June 26, 2013
Lower booze prices and convenience are two key findings of a detailed economic study of expanded alcohol sales in Ontario.
A system blending the LCBO with private sales similar to the system used in British Columbia would increase the amount of money the province gets from alcohol sales and result in lower prices, University of Waterloo economist Anindya Sen said.
“Government and consumers in Ontario should strongly benefit from some increased competition in the retail sale of alcohol,” he said.
The detailed study for the Ontario Convenience Store Association concludes competition would actually hike booze sales by as much as 9 per cent, while driving down prices.
“The econometric analysis reveals that increased competition is significantly associated with roughly a 5 per cent and 9 per cent increase in net and gross per capita income. . . ,” Sen states in his 25-page report provided to the Star.
The study results may conflict with the common belief that expanding retailing would decrease government revenues from alcohol sales, but Sen insists the findings are “consistent with standard economic models, which predict that an increase in competition results in an increase in revenue collected by the provincial government from retail sales.”
The report bolsters Tory Leader Tim Hudak’s promise to end the LCBO’s monopoly on the sale of wine and spirits if he forms government.
One of the systems Hudak would consider is the one Sen has put forward, in which the LCBO, the world’s largest buyer of wines and spirits, would remain the wholesaler, but corner stores and supermarkets would be able to sell beer, wine and liquor along with private specialty stores.
“Treat me like an adult. We’re in the 21st century, we’re not back in the 1950s,” he recently told reporters.
In his 2011 report, then auditor general Jim McCarter said the price of booze in Ontario is unnecessarily high and that revenues are not being maximized.
Earlier this month, the Liquor Control Board of Ontario announced it set record sales in 2011-12 for the 18th year in row, pumping $1.7 billion into provincial coffers.
Sen said he approached the Ontario Convenience Store Association with the idea of further studying the impact that private booze sales would have on provincial revenue.
“I am getting the sense that people don’t like the concept of a monopoly, but they like the fact that the LCBO does make quite a bit of profit, which is then transferred to the government,” he told the Star.
Sen said a combination of competition, efficiencies and convenience would see the province get even more money than it does now.
“Once you have competition in any market, you are forcing the incumbent to be more efficient. That forces them to look for savings, it pushes the marginal cost down and they are going to make higher margins,” he said, adding that “for sure” prices would also come down. The LCBO’s markup on booze is more than 50 per cent of the final retail price, he said.
Sen’s study of provincial systems, including that of Alberta, which has a purely private system, found “provinces with more competition actually generate more per capita revenue for the government (according to StatsCan data).”
Dave Bryans, CEO of the Ontario Convenience Store Association, said the study further supports what Ontarians have been telling pollsters time and again: they want to have choice.
“Sixty-seven per cent of all Ontarians (according to pollster Angus Reid) have said over and over that ‘let’s open up the market,’ ” Bryans told the Star.
Bryans noted there are already has 217 privately run agency booze stores in rural and northern Ontario “with no issues at all.”
Source: The Star