Ben's Beer Blog

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It’s OK to love the LCBO

19 Comments

Summerhill LCBO
(Image: Sina Gorge)

Frequently, when I write articles about the province’s retail alcohol industry (i.e. my slew of recent Beer Store rants), I receive supportive comments in response along the lines of “Hear, hear! The Beer Store and the LCBO need to go!” or “Yes! The time for TBS and LCBO is over,” and while I appreciate your support, I encourage you to read my articles in a little more detail, please.

I never said I wanted to dismantle or sell the LCBO and I think it would be insane to lobby for such a change.

In fact, I love the LCBO.

It’s probably one of my favourite stores and rivals only bookstores for its ability to consume far more of my time and money than I anticipated every time I walk into one. And, while I share some of your concerns related to the way the LCBO conducts its business, if you’re lobbying to get rid of the LCBO, you need to give your fucking head a shake.

Yes, I’ll admit that there are some aspects of the Liquor Control Board of Ontario that are less than ideal. First and foremost of my beefs would be the fact that the LCBO fails to use its considerable monopoly to dictate better prices. What I mean is that, as one of the largest importers of alcohol in the world, the LCBO has more than enough negotiating power to demand better prices from beverage retailers, yet they don’t. In fact, as the 2011 Ontario Auditor General’s report pointed out, on occasion the LCBO actually asks alcohol producers to charge them more. Because the LCBO charges a fixed mark-up, the more they pay for a product, the more they can charge, and accordingly, the more they profit. Accordingly, as the Auditor General pointed out

The LCBO’s fixed-pricing structure gives it no incentive to negotiate lower wholesale costs – doing so would result in lower retail prices and, in turn, lower profits.

So the consumer gets hosed when, instead, the LCBO could be throwing their weight around to get Ontarians better prices. That is, admittedly, greasy.

Secondly, the LCBO has a bit of a reputation for bullying beverage producers. Since they are essentially the province’s only retail alcohol option, the LCBO gets to dictate a lot of the terms necessary to get a product on LCBO shelves including not only the price at which they’ll buy it, but the price they’ll sell it for, approval of the art and design of your product, and even the geographical location of the stores they think your product will sell the most. Given that there aren’t any other options for selling booze, it’s a little tough to say no to the LCBO’s demands.

food-and-drink-spring-101Famously, as outlined in this op-ed from the Toronto Star’s Martin Regg Cohn back in 2012, the LCBO has been known to use that position to strong-arm beverage producers into taking out expensive advertising in their glossy “Food and Drink” magazine. Brewers, winemakers, distillers, and distributors are “asked” if they’d like to take out expensive ad space in the fancy flier and, for fear of angering the one place that sells their products, they pay up. As a result,  according to Cohn, despite spending a whopping $20 million on slick promotional material, the LCBO still nets a tidy profit from the $31 million they charged their suppliers in the same year. Super greasy.

Having said all that, unless you’re a bullied small winery or distillery, or unless you’re a craft brewer who would like to sell products larger than six packs somewhere other than The Beer Store, or unless you’re a magazine editor who’d like some of that sweet advertising cash they’re basically hoarding, you’ve got to admit that the LCBO is really fucking awesome.

No, really, it is.

Do you realize how lucky we are, as a province, to have a government-maintained enterprise providing us with safe, reliable, varied access to so much sweet sweet liquor? Honestly, I understand the inherent distaste for a “government monopoly” but when that monopoly is one of the world’s largest importers of beverage alcohol, and we get to reap the rewards, what exactly are we complaining about here?

Lack of selection?

I just don’t see that argument. Yes, people like to point to products that are available in the US and the UK and lament the fact that they can’t be purchased here, but I assure you that those few items are the exception, not the rule. Because of the LCBO, the province has 634 different stores offering 18,000 different products. 18,000! You can probably just shut up about not finding that wine you had in Italy. You’ve got some other options.

Seriously. People point to privatization as some way to open up selection in the province, and short term, that likely would be the case, but once there’s no more big supplier here buying alcohol in bulk, you’ll see the selection go way down and the shelves will be filled with whatever generic big market shit that can afford to buy the shelf space.

And let’s talk about those shelves.

I’m not really sure how an alcohol-enjoying human might peruse the shelves of a nice LCBO and possibly argue that there could be a better way to buy alcohol. Have you ever been to the Summerhill LCBO? In addition to a great beer selection, large areas dedicated to specific wine regions, and frequent sampling opportunities, they have an entire room dedicated to scotch.

A room.

Just for scotch.

It’s a clean, well-stocked, marbled, mecca of booze–hell, you throw in a hot dog tree and and live round-the-clock performances from Louis CK and it’s pretty much a drawing from my dream journal.

And as for the whole “the Government shouldn’t be in the booze business” argument? Well…uh, why not, exactly?

People drink alcohol and governments require money in order to provide services. It seems fairly logical to me that our government opts to provide retail alcohol services in a manner that helps them collect significant revenue for Ontario coffers. If, for some reason, alcohol sales ever became privatized, you can bet that the government would tax the hell out of those sales. So why not just let them handle the entire system, like they already are, extremely well?

The government makes a lot of money through the LCBO (e.g. in fiscal 2010–2011, the LCBO paid a dividend of $1.55 billion to the Ontario government. It was the 17th consecutive record annual dividend, and it does not include the various taxes levied–a total of $749 million. [source]). It seems insane to me that those who think the government’s main business should be watching its own bottom line can, in the same breath, call for the privatization of the province’s biggest cash cow.

Essentially, I don’t understand much of the “anti-LCBO” arguments. We in Ontario have a well-oiled (though admittedly bureaucratic) machine that provides us with unprecedented access to a world-class selection of alcohol that’s all been stringently tested (the LCBO conducts 500,000+ tests annually) to ensure that all the products meet federal health regulations. The system nets provincial coffers vast sums of money and the actual stores themselves are, for the most part, nice places to shop.

Am I missing the part were this is a bad system?

I’m all for having some more options for purchasing and selling craft beer, and The Beer Store’s private monopoly seems blatantly unfair, but for god’s sake, leave our provincial retailer alone. I love the LCBO.

Author: Ben

http://www.bensbeerblog.com

19 thoughts on “It’s OK to love the LCBO

  1. This is a hard one. I agree with you but not necessarily for the same reasons. The mandate of the LCBO is partially public health and to do what the AGCO tells them especially around liquor permits.

    They act like a large business in many ways. They advertise, modernise and seek responsible profits. Like any large business they have some issues. I think about how they like to pre-buy a year out and that doesn’t work for some craft beer breweries who hardly know what they are brewing in the next couple months let alone committing to a huge sell to the LCBO next year some time. Oh, and can they have the samples now for testing.

    The pricing is middling. Studies have shown whatever the person funding the study has wanted to show. (Okay, not exactly true but still). My guess is that the reality is somewhere in the middle. For big brews, QC is cheaper but not for all things.

    The argument that it should be sold everywhere because business does it better… The AGCO is not going away. Look at the two places that we can readily buy beer. Compare the two. One is private and the other is public. Which do you prefer?

    As for private sales, we can go to the breweries for getting their brews. Now, I have visited more than one hands worth of Ontario breweries alone. The buying experience varies radically from some closet tacked onto a brewpub to a lounge like experience that feels like a curling club to an incredibly spiffy high end retail. So, that puts the idea of consumer nirvana for private enterprise.

    But, yeah, LCBO can do better but I wouldn’t want to see it go just because it is inextricably linked to a private enterprise such as the Beer Store.

  2. The LCBO does such a good job that we should consider nationalizing The Beer Store.

    • I know you’re probably not serious, but that’s not a bad idea. A government owned and operated beer store would basically solve most of my issues with The Beer Store. Mainly I hate that there is one place that’s allowed to have privatized sales so I think I might actually prefer no places for private sales. (cue brewers throwing empty growlers at me in 3…2…1)

  3. Ben, I’m disappointed. The LCBO basically exists as a way for the government to control the liquor consumption of people who live in Ontario. It’s not called a “Control board” for no reason. That’s why the prices aren’t lower. The main argument has always been that the private sector can’t stop kids from buying booze. We know that isn’t true, but it doesn’t stop the LCBO defenders from saying it. The revenue argument has always been weak: Ontario has the third lowest revenue from alcohol sales in Ontario, surpassed by Alberta (which brings in 50 percent more from taxes on liquor) with a fully privatized system, and BC, which brings in more with a hybrid system.

    The LCBO does not serve consumers well, either. Producers bid on shelf space, but it’s not a competitive free for all – arcane import rules and quotas assure us of that. Maybe there are 18,000 products in Ontario, but that doesn’t do me any good if the ones in my city all have the same basic shit. Furthermore, (at least in Ottawa), the locations make no sense, there are certainly not enough of them, and the hours of operation are even worse.

    Granted, I understand why you like the store: it sells booze which is glorious in and of itself. But go live in another jurisdiction and you’ll quickly realize that the LCBO is garbage. , Alberta is awesome. You think the LCBO is good, Costco liquor and the real Canadian liquor store kick ass too. And they have actual sales and respond to consumer demand (passing on purchasing power of economies of scale to consumers). And if you want to pay more and buy some booze at 2:00 am, you can run down to your local convenient store.

    In short, it’s in the name. The LCBO is not about consumers, or about revenue. It is, and has always been, about control.

    • You know, it occurs to me that perhaps people’s opinions on this reflect what they feel the role of government should be. For me, I like knowing that the LCBO is regulated and, yes, controlled. As much as I love sweet sweet liquor, I don’t like the idea of a deregulated, privatized wild west where any yahoo with a backyard still can slap a label on a bottle and compete for shelf space.

      I like a sale as much as the next person, but I hate going blind.

      Obviously I’m being hyperbolic, but I really do think there is a place for the LCBO. For the most part, the organization has good intentions but they’re hamstrung by archaic legislation.

      Perhaps a two-tiered system, wherein other outlets are allowed to sell booze, might force the LCBO out of the dark ages a bit and make it even better, but I just can’t see the justification for abandoning it entirely.

      • This isn’t really an ideological thing (even though I don’t think government should be trying mitigate adult drinking that much). The LCBO has good intentions in the sense that they want to make you drink responsibly and ensure that minors don’t buy booze. That’s their argument. If they only sell at xxx locations, between xxx hours, and with government employees as gate keepers, they can accomplish those objectives. Government regulation without monopoly can accomplish those other public safety goals: think about it – Private businesses already screen for age and intoxication effectively – bars, stores that sell tobacco, restaurants do this, and with no less proficiency than government. They supplement that argument with the idea that it’s a revenue generator: but It’s not about revenue – you can replace the LCBO profits with liquor taxes on private businesses and the balance of the evidence is that you’ll probably get more revenue. Once you demolish these arguments, you’re left with a issue of what best serves the consumer, and there is no question that private stores would do a better job on that front.

  4. Though I think the LCBO is making great strides – truly I’m a much bigger fan than I used to be – it’s still does a poor job bringing in beer AND revenue. Here’s why. http://brewscout.wordpress.com/2013/06/20/bringing-ontario-up-to-date/

  5. Ben appears to have foregone alcohol and has drunk the Kool-Aid. While I agree that the LCBO should not be broken up or privatized, the market needs to be opened up to niche retailers who are willing to cater to consumers of specialty products – people like us. The monopoly has made great strides in the 35 years I have been one of its unwilling customers, but as a consumer and producer of craft beer, I am still very poorly served by this entity.

    Talk to a craft beer sales rep and you will learn that the selection offered in any given store is largely at the whim of the manager. Here in Peterborough, the selection at the largest, supposedly flagship, store in town has diminished drastically simply because the latest manager is nearing retirement and doesn’t give a rat’s @r$e about the store in general and has a particular disregard for craft beer. Consumer wishes be damned! A couple of the other, much smaller, stores have picked up the slack a bit, but it’s the usual story: cold storage filled with multiple package sizes of a handful of pasteurized mega-brands, while unpasteurized craft beer is scattered on the floor and random shelves.

    A common scenario goes like this: a rep persuades a reluctant manager to stock a new brand, forcing him to remove another product. Shelf space is a zero-sum game. The new beer is popular, selling 48 cans in a couple of days. the rep returns next week, logically expecting an increased order. The manager orders one case, shrugging off the clearly expressed desire of customers for a particular beer. Nobody, not the rep, not the customer, not even your MPP has the power to alter this reality.

    I could go on for pages with other abuses, but I’m getting tired of typing and have to go and make some beer.

    • That’s a solid argument in favour of amending the LCBO’s practices, but not dismantling them. You’d be at the mercy of any privatized store manager’s whims as well, but they don’t have to answer to anyone. The LCBO is in a position to mandate a certain percentage of shelf space form craft or local options. Convenience store managers or privatized boutique owners are free to be bought out by the highest bidder. The big guys already do it in bars, you can bet they’d do it in a new retail environment with less regulations.

      • Most voices I hear, from Tim Hudak to the Ontario Convenience Store Association, are calling for a two-tier system. Straight-up privatization really isn’t the non-status-quo option.

        The idea that the selection at private retailers will be at the random whim of the owner, or bought out by macrobrewers is just as knee jerk as assuming that a government-owned, union-staffed business can’t deliver a profit. Craft brings a bigger margin and local finds a devoted following. This is what the real-world experience in places like Quebec, New York, and Michigan clearly proves.

  6. I grant that the LCBO is improving and does some things right, but I think that’s where our agreement ends. The fact that the LCBO is an effective buyer, importer, and distributor of alcohol in no way qualifies it to be the (nearly) exclusive retailer.

    The things they do badly as a retailer compared to places like QC, NY, and California:
    1. Handling. Beer and wine is regularly exposed to light. 95% of wine inventory is stocked (improperly) standing up. Refrigerated cases are filled with macrobrew shit unless a craft rep has nudged-and-winked a store/beer manager into not following the planogram.
    2. Responding to customer requests. Have you ever suggested to an LCBO employee that they bring in a product you tried while travelling? That, my friend, is the very definition of a blank stare. Or the hurdles you have to jump if you want to private order something? This is not normal.
    3. Employee expertise. Unless you’re talking to the one “beer guy” at one of a dozen stores in the province that actually has one the other 99% of employees are likely to say things like: “stout? Oh you mean Guinness?” “I tried that. You know it’s sour right? Are you sure you want to buy it?” (Cuvee Jacobins) “Are you sure that’s beer? Looks like champagne to me.” (About Dupont) “We don’t really carry the off-the-wall beers. Try Summerhill.” (About Crazy Canuck.)

    These are all not just random grievances. I’m sure the SAQ is just as bad, but the point is that Quebeckers who care have a few dozen other options where these decidedly are not problems..

    There is no reason to think that a reformed LCBO (and Beer Store) couldn’t maintain the distributor functions in a system that includes privately-owned retailers.

    The point that the LCBO offers public health protection for Ontario with their insane lab tests only holds water if you can point to a North American jurisdiction with private retailers where someone has been made ill by packaged alcohol in the last 40 years. Otherwise, their inane stunts like not allowing Cantillon into the province because it didn’t pass lab test is just a further example of how backwards our system is.

    Again, the setting of the argument as: “the LCBO has its flaws, but is pretty great in some ways and if we privatized who knows what would happen?” is false. Plenty of other jurisdictions have tried partially private systems, it has worked for them, and their is no reason to think it wouldn’t in Ontario.

  7. SO its super greasy, but it’s ok to love them because its clearly the lesser of two evils. Not sure I can get there. I do think a re-vamped, revitalized LCBO can be part of the solution in modernizing Ontario for consumers of alcohol and fine craft beers. However because they are big (by default), look nice and makes money is not enough reason to love, or overlook the super, super greasy components (of which several more can be added if truth be told).

    Rooms full of scotch are great, every corner store should have one.. ok, too much. The problem seems to be the monopoly driven attitude leading to the greasiness and the ‘dictating of terms’ to suppliers.

    But all in all, I’d rather just be friends with the LCBO, saving my love for the new Ontario in my dreams.

  8. I’ve only lived in Toronto for a year and a half, but I’ve tried every craft beer available at my local LCBO right now (a big one, King and Spadina). I kind of miss being able to stop in at a specialised beer store once a week and picking up a couple of new beers I’ve never tried before. I miss having conversations with craft beer store owners and employees about new and upcoming beers. I miss being able to offhandedly mention a small craft brewery I find on my travels and have the craft beer store track them down and start stocking their stuff.

    Now, I have no problem with the LCBO, but it’s not meeting my wants as a craft beer nut.

  9. Just found your blog (from CBC).
    The blunder the government made was forcing all beer can and bottle returns to go through the Beer Store. We’re forced to go there!

    So you end up buying there.

    I would buy all my beer at LCBO if I could return there.

    John W.

    • Thanks for checking out my blog, John! I actually don’t even return my empties. I know I’m basically throwing (a lot) of money away, but I’ve always just left them out for the industrious blue box scavengers who roam Toronto. I like to think of it as doing my part for the city’s weird human ecosystem.

  10. Pingback: Ontario Craft Beer to Try this Summer: 5 Local Brews | Green Niackery

  11. Pingback: A “paid-for” monopoly is still a monopoly | Ben's Beer Blog

  12. Not a big fan of the LCBO and part of that has to do with price as well as availability. I’ve lived in parts of the world where getting alcohol is usually cheaper, not to mention has greater variety.

    When I was in Minnesota for a while visiting friends, we went one night to a “Liquor Warehouse” where they stocked beer, wine and hard liquor at lower prices not to mention a greater selection then we have here.

    When I lived in Japan there were tons of independent as well as chain liquor stores that sold sold products we simply can’t get here. A 2L cask of good Aussie wine for 1300yen (roughly $13.00)? Unheard of. A bottle of XO Cognac for just over 10000yen (roughly $100)? Impossible. Imported Canadian beer sold at a price equal what you buy in the Beer Store? How is that possible?

    Costco selling beer, wine and alcohol not to mention their own labels. Why can’t we simply have the same choices at better prices than the Government charges? It’s because it brings in money and they’re not going to change that.

  13. Canadians are so obedient. Good Canadians.

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