It’s an interesting morning from a task variation standpoint. I’m just about to start teaching this semester’s Beer 1 Online Class (spots still remain) at George Brown College in Toronto. The online class usually has some concessions to distance included. If you have all the students in the same classroom downtown, you can control glassware, pour sizes, which beers are available, and even service temperature. Naturally, sometimes there are tech issues, but they’re easily fixed with a call to IT.
With the Online Class, there’s a little more variability. For one thing, you can’t taste the sixty or so beers that are in the recorded course material. The cost of the materials would be more expensive than the class. That means I have to choose something like twenty beers to taste over five weeks. Since people are further afield in Ontario, I have to choose beers that are widely available. Ottawa is fine. Calgary is harder. This semester we have someone living on the southern coast of France, which is actually easier than Sault Ste. Marie. Tehran was extremely difficult.
This time around, the LCBO has gone on strike, and this is a complicating factor in terms of my logistics. I had to send out an email about provisioning ahead of time and suggested people find the best beer store near them since we’ll have to work with what exists.
You might think that the additional effort would bother me, but being a realist, I can’t be mad at the LCBO workers striking. I should also point out that I work for Food & Drink as a contributing writer and having an opinion at this point in time is probably not a good idea professionally.
That said, I don’t see a whole lot of substantive information out there in the media about the strike three days in. The majority of the media outlets covering it are doing so on a surface level because that’s the extent of the resources they have in 2024. It’s hard out there for journalism and concrete data is difficult. I’d quite like to explain the situation with some actual information.
Now, it should be said that I’m mostly just curious about how things work in Ontario, and having covered the Master Framework Agreement for several years, it occurred to me that I should do some research on the effect that the MFA had on the LCBO and the way that grocery and convenience store sales are structured.
Here’s a link to an Aggregator spreadsheet that I’ve been collating for the last several years with information about beer in Ontario from various sources including Beer Canada, Statistics Canada, and the LCBO. Everything is verbatim from the reporting of these organizations, so it is worth noting that any blank fields are due to information not having been available for those years.
———
Imagine that you’re a worker at the LCBO and that you’re a relatively new employee and that you’re not part of the union on a full time basis. Anecdotally, I can tell you that unionized positions have become less prevalent over the course of the last decade. I know people who work at the LCBO for the holiday season, so part time work is a significant thing. Also, as an essential service you had to work all throughout the pandemic. Some of the lifelong union members will have taken that opportunity to retire if they had that as an option.
I had a conversation yesterday with an ex-employee who said one of the criticisms likely to be leveled at the LCBO workers is that it’s not skilled labour. All labour is skilled labour, and especially by the time you get to the high end products at the LCBO, product knowledge is a significant time sink. As a new employee, you’re probably on the shelf stocking or cashier end of things rather than the vintages desk. Ok, maybe not aspirational, but it’s honest work.
The thing is that the amount of work has probably increased per employee over the last five years. This comes at a time when other things have also been increasing.
The LCBO is the wholesaler for all of the grocery stores in the province of Ontario. If you think back to 2015, when Kathleen Wynne put the MFA in place, one of the more or less unstated goals of the MFA was to repatriate large brewery profits to the LCBO. In terms of the overall alcohol market in the province, if the LCBO is the wholesaler instead of The Beer Store, the percent of the alcohol market controlled by the LCBO increases. Check it out:
|
Year |
2023 |
2022 |
2021 |
2020 |
2019 |
2018 |
2017 |
2016 |
2015 |
|
Number of Grocers (LCBO) |
449 |
450 |
450 |
439 |
363 |
247 |
126 |
60 |
0 |
|
Number of Convenience Outlets (LCBO) |
389 |
395 |
396 |
369 |
209 |
210 |
212 |
212 |
212 |
|
Number of Beer Stores (LCBO) |
422 |
420 |
433 |
433 |
450 |
450 |
450 |
451 |
450 |
|
Number of Ontario Breweries (Beer Canada) |
380 |
380 |
360 |
350 |
300 |
260 |
222 |
180 |
Not only did the LCBO expand as a wholesaler for beer and wine in grocery over the period 2015-2023, but they added something like 170 convenience store outlets. As you can see, the number of Beer Store locations in the province dwindle over that time as well. Some of the capital in the chain was tied up in land. At the moment a lot of the land has been sold and stores are being leased by the chain, increasing operating costs.
What does that do to the market share, I hear you ask?
|
Year |
2023 |
2022 |
2021 |
2020 |
2019 |
2018 |
2017 |
2016 |
2015 |
|
LCBO Market % (LCBO) |
51.00% |
51.90% |
51.30% |
48.80% |
46.90% |
42.10% |
40.10% |
38.20% |
37.70% |
|
Beer Store Market % (LCBO) |
41.30% |
41.70% |
42.60% |
44.10% |
45.30% |
45.10% |
47.30% |
48.80% |
50.30% |
|
Own Store Market % (LCBO) |
7.70% |
6.40% |
6.20% |
7.10% |
7.80% |
9.00% |
8.80% |
8.80% |
7.90% |
Well, the LCBO’s total market share has increased by 13.3% since 2015 over the course of the Master Framework Agreement as a result of those 450 grocery locations and the 170 new convenience locations. The Beer Store has lost 9% of the market. You may notice that the numbers do not quite add up, but remember I’m pulling them directly from someone else’s reporting. Sometimes there are caveats on informational certainty.
Say, what about the size of the Beer market during that period?
|
Year |
2023 |
2022 |
2021 |
2020 |
2019 |
2018 |
2017 |
2016 |
2015 |
|
LCBO Beer Market Volume |
36.87% |
35.39% |
36.65% |
37.14% |
35.60% |
33.51% |
31.97% |
31.47% |
30.12% |
|
Beer Store Beer Market Volume |
68.76% |
64.61% |
63.35% |
62.86% |
64.40% |
66.49% |
68.03% |
68.53% |
69.88% |
|
Total Beer Volume Ontario – hL (LCBO) |
7,602,000.00 |
7,971,790.00 |
8,322,550.00 |
8,652,190.00 |
8,816,780.00 |
8,935,000.00 |
9,075,410.00 |
8,715,110.00 |
8,483,330.00 |
I mentioned caveats. The 2023 Market Volume total probably includes brewers own stores in the Beer Store calculation, which unaccountably increases the total to well over 100%. It should read something like 61-63%. I attribute the uncertainty of the data to changes in ownership structures over the course of that year. It was a bad year for breweries.
We can see that the LCBO’s market share on beer has increased from 30.12% to 36.87%, and that The Beer Store’s market share has dwindled by a little more than that to about 61% from around 70%.
Alright. Surely, the dollar value of the beer sales through the LCBO must have gone down because of the 800,000 hL decrease in volume we’re seeing over eight years, right? Not really. There’s been a huge amount of inflationary pressure. When Ford came to office mid MFA, there was the removal of an annual price floor increase as part of the plan to get to Buck-a-Beer.
|
Year |
2023 |
2022 |
2021 |
2020 |
2019 |
2018 |
2017 |
2016 |
2015 |
|
LCBO Total Beer Volume (LCBO) |
2,803,000.00 |
2,821,310.00 |
3,050,490.00 |
3,213,270.00 |
3,138,750.00 |
2,994,110.00 |
2,901,080.00 |
2,742,860.00 |
2,555,150.00 |
|
Domestic Beer Sales (LCBO) |
$918,472,000.00 |
$922,329,000.00 |
$880,195,000.00 |
$797,668,000.00 |
$742,994,000.00 |
$646,083,000.00 |
$571,998,000.00 |
$518,554,000.00 |
$471,001,000.00 |
|
Import Beer Sales (LCBO) |
$490,090,000.00 |
$442,339,000.00 |
$570,670,000.00 |
$717,567,000.00 |
$707,389,000.00 |
$717,036,000.00 |
$716,939,000.00 |
$670,267,000.00 |
$617,020,000.00 |
|
LCBO Total Beer Sales (LCBO) |
$1,408,563,000.00 |
$1,364,668,000.00 |
$1,450,865,000.00 |
$1,515,235,000.00 |
$1,450,383,000.00 |
$1,363,119,000.00 |
$1,288,937,000.00 |
$1,188,821,000.00 |
$1,088,021,000.00 |
|
LCBO Dividend to Government (LCBO) |
$2,580,000,000.00 |
$2,550,000,000.00 |
$2,390,000,000.00 |
$2,380,000,000.00 |
$2,370,000,000.00 |
$2,120,000,000.00 |
$2,060,000,000.00 |
$1,940,000,000.00 |
$1,810,000,000.00 |
Sorry that it bunches up a little. There are a couple things that are reflected here. One is that the LCBO’s total beer volume in hectolitres is up about 250,000 since 2015, but is nowhere near the peak it enjoyed in 2020 (essential service, nothing to do but sit at home, CERB). However, Domestic beer sales are up about 450 million over the MFA period through the chain and through grocery for which they are the wholesaler. Price adjustments mean that despite selling 410,000 fewer hectolitres of beer through the LCBO chain in 2023 than at the peak in 2020, sales have not decreased precipitously. The CPI is a stone cold bummer, man.
The LCBO’s dividend to the Ontario government as a crown corporation is up 770 million dollars since 2015 and it is because they have repatriated funds that were going to foreign owned brewers through The Beer Store chain. That 770 million dollars represents 13.3% market share. Back of the napkin math says that if The Beer Store gets run out of town, there’s 2.39 billion dollars up for grabs annually, and increasing rapidly due to inflation.
Now, let’s go back to our junior union member at the LCBO who votes with 97% of the OPSEU members to strike. It’s the first time that’s ever happened in this organization. Grocery and Convenience are likely to continue being wholesaled by the LCBO, which means there are going to be a lot of warehousing positions that need staffing. A lot of logistics. A lot of administrative positions. If you let the approximately 2.39 billion that’s about to shift direction go without a fight go, you’d be crazy. They had to strike and they had to strike now. They’ll never have this degree of leverage again because this is a one shot deal. You can’t put the genie back in the bottle.
So, remember, when you’re tempted to criticize the OPSEU members for going on strike, they really don’t have a choice in the matter. If you’re tempted to say that we should blow up the LCBO, remember that all of this is in aid of remitting funds to the provincial government that pay for programs you enjoy daily. We’ll get a couple billion additional provincial funding out of it. The other option is badly paid workers and billions in the pockets of people who already have billions.
Now if you’ll excuse me, I need to go figure out what’s in The Beer Store in Nepean and talk to a bottle shop in Nice about their Witbier selection. Busy, busy, busy.
The case for privatisation has been made repeatedly for decades in this province by responsible actors. Privatisation is the norm in most liberal economies. It puts more money in private hands for re circulation into the economy in ways that maximise overall wealth, not just for “billionaires”. Apart from that, there are many ways to raise extra money, the government can raise general taxes, or nationalize other parts of the economy, why focus on liquor control, which is simply an historical legacy of early post-Prohibition days? Last point: what about consumer choice? Retailing responding to actual and variable consumer demand? Meaning wholesaling too and importation? The state doesn’t determine the toothpaste or olive oil I can buy, why liquor? All the safety issues can be addressed by appropriate regulation, as in all the non-control states in the U.S.
Here’s the difficulty with the rhetorical questions you’re asking: They espouse a certain worldview that you’re absolutely entitled to. You certainly have the right to a preference for a free market over the situation that exists here. If we were starting from first principles, the rhetoric might be persuasive. We haven’t been in a first principles situations since 1927.
The reality is that we have an enormous organization that generates 2.58 billion a year in revenue and is tied up in capital through land ownership, stock, materials, etc. I don’t believe that a seamless transition exists in which we privatize the LCBO and also come up with 2.58 billion in revenue through new taxes. It’s about $184 dollars per person in Ontario per year and climbing. Let me ask you this: since the remittance to the province is provided by customers who are self selected, why should that money be provided by people who up until this point have chosen not to spend their money on alcohol? Is that enforced remittance through taxation not more galling to a free market advocate?
Even in a frictionless situation where you could simply pull a lever and replace the funding, the chaos engendered by replacing a uniform wholesaler with… what, exactly? A third party system like in the US? Those only exist because of the same first principles situation that our system exists with. You say “simply an historical legacy” as though you can discount causative cumulative effect.
All I know is that I’ve seen people over the last 15 years suggest that it should be a free market, but they never have a suggestion as to how that might be enacted. There’s no road map from here to there. It took us this long to get to convenience stores.
Thanks for your reply. In a world where multi-billion dollar mergers of mega-brewers from different parts of the world are engineered without undue difficulty (or for other industries), I see no problem privatizing liquor in Ontario. The existing outlets and rights would be sold, resulting in a windfall of many billions, I assume, for the Province. Quite possibly this would mean one major buyer would emerge but then others would be allowed to set up their own shops, or maybe on a privatization, a percentage of the outlets sold would be reserved to individual, possibly resident-Ontario, buyers. There are many ways I’m sure this could be done responsibly and fairly.
Some U.S. states which originally were “control” states sold off their liquor control sales outlets in a similar way. There are by my last checks just 17 control states in America, the rest are free-market states, so twice as many.
The LCBO history you describe since 1927 is real of course but that alone is no bar to privatisation, if the will is there. It may be though, on a cultural level we are so, well, acculturated to the LCBO and its governance of liquor distribution that there is no great will to change. That is different, culture vs. mechanics to effect a change. I’m not sure what the answer is. It would be interesting if a current poll was taken among the general population to see what it feels, but we don’t govern by plebiscite as such of course.
On the point about liquor buyers having to date supplied the rent to the province from the monopoly, and why should that be shifted to the general public, I would say this. I do not see why liquor buyers should be required to shoulder that burden, today. The idea that they should reflects what is known as a “sin tax” perspecative – and that very term should tell us the notion is outdated, carrying moral implications we longer associate with use of stimulants, hence eg legalisation of cannabis in Ontario. Liquor is a commodity today like any other, Its users shouldn’t bear any unusual burden to contribute to public coffers.
Second, I am not convinced that the Province would lose out on a net annual basis from privatising the monopoly. That is an economic question I would like to see a full, contemporary study of, but factoring the large windfall from the sale, both its present and future value, the license fees that no doubt would be charged annually to private operators, and various other income that would still flow to Ontario post-privatisation (maybe fees to conduct lab checks, etc.), I am not clear there would be any significant drop. We must factor too that money going into private hands is used productively, to hire people, to re-invest, to source local goods and services – and that will occur independently of who owns the liquor stores. Anyway we permit foreign ownership in Canada, indeed American foreign ownership has special protections as you know under free trade agreements.
But finally, I come back to consumer choice. The questions I raised are no less real for being rhetorical. Conumers, ultimately, should decide what liquor they want to buy, and a local retailer should be able to respond to that choice. I don’t accept to be told (I don’t mean by you) that I have “enough” choice as is. If I saunter down to a local privatised liquor retailer and say, hey, you know there is a great dark lager in… (here, there, everywhere), can you you get that? They should be able to say, sure, let me look into it. Some retailers may want to specialize in the beers, say, of one country, or region, or one style, all that kind of specialisation could take place.
So that’s my view, thanks for the chance to have this productive conversation.
No offense, but anyone who believes in the “free market” in this day and age is a mark. The profits from LCBO sales go into provincial coffers. Loblaws, Couche-Tard, Liquor Barn, etc. will not retail alcohol out of the kindness of their heart. That will be taken out of our pockets. It will not be “recirculated” in the economy. They will not add well paying jobs. High paying, tax generating jobs will be lost if the LCBO is sold off. That kind of thinking is some Reagan-era BS that only the deluded still believe in.
Liquor sales being a public corporation is a gift, in this this province. We are loathe to throw it away to become Alberta.
Well, it has never happened in any other jurisdiction, but maybe this time!
The state might not determine the toothpaste and olive oil you can buy but it sure does regulate it.
Wow
Terrific work and analysis, Jordan.
It’s so educational when you write about this stuff. I don’t know of anyone else who does it. Thanks!
It’s not hard. It just requires you to pay attention over the long term, which, I grant you, is not all that common a trait currently.
Nothing about privatization makes me think there will be better selection. Sure there may be in Toronto but in I doubt it in Kenora or Havelock. I suspect that people will have to drive a lot further and stock up. I have been to Alberta and that was my experience there and in fact some “liqueur marts” had terrible selections. I have a corner store across from me and have no problem with them selling beer but I know they will have at most the 8 most popular which I never drank anyway. Instead of going to the 3 LCBO’s in my area I will probably have to drive somewhere out of my area if I want to have a good selection. I really like the LCBO and I think we will miss it.
Well,this is it. The standardization of availability is pretty key.
I really don’t think it’s going anywhere. I think it makes them too much money. They’re probably trying to limit the union’s influence in order to squeeze more out. Hence the need for the union to strike. Just normal labour relations stuff.
I went to liquor stores in Alberta that ONLY had gin & vodka. Trying to find something specific there is a nightmare. I had to go to 5 liquor stores in Lethbridge to find a Granville Island (post buyout) beer.
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