Saturday, July 9, 2011

LCBO - Spinning Choice

This morning's newspaper brought the usual bunch of ad inserts from retail stores and one glitzy-four-page-booklet cleverly shaped in the outline of a beer can. Open the booklet and the heading to the left appears on two pages. Irony, was the first thing that came to mind. A monopoly that offers choices, practically oxymoronic.
The LCBO is the Ontario government alcoholic beverage monopoly established in 1927 after a brief attempt at alcohol prohibition.
Whenever the LCBO comes up in conversation among friends (I'm the one bringing up the topic) I get a new appreciation for the psychological term Stolkholm syndrome where you eventually empathize with your captors, in this case your government captors.
Friends, and likely most of my fellow citizens, support the LCBO monopoly because they claim (based on government and union sources) that it brings in revenue for the province. That's reassuring, even the government can't screw this up. Good, the government stores sell beer, wine, and liquor to the exclusion of most competition and they make a profit! Whoop-dee-do! It's a classic case of looking at just one side of the economic equation (for all you Austrians). The citizens of Ontario are taxed heavily for alcoholic beverages, and the government also fixes the price and eliminates competition, and they make profit. How hard is that? Of course they do.
So a run-of-the-mill case of 24 beer cans in Niagara Falls Ontario will cost about $40 (Canadian and US dollar are now roughly at par including bank fees) at the LCBO, and across the imaginary line in Niagara Falls New York, at the Walmart, it costs $18, thats right Walmart, $18. Never mind that my friends (and everyone else) make sure to buy liquor at the duty-free store or in the States every time they cross the border, they are not so supportive of the government then.
So why if the LCBO is one of the largest bulk buyers of alcohol in the world (it is) don't we Ontarians get a better price? Several reasons. LCBO is one of the largest social engineering organizations in the world too. As part of the Ontario nanny-state-syndrome, our political masters don't think people are smart enough to handle their liquor, so we get a guilt message each time we purchase. High price is part of the social engineering or as they call it euphemistically "social responsibility."
Click to enlarge
Second, there is little competition. The LCBO claims it has competition, their own pie chart to the right shows that only(!) half the market share of sales belongs to LCBO. The Beer Store is also a monopoly, albeit a private monopoly sanctioned by the government (some competition!) to sell beer. So >77% of beer and liquor is controlled by monopoly, notice that almost 10% is "illegal." Yeah, right, lots of competition. I love this section written on the LCBO website:

"The LCBO also competes for “share of wallet” – money that consumers may decide to spend with other retailers for things like Christmas gifts or pizza and a movie instead of a bottle of wine with dinner. (Lots of choice folks!)
So it’s important that customers visit our stores because they want to, not because they have to. Unlike other retailers, however, we can’t offer deep price discounts. That would not be socially responsible."
(my emphasis - see what I mean by social engineering?)

No, I'm not making this up, that wouldn't be socially responsible!
A third reason why we don't get better prices is that the Ontario government has a monopoly agreement with the LCBO workers through their union OPSEU.
Imagine a mom-and-pop variety store selling all sorts of stuff including beer and liquor in the States. They make a living if they compete with other retail outlets, but there is no guarantee of salary, it depends on their ability to compete etc. etc. Not true at the LCBO. A store manager makes over $61,000 annually in a 40 hour week with great benefits (see page 90 of the OPSEU collective agreement). I have nothing against unions, but why would you pay a cashier $55,000 plus benefits annually? What special skill does it take to make change?
 So ladies and gentlemen, do you really like spending MORE than you have to on your alcoholic beverages? Me? I'd rather keep the extra money so I can buy other stuff or just save it, wouldn't you?
I've created a little video for my election campaign, have a look:

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