Is the LCBO century coming to a close?

LCBO, King and Spadina Uploaded to Flickr by Skeezix1000

On June 1st, the LCBO celebrated its 90th birthday. To mark the occasion, they posted a photo to Twitter of their very first store. But will the LCBO live to be 100 years old?

Last week, the Ontario government introduced a plan to reduce the alcohol licensing fees for small, independent grocers by 66% ($2,000 per year). It’s tempting to interpret this as a reaction to the negative public response to the latest batch of alcohol sales licenses awarded to grocery stores: on May 9th, it was announced that another 76 grocery stores would be allowed to sell beer and cider. Only 11 of these grocers were independent stores and more than a third of them were Walmarts. Naturally, this did not go over so well.

The problem lies with the “competitive bidding process” which involves, among other things, grocers offering to lower their profit margins (giving more of a cut to the LCBO) in an effort to outbid their competitors. This, combined with the $3,000 annual licensing fee, meant that many, if not most, independent grocers in Ontario couldn’t afford to win. So now Ontario is changing the playing field to give more access to small retailers. This is a welcome step in the right direction, just the latest small step in finally leaving the shadow of prohibition behind us.

The people of Ontario have a troubled relationship with alcohol. Since the Dunkin Act of 1864, we entered into a protracted period of prohibition that we still haven’t fully recovered from. That piece of legislation, along with the Scott Act of 1878 (which is still in effect), introduced the “local option” which allowed municipalities to ban the sale of alcohol.

This gave so much fuel to the prohibitionists’ fire that by 1914, fully 62% of the municipalities in Ontario had gone dry, with some remaining so well into the 1970s and one, the Junction in Toronto, remaining dry until the year 2000 (the Junction is now home to 4 breweries and counting). Finally, the Ontario Temperance Act was passed in 1916, the official start of Prohibition in Ontario.

The 90th birthday of the LCBO also happens to be the anniversary of the end of Prohibition, with the passing of the Liquor Control Act in 1927. Back then, you had to have a permit to purchase alcohol; for 30 years (until 1957) this license came in the form of a passport of sorts, where every purchase of alcohol you made within any given year was recorded. This was done so that the LCBO could monitor your alcohol use and consumption and cut it off if they deemed it “excessive”.

It wasn’t until 1969 that you could pick your own booze up off the shelf. Until then, an LCBO store was merely a clerk in a small room attached to a warehouse. You’d tell them what you’d want, and they’d go into the back and fetch it for you. We’ve come a long way since then. Today, LCBO stores are actively inviting, yet many believe that the LCBO is setting itself up for self-destruction. Is the century of the LCBO really coming to a close?

Well, not exactly, but in ten years time the retail chain as we now it may no longer exist. Judging by the words of Media Relations Coordinator Christine Bujold, the LCBO is embracing its new role as a wholesaler, well aware that selling directly to grocers is not going to threaten the government’s revenue stream:

The LCBO’s new business as a wholesaler to grocers gives the government a higher return than what it receives from the LCBO’s retail sale of beverage alcohol.  So, in fact, as a wholesaler to grocers, the LCBO is able to collect even greater revenues for the government to reinvest in public services for Ontarians.

It’s simple: the LCBO retail chain is a huge expense. The government can generate just as much revenue through the taxation and wholesaling of alcohol and, rather than diverting that income back into operating hundreds of stores across the province, can invest that money in infrastructure, education, healthcare, and other public welfare services. And in the process, an entirely new private retail sector (and countless new jobs) will be created.