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‘We are not selling the LCBO’
The Ontario government should get out of the booze business by selling its liquor agency and allowing grocers and other big retailers to sell alcohol, says a report calling for sweeping changes to the system.
The province would still collect more than $1.5 billion a year in alcohol tax and licensing revenue but also get $200 million or more annually by selling licences to sell alcohol, said the Beverage Alcohol System Review, released today.
Consumers, meanwhile, would benefit from better selection and lower prices if booze was more easily available and retailers were made to compete, the review states.
The province disagreed, with Finance Minister Greg Sorbara immediately pouring the recommendations down the drain.
“We are not selling the LCBO,” said Sorbara, who called for the report in January.
Nor will the government permit beer and wine to be sold in corner stores nor let the LCBO be turned into an income trust — a type of investment vehicle that gives investors regular dividends for their interests based on sales.
“It is our very strong view that the public interest of Ontarians is best served by the continued public ownership of the LCBO,” Sorbara said.
A four-member panel examined how the province can make more money from alcohol sales while remaining socially responsible.
Its report argues that competition would break an existing monopoly in which Ontario runs the LCBO and beer stores are jointly run by Brewers Retail, which itself is owned by Molson, Labatt and Sleeman.
The report notes that Ontario first took over alcohol sales in the 1920s to restrict availability and potential abuse.
While that rationale is still valid today, “it is not necessary for the government to own and operate wholesale and retail facilities to do this,” the report states.
It says the province can sell the LCBO and allow grocers to sell alcohol and still maintain some controls through regulations to ensure prices don’t fall below a certain level and by limiting the number of licensed liquor outlets.
Also, licensees would have cut-off times after which they would not be able to sell alcohol — for example, a larger corner store might carry cases of beer but couldn’t sell them after, say, 11 p.m. or midnight.
Currently, the government owns and operates the nearly 600 LCBO locations across the province. The report says it will be ``financially challenging” for the government to keep pace with consumer trends and changing demand while increasing the $1-billion-plus dividend LCBO provides for provincial coffers each year.
Therefore, the private sector should handle distribution, the report recommends.
In an auction process, retailers would bid for 10-year licences to sell alcohol in existing establishments. There would be limits on how many licences would be available in any one region.
While the auction would be open to any existing retailers, it’s likely the biggest stores — think Loblaws, Wal-Mart or gas stations with convenience stores — would have the finances to win the licences over smaller corner stores.
LCBO’s warehouses would be included in the auction.
The province would collect the auction proceeds in instalments over the term of the licence.
“At the end of the term, licence-holders would be required to re-bid in a new auction. In this way, government — and taxpayers — would receive additional value regularly and permanently,” the report states.
The report also notes that the LCBO needs to improve its recycling — only 64 per cent of its products are recycled each year. While the LCBO contributed several million dollars annually to blue-box recycling programs, it does not have a direct program similar to those found inside beer stores.
The panel said the recycling issue needs further examination.