AG Report on pricing at LCBO

[lister]

Auditor General: Ontarians paying more than they should at LCBO

From the DUH! department...

[JerCraigs]

From the DUH! department...

Not sure that's as obvous a "D'uh!" as you might think.

But the auditor general countered that, by modernizing its pricing structure, the LCBO could actually generate more money for the public coffers.
“It might be able to increase its overall profit margins while still meeting its retail pricing objectives,” McCarter told reporters.

One way to read that as implying that they should get stuff from suppliers dirt cheap, and mark it up even more to maintain the retail price.

[cmadd]

One way to read that as implying that they should get stuff from suppliers dirt cheap, and mark it up even more to maintain the retail price.

I think that's the only way to read that...

[The_Jester]

The "profit margins" comments scares me. It's my guess that there's a narrower profit margin on some of the premium beers and special promotion beers, due to higher costs and lower volume. I hope I'm wrong.

[JerCraigs]

One way to read that as implying that they should get stuff from suppliers dirt cheap, and mark it up even more to maintain the retail price.

I think that's the only way to read that...

Yes, but as a taxpayer, we should want them to do that. We wouldn't pay anymore but they province gets more money.

As a customer, it would be nice if they would reduce the prices for us.

As craft beer supporters, its to the breweries benefits to get paid more.

[cannondale]

One way to read that as implying that they should get stuff from suppliers dirt cheap, and mark it up even more to maintain the retail price.

I think that's the only way to read that...

Yes, but as a taxpayer, we should want them to do that. We wouldn't pay anymore but they province gets more money.

As a customer, it would be nice if they would reduce the prices for us.

As craft beer supporters, its to the breweries benefits to get paid more.

Therein lies the rub.

As Ontarians, we should demand fiscal responsibility of the LCBO. Increasing margins would provide additional cash for social programs. And in particular, as beer connoisseurs 'suffering' with the provincial liquor monopoly in the name of social responsibility and provision of funding to the provincial coffers, we should be 'outraged'.

Having said that, if the LCBO begins negotiating for better pricing from brewers, brewers may be even less inclined to do business with them. It has been reported many times here that several brewers are reluctant or refuse to jump through the LCBO's hurdles as it is. This could impact the variety of beer that is brought into the system.

Quite the dilemma.

[Kel Varnsen]

But the auditor general countered that, by modernizing its pricing structure, the LCBO could actually generate more money for the public coffers.
“It might be able to increase its overall profit margins while still meeting its retail pricing objectives,” McCarter told reporters.

One way to read that as implying that they should get stuff from suppliers dirt cheap, and mark it up even more to maintain the retail price.

Could that also not mean that the LCBO could lower their retail prices in order to sell more alcohol which would increase its overall margins. Especially if increasing the sales volumes allows them to get even bigger discounts from suppliers.

[JeffPorter]

I dunno. This isn't necessarily a "craft" issue to me. I see this more as - "If you're buying tens of thousands of bottles of bacardi, perhaps you can see if you can get a deal from the company"

Although the implications for "craft" products are interesting and, like cannondale said, is the rub...

But it seems to be geared more towards brewers, distillers, wineries etc, that have a large capacity and can sell in bulk.

If, say, Flying Monkey's had the capacity to flood every store in the province with Supercollider, would it be worth their while to sell for less in order to move more products? I dunno.

Also, it strikes me as weird that many breweries ask the LC to buy more units and they don't, even though those beers are big sellers. I'm thinking of St. Ambroise Pumpkin Ale which was gone in a few weeks, even though the brewery wanted to sell more.

[JerCraigs]

Could that also not mean that the LCBO could lower their retail prices in order to sell more alcohol which would increase its overall margins. Especially if increasing the sales volumes allows them to get even bigger discounts from suppliers.

In theory, but that's where you run into the "social responsibility" arguments.

[Ale's What Cures Ya]

We pay too much for alcohol, too much for car insurance, too much for hydro and can't get a doctor.

There's nothing quite like big government and overspending on bloated social programs if you want to hamper the lives of citizens.

[JesseM]

But....but......but paying too much for booze is the socially responsible thing to do ......

[saints_gambit]

interestingly, the only people who are likely to suffer from this are those who can afford to sell high volume at a lower rate.

Sort of a craft beer miracle christmas in Ontario.

[JerCraigs]

But....but......but paying too much for booze is the socially responsible thing to do ......

Its probably sacrilege to point this out here, but there is obviously a socially optimal price for alcohol from a societal perspective, particularly in a place like Ontario where health care costs are paid by the public. There is a point at which increasing the cost of alcohol (especially through taxes) is balanced by the social costs of drunkenness, health issues etc. In most cases this is unlikely to affect the craft beer market however, since few of their products are selling at the bottom end of the price range. If anything having the gut rot be more expensive makes the good stuff seem like a better deal.

Of course the flip side to this argument is the study in Eastern Europe of smoking which found that smoking is a massive economic benefit. High taxes and revenue combined with the fact that smokers die younger avoiding the high cost health care years that come later in life. This equation of course places no economic value on human life or quality of life though...

[shintriad]

The Canadian Restaurant and Foodservices Association (CFRA) has chimed in: http://www.theglobeandmail.com/news/nat ... le2267453/

The comments in the Globe, as usual, are almost uniformly supportive of overhauling Ontario's liquor laws. Those comments supporting the status quo are being suitably downvoted into oblivion. Nice to see, in any case.

[Ale's What Cures Ya]

I don't buy the argument that the government's coffers would suffer from opening up the market and abolishing the LCBO's retail arm.

The reduction of LCBO expenses would be massive by divesting themselves of all retail locations. No more upkeep to pay on those locations equals savings. The LCBO also wouldn't be on the hook for the absurdly inflated wages paid to LCBO staff. Those two things alone would be massive savings for the government.

The LCBO currently operates 618 stores. I'm not sure how many convenience and grocery stores there are in Ontario, but I'm willing to bet it's far more than 618. Maintaining the taxation level (or even raising it slightly) on alcohol sales while allowing many, many more places to sell alcohol will maintain the amount of money being put back into the government's pocket, while also allowing people to open small niche stores that cater to the particular tastes of people like the members of this forum.

Allowing private retail stores is win-win, and it's refreshing to see that a light is starting to go off in a lot of people's heads. We're probably still at least a decade from a fair, honest and real retail model in Ontario, but there seems to be a lot to be hopeful for.