Killing Ontario's beer cartel is overdue

In 2014, Ontario’s The Beer Store was lobbying the province to continue its government-granted quasi-monopoly. In response, I wrote this column to dispel myths and cherry-picked data used by the Beer Store’s president. Not noted in this column but something I’ve referenced in previous columns is that any claim that a change to TBS or Ontario Liquor Stores would result in less revenue to government is nonsense. Alberta privatized all government liquor stores 26 years ago and the markup on beer, wine and spirits stayed. Governments can and do apply taxes and markups regardless of whether your cashier is a government union member or works at Loblaws.

Ontario liquor cartel spreads myths about Alberta booze

Calgary Herald, February 15 2014, A13
Mark Milke

It's been two decades since the Alberta government exited the business of selling beer, wine and spirits to consumers. The privatization of all government liquor stores (completed in 1994) led to a dramatic expansion in the number of private sector liquor outlets in Alberta, vastly improved product selection, better customer service, and price-competition while creating thousands of new jobs.

Unsurprisingly, liquor monopolists in other provinces criticize Alberta's liquor privatization. The latest convenient critic is Ted Moroz, president of the Ontario-based The Beer Store, which has a near monopoly on private sector beer sales in the province.

In a recent speech, Moroz argued that Alberta's privatization of government liquor stores and embracing of competition (Alberta sets no limit on the number of new liquor stores) led to "skyrocketing" beer prices and a "less efficient, more expensive retailing system." Moroz also warned that if Ontario treads this path, there will be more societal problems.

But Moroz cherry-picked his numbers. For example, he claimed a 24-pack of Molson Canadian costs $50.70 in Calgary but $37.95 at the Beer Store. I phoned up the Real Canadian Liquorstore in Calgary (owned by Loblaws). His 24 Molson Canadian was $40.89. Moroz also failed to note his Ontario example was on sale; according to The Beer Store website, the regular price of a 24-pack of Canadians is $40.95.

Liquor stores in Alberta operate in a free market so one can find prices higher than that and perhaps lower than the above example. Which leads to another useful point: If Ontario (and other provinces) allowed the sale of beer in corner stores they might well be more expensive than the current (Ontario) cartel price. Convenience stores regularly charge more for items found much cheaper in big box grocery stores, be it milk, bread or in the future - beer.

But that's the price of convenience. That doesn't mean corner stores shouldn't be allowed to sell beer, wine or spirits; it does mean provinces across Canada should allow corner markets plus existing grocery stores and would-be liquor store operators to get into the market. Then, as happens on regular grocery purchases, consumers could buy beer and other beverages based on their preference for cost or convenience.

On price, according to a comprehensive 2003 study by the University of Alberta's Douglas West, liquor store prices rose by four per cent in Alberta between 1993 (pre-privatization) and 1996. They then fell between 1996 and 2000 as competition increased.

But Moroz still claims Alberta's private stores gouge consumers. Using numbers from a Parkland Institute report, Moroz compares alcoholic beverage prices in Alberta between 2002 and 2013 (up 28.2 per cent) to Ontario (up 9.2 percent).

Except, critically, the Parkland Institute and Moroz ignore how provinces with government liquor stores in abundance saw price spikes in excess of Alberta. According to Statistics Canada, for example, government-liquor-store-happy Saskatchewan saw prices rise by 32.2 per cent between 2002 and 2013; neighbouring Manitoba, also stuffed with government liquor stores, saw prices rise by 36.3 per cent.

When Moroz asserts that competition among liquor stores leads to a less efficient retail system, he ignores the reality in multiple other sectors that face competition every day. In groceries, computers, long distance calls, and airline tickets to name but a few, competition has driven down prices and made companies more - not less - responsive to consumers. Meanwhile, privatization of government businesses has long led to substantial economic and employment growth. To claim otherwise is to assert the Soviet-era GUM department store in Moscow was better for consumers, the economy and more efficient than say, Wal-Mart, Costco or Loblaws.

As for social ills, also brought up by privatization opponents such as Moroz, a 2009 Frontier Centre study found that Saskatchewan, a province with a plethora of government-run liquor stores and comparatively low overall sales and alcohol consumption rates, still showed the "highest, second-highest or third-highest rates of alcohol-related harm with respect to friendships, marriage, work, studies, employment, finances, legal problems and physical violence." Apparently social problems, including in provinces with government-run liquor stores, are a bit more intractable and unrelated to whether a government or private sector employee swipes your credit card for your case of beer.

The Beer Store president claims Ontario's government/private liquor cartel model is the "envy of jurisdictions across North America and around the world." Moroz might care to get out more, say to wine-producing California (or most American states) or to European countries.

As Frommer's travel guide notes about Italy, for example, "consumption of alcohol isn't anything out of the ordinary" and "there's almost no restriction on the sale of wine or liquor." Contra Moroz, I doubt your average American and European would look forward to traipsing to a government liquor store for wine and spirits and to a government-sanctioned cartel for their beer.