TORONTO – A new economic
study suggests that expanding the current retailing system beyond the Liquor
Control Board of Ontario (LCBO) and Beer Store would not only preserve the $1.6
billion profit that the LCBO returns to the government, but would quite
possibly increase it. The study was conducted by Anindya Sen, Associate
Professor of Economics at the University of Waterloo.
“This study is based on
economic models and independent analysis of 18 years of statistical data on
revenues provincial governments receive from alcohol sales,” said Sen.
Two key findings emerge
from the study:
- Contrary to common belief, expanding alcohol
retailing beyond the LCBO and Beer Store would preserve the LCBO's profit
and also provide the framework for even greater profits for the
government.
- The vast majority of revenue Ontario receives
from alcohol sales comes from LCBO's wholesale mark-up of alcohol.
“In releasing this study,
our goal was to ensure that when the time comes for a real discussion about
modernizing Ontario's alcohol retailing system, people and politicians have all
the facts,” said Dave Bryans, CEO of the Ontario Convenience Stores
Association. “Professor Sen's study shows that Ontario can expand alcohol
retailing and still earn the revenue it now gets from the LCBO - and more. And
at the same time, protect the value of the LCBO as an asset for the province.”
The study also illustrates
the LCBO's value as an asset, with the most profitable part identified as the
wholesaling arm, which in turn possesses the most asset value, as compared to
LCBO's high-cost retailing arm. LCBO's wholesaling division is the entity that
purchases alcohol from manufacturers and is one of the largest single alcohol
wholesalers in the world. This is separate from the LCBO's network of retail
stores where alcohol is sold.
“I approached the Ontario
Convenience Stores Association because, while there has been considerable
debate on the likely impacts of expansion of private retailing on government
revenues, there is a dearth of comprehensive and academic research in this
area,” said Sen. “The objective of this report is to offer some clarity to this
question through rigorous methods employed by economists.”