think the government would be reaping in profits (ha!) that would exceed its passive collection of sales and corporate profits taxes, and wireless spectrum licensing / royalties?

            Probably not, but of course they ARE reaping in profits (ha!), right now, with the LCBO. In 2009, the Ontario government got $405 million in PST from LCBO sales. The government's share of the LCBO's profits was $1.4 billion. Unless we're going to raise taxes on booze, or tax the Hell out of these hypothetical private liquor store owners, I don't see how we'd make up the $1.4 billion shortfall between what we'd get from the private sellers in tax revenue, and what we get from the LCBO in tax revenue plus dividends.

  10. "I can't help but think that for most Ontarians the attitude is largely a case of "If it ain't broke, don't fix it!". "

    Yup. Not only that, I think the burden of proof is on the pro-privatization crowd to demonstrate that their ideologically-preferred solution would be better for Ontarians.

  11. Here is my summary:

    – there will be more outlets in a privatized system
    – a few/some/most/all of those private outlets will be open later into the evening, especially around the weekend
    – generally speaking the selection will decrease, but given that you are one of the ~95% of the folks who is not in need of some rather rarer item you won't notice the difference
    – if you happen to be an employee in the liquor retailing busienss your wages will drop
    – price change (either way) will be hard to detect

    There, I said it.

    • JMHO but most B.C.ers are satisfied with the status quo. We have both government and private – the Union talking heads keep an eye on every move the private outlets make. Can't remember the last time they threatened to go on strike.
      – private you pay 20-30% more, but the beer and wine is cold
      – hours for private are 9am -10pm, 7 days a week vs 9am – 6pm later on Fridays, not Sundays or Stat. holidays
      – selection depends on the store – some are excellent
      – staff get paid $15-16.00/hr average + tips
      My local pub/store has had the same happy staff for years.

      • I would not say you pay 20-30% more at private at least not in Victoria, you actually pay the same or less during normal liqour store hours,9am to 6pm and private has in some cases better selection, Look at Liquor Plus.
        On another point I notice mention of SAQ in Que as public system that works. That is only partially true I am a beer drink who has the pleasure of living in the Ottawa for a short 2 yr stay. I can go to Costco in Hull and buy beer at considerable savings, 22.95 for 24 Blue in Costco Hull, 29.95 at the Beer Store in Ottawa. I think that the Costco being in the beer and wine game certainly effects prices.
        All that said at 29.95 a 24 Blue is still cheaper in Ontario than BC.

        • Are those pre-tax prices? I'd have thought that in addition to Costco having cheap prices, the difference could simply reflect a difference in taxes between Ontario and Quebec.

          Also, you're NEVER going to find a 24 in Ontario for $22.95, and the LCBO can't help you there if they wanted to. There's a minimum legal price for a 24 of beer in Ontario, and I believe it's over $25.

    • I'll concede the first point even though there are LCBO's freaking EVERYWHERE it seems to me.

      The second point might be true, if they're allowed. I'm not sure the LCBO is allowed to sell past certain hours, so I'm not sure that that restriction would be changed for private retailers.

      I may actually be in the 5% who wants that extra selection, but I certainly concede that the drop in selection, while real, likely wouldn't be a big deal. Pricing differences may be hard to detect, but I'm lead to believe that because Ontario is so big, the LCBO is able to get some pretty good deals since they're shopping for the whole province; but I don't know for a fact that this is true.

      Here in Ontario, the other change would be that our government coffers would immediately be lighter by over a billion dollars a year, which is how much of the LCBO's profits the government gets in dividends every year ($1.4 billion in 2009). So, here, the question is not "would you like to have more stores with better hours and only slightly less selection" so much as "are more stores with better hours and only slightly less selection worth creating a $1 billion+ hole in the province's annual budget?"

      • What you call a billion for the public coffers, I call an inappropriate expropriation of the economy. Po-tay-to, po-tah-to…

        With that as the standard, why don't we just start picking off other profitable sectors of the economy to nationalize? The question would not be "would you like fewer hours and locations and surly employees (with ten days per year in their sick-day bank) counting days to retiring at sixty with a fatso pension" so much as "how many more billions can we suck out for government programs?"

        Shudder…

        • Again, I don't disagree with your philosophy here per se, it's just that privatizing something is a hard sell when the profits from that entity are paying for over 20% of your province's post-secondary education system.

          • Then again, I suppose we could privatize the LCBO and shut down say 4-6 universities to keep things revenue neutral. I wonder if kicking thousands of university students out of school would increase or decrease liquor sales (LOL).

          • But now you're getting into a whole different discussion – which I personally don't mind at all – about how to fund those things that governments fund, which could then expand into whether governments should be funding them at all.

            Btw, I'm not at all saying that I'm unhappy with the current arrangements, but I certainly wouldn't have any problem at all having the discussion – you never know what kind of improvements could be developed, and on the other hand we might expose a few examples of where the public system is actually returning very good value for the money.

          • I think you have the right attitude about this. MYL has a philosophical difficulty with the principle of the gov't owning a profitable business and I can accept that. But I get the impression it is also colouring his thought process, too. It's not like Ontario stepped in and nationalized a profitable business, which is what he is implying above. As has been established by the article and other comments, the original purpose of LCBO had nothing to do with customer convenience or price or gov't revenue or anything like that – it was to suppress consumption. If we legalized pot, and allowed retail outlets, my guess is we might have the same approach initially if we didn't have the LCBO precedent.

          • Yup.

            And yup, we should legalize pot.

          • As has been established by the article and other comments, the original purpose of LCBO had nothing to do with customer convenience or price or gov't revenue or anything like that – it was to suppress consumption.

            And if that were still its purpose, and the voters of Ontario really wanted that to be its purpose, well, fine.

            But that no longer appears to be its purpose. Its purpose appears to be to make money selling booze to Ontarians. Which is at odds with its original purpose. Why so many people are NOT troubled with this smothering of the market by an entity that no longer belongs there, I must leave to those people to explain why their thought processes are so coloured.

            Which is what was established by the article.

          • Can one "smother" a market that was never born?

            Anyway, I presume people aren't up in arms about why we haven't privatized the LCBO yet for the same reasons they're not up in arms about why we haven't privatized our universities yet.

            I'm not sure what all of those reasons are, but I think they're largely the same reasons. :-)

          • I think you are looking for an argument that isn't there. I am not against privatization. Like LKO, I have questions about how the dollars we have come to depend on are going to be replaced if we privatize. I also am expressing a degree of satisfaction – and I am not naturally inclined to be so good natured about government services – with how this particular state run entity manages to exceed normal expectations of such enterprises. The lack of public outcry and the money questions leave me wondering what exactly we are trying to fix. So why blow somehting up and go through a period of real upheaval for, at best, a status quo financial return for the taxpayers and, at best, status quo service and prices?

      • would there necessarily be more outlets? Especially in smaller rural areas, espeically those in smaller places? In Saskatchewan there had to be offsale for places that were just too small for a liquor store.

  12. If there is one drug that we should make illegal and attempt to destroy it is alcohol – speaking from personal experience I can safely state that all other forms of altering your consciousness pale in comparison when it comes to the damage that this drug has and is causing in all of our lives. I would rather have my grand kids smoking pot anyday rather than take this substance – it removes more than paint !

    • If there is one drug that we should make illegal and attempt to destroy it is alcohol

      That's been tried, just a century ago. Had to be undone.

    • Most psycho-active substances have a similar profile; many can tolerate them, a portion of the population cannot. Alcohol has played an important role in the success of the human species surviving and thriving, because of the pasteurizing qualities of its production process. Smoking pot doesn't cause psychosis, conclusively, but there is certainly a correlation to it triggering pre-existing conditions. Used responsibly, many psychoactive substances could easily be accommodated in a legalized regime. That being said, I agree with your that our treatment of pot is exponentially out of proportion to its relative toll on society in comparison to booze. Ask a cop what he woud rather deal with: a booze-fueled a**hole or a pot smoker.

  13. This link describes how the AGLC (the current incarnation of the ALCB) sets the prices that it charges the retailers. The PDF has the exact, current markups.

    So, by adjusting these markups a government can achieve almost whatever revenue flow it wishes to achieve, including obtaining the same overall revenue stream that it used to get when it had a monoply on the retailing.

    • Fair enough, but it seems a little strange to me that we would privatize retail sales because free market competition is really important, and then make up the big shortfall in government revenues by gouging the private retailers through the continued existence and leverage of a government-monopoly distributor.

      If not effecting government revenues is a goal, I think I'd prefer not to privatize over privatizing combined with screwing over the new private operators.

      • Yup. So let's just make it like competitive retail of a regulated product, like so many others.

        • But why? If it were losing money and customers were genrally unhappy, then there would be a reason. But in the current situation where they are making money to subsidize government, and not the other way around, and customers are generally well served and getting a reasonable price, what are you trying to fix?

          • In theory, even if we had dozens of private liquor retailers all desperately trying to keep their heads barley above water, fewer stores, shorter hours, less selection, higher prices, terrible customer service, and a 1.5 billion hole in the provincial budget the people of Ontario would still be better off, because we could all sleep better at night knowing we had total free market competition. Some might say that this sense of ideological correctness wouldn't be as satisfying as still being able to buy a nice single malt at a reasonable price at 9:30 at night, and, NOT having an annual $1.5 billion hole to fill, but those people are communists.

          • LOL

          • Well, Mister funny-typo man, there is a jurisdiction not far from here that went through ALL of those (dozens of private liquor retailers, fewer stores, shorter hours, less selection, higher prices, terrible customer service, and a hole in the government budget ), EXCEPT for the struggling business aspect. Owing to intense consumer demand, the retailers were still making out like, er, bandits.
            http://en.wikipedia.org/wiki/Prohibition

            So, even though the government then was doing whatever it thought it could to prevent that market from even existing, the market still found a way for supply and demand to meet at price. All that was left was for the government to lose out on tax revenue AND lose out some more on wasteful spending in a futile attempt at impossible enforcement.

            So, those you label as "communists" are merely intensely ill-informed as to the virtues of a properly regulated free market in a democratic country enjoying the protection of the rule of law.

      • Well I'm not at all sure why you would call that screwing over the new private operators. They are still free to set whatever price they want. Presumably that price will cover the marked-up cost from the province, the cost of their employees, the cost of the facility and then some profit for themselves.

        Given that, as myl suggests, Ontario's private sector is more efficient than the LCBO, then the final retail price should be about the same as the current LCBO price.

        And some/many other products are taxed in an equivalent manner (if I'm not mistaken cigarettes are heavily taxed, gasoline is taxed) and then sold by private businesses – do you have the same concern in those areas?

        • We're still talking in this context about ways in which privatization could be achieved while not effecting government revenues aren't we? 'Cause that's a $1.4 BILLION dollar hole to fill. Tax revenues to the province from the LCBO are only about $400 million. So, to make up the shortfall left by privatization through increased PST contributions, the private retailers would need to either triple sales, or triple prices. TRIPLE. (that's an oversimplification of course, but it gives one an idea of the scope of the problem). So, the only way for the province, as a distributor, to make up that $1.4 billion annual shortfall would be to totally gouge the retailers, or sell the liquor to the retailers at a reasonable price, and force them, somehow, to sell the product for triple the price the LCBO was selling it for.

          Now, maybe these hypothetical retailers really will be super-efficient. However, I don't care how much more efficient private retailers could (THEORETICALLY) be, I don't see any way on God's green Earth that they could figure out a way to run their businesses AND collectively give the province $1.4 billion a year on top of sales taxes AND still make a profit.

      • PS

        If there is any gouging going on it will be the consumer who ends up getting gouged, and it that is the case it is already occurring today, except that the LCBO is doing the gouging.

        • Sure, but in the context of making a changeover to a privatized system while not effecting government revenues the private business would surely have to gouge the customer many times more than the LCBO to make up the $1.4 billion hole left in the provincial budget.

          I don't deny that private owners could well be more efficient than the LCBO, I just question the notion that they could be more efficient to the tune of $1.4 billion a year. Imagine (for simplicity's sake) that one single private entity takes over for the LCBO under privatization. Now imagine that on day one they are INSTANTLY as efficient as the LCBO, and have a year exactly equivalent to what the LCBO would have done (let's assume that they're not so good that they start out more efficient than the LCBO on their very first day of operation). At the end of that first year, the government has $1.4 billion less in their budget, and the new private entity has made a $1.4 billion profit for their shareholders. If the private entity intends to make up that government revenue shortfall through increased PST revenue for the province, they're going to need to find that $1.4 billion through efficiencies, price increases and/or increased sales. I just don't see them ever making up that much through efficiencies, and alcohol sales are generally falling, so they're going to have no other choice but to charge Ontarians more than the LCBO if the change is to be revenue neutral for the government. About TRIPLE more if they can't find any efficiencies or increased sales.

          (myl would ask now why the government should get to keep that $1.4 billion anyway, and it's a fair point, but we're talking about this notion that we could privatize the LCBO and not have the government of Ontario lose any revenue, and personally, I'm convinced that that is metaphysically impossible. That's not to say it shouldn't be done anyway (I'd still say it shouldn't, but whatever) just that we should acknowledge the consequences of doing it).

      • LKO,

        By chance, are you aware of the financial details related to so-called "boutique" outlets in cottage country that carry the LCBO brand, but are owned and operated by convenience store operators? Is the cash flow from these outlets different from a formal outlet? In other words, does the government get the same amount of revenue from a bottle of wine from one kind of outlet as the other?

  14. It's a knack that not everyone has….

    Btw, when the barley is above (on top of) the water rather than at the bottom, then its a lager, right?

  15. Our cottage country outlet of choice must be making a mint. It fills a niche market that would otherwise have to drive 30 km to a formal outlet, it fills an otherwise empty space in the building it occupies, it draws business to that building…. all while paying for roads, hospitals and the like. Sweet deal. Undoubtedly, in a privatized jurisdiction, we may have been served in a similar fashion but it speaks well of the LCBO's ability to adapt and meet market demand.

    • it speaks well of the LCBO's ability to adapt and meet market demand.

      To recap: we are now praising the public entity for the extraordinary talent of private-sector thinking skills to serve its customers in a fashion (very ordinarily) expected of private sector ventures, as justification for it never becoming a private sector venture at all.

      Yeesh.

      • To recap: MYL is convinced that we should replace a well-functioning government-run business with a (hopefully!) well-functioning privately run business (or businesses) and not worry about the fact that this will take around $7 billion away from the government of Ontario over the next five years.

        I don't think this is ever going to happen, but if we privatize liquor sales in Ontario I hope someone in government will explain the plan to find an extra $1.4 billion for the budget every year. Or at least acknowledge that they don't really care, and that adding over a billion dollars a year to our deficit is a small price to pay to replace a well-run public entity with a well-run private entity.

        • Given the tight fiscal picture for many provincial governments, I hope someone in government will explain which profitable industry is NEXT on the list for confiscating its profits that should more deservedly be shared fully by all taxpayers. Or maybe LKO could provide that list, since he seems to like "public revenues" as a justification for what would otherwise be unjustifiable.

          Repeat as necessary. The production and installation of the iron curtain will create many thousands of jobs!

          • With respect, MYL, this is a straw man you are setting up. Today's LCBO is the legacy of state paranoia over liquor sales. It is not the prodct of the state suddenly nationalizing a popular, profitable industry.

            LKO is correct to worry about the public revenues that would be lost in the privatization of what he and EeeOar and others have said they are not philosophically wedded to but which has, nonetheless, developed. Their pragmatic questions and observations have been more informative and responsible than dogmatic frustration.

          • I respect your opinion. But the LCBO no longer exists in order to fulfil its original mandate, and its continued existence owes itself to the ongoing comfort of the citizens of Ontario with government expropriation of otherwise private enterprise. And that stinks.

            Oh, sure, it's a pragmatic stench. But it still stinks. That's all.

          • We agree that its original mandate has whithered and died. We agree that Ontario citizens have grown comfortable with how it has evolved and with the dependence we have on the revenues we enjoy from it. We also agree that it is a decidedly odd model and that it is not one we would voluntarily construct out of thin air.

            The remaining differences we have, in light of all that agreement, seem trifling in comparison. Let's go for a drink.

          • I've got the first round. Cheers!

          • The remaining differences we have, in light of all that agreement, seem trifling in comparison. Let's go for a drink.

            That's beautiful, seriously. I suspect that quite a few of the discussions I have persued on this board would/could/should actually end with a similar conclusion, except that in too many cases the discussion devolves into…….well, I'm sure we all know what I'm talkin' 'bout.

          • which profitable industry is NEXT on the list for confiscating

            I know we both know where the other is coming from, so I don't want to go around in circles too much, except to say that I don't think liquor sales count as an instance of a profitable industry being "confiscated" per se (though I concede that this could arguably be seen as a question of semantics). I could be totally wrong on the history, but I don't believe there was a thriving, profitable and legal trade in liquor in Ontario before the government of Ontario got in to the business.

            You'd presumably insist that if we legalize marijuana that the sale and distribution of marijuana be left in private hands; however, if the government decided to control the sale of marijuana themselves through a government monopoly, would we characterize the loss of business as having been "confiscated" from drug dealers? I suppose we could, but couldn't it be argued that they simply had their ILLEGAL businesses "confiscated" from them?

          • I will, myself, also resist the urge to go 'round again. But as to your pot scenario:

            Once declared legal enough for a government monopoly, no illegal business would be confiscated; only legal business. To go from "nobody, neither you nor we in government, can do that because it's so reprehensible that we must declare it illegal" to "well, heh, actually, it's not that reprehensible now that we're the dealer, but only we in government can be trusted to do that," in order to siphon off the profits, is pretty morally repugnant in a society that allegedly values freedom. See: gambling. Actually, come to think of it, see also: medical and hospital insurance.

            Regulate and tax as strictly or as laissez-faire as your voters care to deem proper, but stop participating. That's all I ask.

            As to government monopoly: how's that Federal Flin Flon pot working out? Any sense (snicker) of its market share in the country?

        • Here are the numbers for 2009 from the LCBOs annual report from their website:

          Total Sales $4.298 billion
          Cost of supply $2.205 billion
          Salaries & Ben $0.389 billion
          Depreciation $0.046 billion
          Other op exp $0.247 billion

          So after deducting the 4 expense lines from the top line you are left with the LCBO profit (or dividend) of $1.400 billion.

          In a privatized system (Alberta model), the LCBO would still buy from suppliers and then resell to the private retailers, so the LCBO income statement would be:

          Total Sales $3.605 billion
          Cost of supply $2.205 billion

          which leaves the LCBO with exactly the same $1.400 billion profit (dividend).

          The retailers (as a group) income statement would be:

          Total Sales $4.298 billion
          Cost of supply $3.605 billion
          Salaries & Ben $0.300 billion
          Depreciation $0.040 billion
          Other op exp $0.200 billion

          So after deducting their 4 expense lines from the top line you are left with a group private enterprise profit (or dividend) of $0.153 billion.

          There you go, everyone is happy.

          • In a truly privatized system (government out of teh supply chain), the LCBO would not exist as a mark-up middleman, but rather as an enforcer of regulations.

          • Oh yes, absolutely!

            My intent is only to show LKO one (of probably a few different) way(s) of shifting ~96% of the way to a fully privatized system while still maintaining the existing cash flow.

            As well, this method has the benefit of being basically the system that Alberta adopted in the mid 1990s, and given that we accept that Alberta is a bastion of free enterprise, then how can you argue against that? ;-)

          • I'm not so sure the private owners are happy to have their supply expenses artificially increased by 60%.

            I don't see why we'd bother doing this rather than just leaving the LCBO public. Privatize or don't, but a half measure like this just seems silly, imho.

          • Yes, I'm also sure that the retail store owners would be much happier if they could get the supply without the government markup. OTOH, if there was zero government markup, I suspect that the suppliers wouldn't just standby and let the retailers take all of that $1.4 billion for themselves – at least if I was running a distillery or brewery I would certainly be increasing the wholesale price to these retailers as much as I possibly could.

            And to recap, I'm not advocating that Ontario should do what Alberta did, I'm just indicating that it is really not that hard to get the government out of the retail side of the alcohol business while still retaining essentially the same cash flow, which meets MYL's "requirement" for governments to stay closer to their role and also meets your "requirement" to not loose $1.4 billion in revenue.

          • Nice to see you both still here in the aisle between the Niagara whites and the Chilean reds.

            EO: the supplier SHOULD seek to secure the highest price it can get away with for its product. The retailer (and the consumer) SHOULD seek the lowest price. Supply meets demand at price, and free competition in the marketplace keeps price / availability / service / satisfaction at the best possible equilibrium. None of that exists now here in the aisle of this crown corporation outlet.

          • Yes, I think you are mostly right, at least in terms of the economic theory of what would happen…..

            I will quibble with this: I'm sure that the suppliers are already trying to maximize the price at which they are selling to the LCBO, but since the LCBO has so much buying power, the suppliers margin is somewhat lowish. And are you sure that the LCBO has NOT found the markup that allows them to maximize the amount of revenue that they turn over to their "owner"? They certainly seem to understand the idea of "profit margin"! ;-)

            BTW, I have found some of the Chliean reds to be quite refreshing, although occasionally you might also track me down over by the scotch or even over by the Heineken.

          • Regarding "profit margin"….an organization that manages to make a $1.4 billion profit on sales of $4.5 billion seems to set a standard that I'm sure many private companies would love to equal.

          • And are you sure that the LCBO has NOT found the markup that allows them to maximize the amount of revenue that they turn over to their "owner"?

            Well, since their masters ensure their protection as a monopoly, market forces have very little to do with anything; they only enter into it at the borders and the basement distillers. So the consumer has precious little power to exert pressure downwards on price. This, apparently, we call a good thing.

            And I've already beat you to the Heinekens. Both of you. At least, I think it's both of you.

          • Sure, consumers can't exert downward pressure the way they could if there was a multitude of retailers, I give you that.

            But consumers can certainly exert downward pressure by reducing their demand. For most of us that should be one of the easiest consumer choices that we could ever make.

            And as my absolute last post against this topic, I give you this! You're welcome!

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