Ontario restaurateurs want LCBO to extend 'diplomat' discount to them: letter

OTTAWA – Ontario’s restaurant owners want the province’s liquor agency to give them the same deep discounts it gives to the diplomatic community.

The Liquor Control Board of Ontario last month started giving foreign embassies and consulates a 49 per cent discount on beer, wine and liquor sales.

A so-called “embassy” discount — which also applies to federal government purchases — was already in place, but the agency made its products even cheaper for the diplomatic corps starting June 23.

On Tuesday, a group representing Ontario’s restaurants said the new discounts are unfair when they have to pay full retail prices for alcohol.

In an open letter to the liquor board, Joyce Reynolds of the Canadian Restaurant and Foodservices Association called the agency’s pricing scheme an “insult” to hard-working business owners.

She says the industry employs 425,000 Ontarians and contributes $25 billion a year to the provincial economy, while diplomats offer no economic benefits to the province.

“Yet again, the LCBO has demonstrated that it is out of touch with current business challenges, and the financial burden of an overly complicated liquor control system,” Reynolds said.

“We hope you will consider introducing a little more fairness into the beverage alcohol system for hard working Ontario business owners.”

The association represents some 80,000 restaurants and bars, of which 30,000 are in Ontario.

The LCBO says it must offer discounts for foreign embassies because of a federal law, the Foreign Missions and International Organizations Act, and under the Vienna Convention of 1961.

An agency spokesperson says the uniform 49 per cent discount replaces a hodge-podge of previous discounts that were incompatible with a new computerized sales system.

Under the new discounts, a case of imported wine that costs ordinary consumers $203.18 is priced at $104.80 for this group, including HST and bottle deposit.

That’s $26.47 cheaper than it was before the new system kicked in June 23.

Imported non-U.S. beer is also cheaper by $28.68 a case under the new discount system, though imported hard liquor went up in price.

The agency says the net savings to embassies, when all prices are considered, amount to only a few percentage points.

Embassies must order their alcohol through LCBO headquarters, rather than at retail outlets, to obtain the discounts.

LCBO spokeswoman Sally Ritchie says licensed restaurants get a price break as well.

“While they pay nearly identical prices to consumers, they subsequently receive a tax credit for the 13 per cent HST,” she said.

“So in effect, they are purchasing at 13 per cent less than the consumer. Additionally, on Ontario wine, they receive a further five per cent discount.”

Ritchie also noted that Canadian embassies abroad get reciprocal price breaks on alcohol purchases under the Vienna Convention.

Update: Sally Ritchie sent the following response from the LCBO on July 31:

The CRFA letter is based on mistaken media reports that diplomats and the federal government purchase from the LCBO at a discount.  This is not the case. For many years, embassies, consular posts and international organizations have been able to purchase from the LCBO at a discount.  This is required of Ontario and other provinces under federal legislation and international agreements, most notably the Vienna Convention of 1961. Canadian embassies abroad receive similar treatment.

Individual diplomats pay the same retail price as other consumers when purchasing from the LCBO and no government employee (from any level) receives a discount on LCBO products. Neither do LCBO employees, for that matter.

To be clear, the discount is available only to embassies, consular posts and international organizations who comply with specific ordering procedures.  All embassy orders must include both the embassy seal and Canada Border Services Agency stamp, and also include a diplomatic ID number (issued by the federal government) of the person who is eligible to purchase on behalf of the embassy.

Regarding licensees, while they pay nearly identical prices to consumers, they subsequently receive a tax credit for the 13 per cent HST. So in effect, they are purchasing at 13 per cent less than the consumer. Additionally, on Ontario wine, they receive a further five per cent discount.

Bars and restaurants mark-up alcohol before selling it to their customers, sometimes as much as 300 per cent, allowing them to profit from the sales.  There is no evidence to suggest that further discounts provided to licensed establishments would translate to more people dining out.  And additional discounts on LCBO products would certainly have a negative impact on government revenues.  LCBO supports the licensees sector through the following measures which simultaneously assist licensees with their businesses while maintaining government revenues:

  • Dedicated LCBO staff to assist licensees, with for example, developing wine lists, product ordering and promotion
  • Advance notice of upcoming sale prices so that they can plan purchases accordingly
  • Full access to LCBO products on sale and delisted products at reduced prices
  • Development of licensee exclusive products to help restaurants and bars offer their customers a unique portfolio of products