GOLDBERG: Liquor board’s union exaggerating its impact on Ontario’s budget

Here’s the simple truth the Liquor Control Board of Ontario’s union bosses don’t want Ontarians to hear: The provincial budget will be just fine when people buy a case of beer or a bottle of vodka at the grocery store.

From day one of the LCBO union strike, union bosses have been fearmongering. They consistently exaggerate the impact of the LCBO’s retail monopoly on the province’s finances.

“We’re proud that LCBO revenues contribute $2.5 billion every year to the public services we rely on, like health care and education,” said Colleen MacLeod, chair of the LCBO bargaining team, when the strike began.

Here’s the truth: If Ontario lets people shop for all types of alcohol at grocery stores and private retailers, the vast majority of the province’s liquor revenue will keep rolling in. And any small decrease could easily be filled by trimming the size of Ontario’s corporate welfare budget.

The LCBO’s very own numbers show that allowing alcohol to be sold at non-LCBO stores would still preserve at least 80% of the LCBO’s current retail revenues. That’s because the LCBO would remain the wholesaler.

Right now, when the LCBO sells an average bottle of Ontario wine in one of its stores, that bottle sells for $14. That price is made up of the actual price of the wine, taxes, bottle deposits and the LCBO price markup.

If that $14 bottle of wine is sold at the LCBO, the LCBO’s markup – which is how it makes its profit – is $5.97.

When the bottle of wine is sold somewhere else, the Ontario government still makes money because it sells the alcohol to the other vendor. The government’s current formula sees the LCBO give that store a small discount so it can make a slim profit margin.

When the LCBO sells that $14 bottle of wine to a private vendor, it makes $4.75 in price markups. That means 80% of the markup profit the LCBO makes when the wine sells at an LCBO store is maintained even if that wine is sold somewhere else.

What would it look like if you could do all of your liquor shopping at the grocery store?

Here’s what the Ontario government’s profits would look like if the same wholesale discount formula was applied to a bottle of whisky, which right now can only be sold at the LCBO.

The average bottle of Canadian whisky at the LCBO sells for $30.75. The LCBO price markup on that bottle is worth $15.92. If the same wholesale discount was applied to the bottle of whisky, the LCBO would sell that whisky to a private store with a price markup of $13.22. That means the Ontario government would keep 83% of its present profits even if you buy your whisky at the grocery store.

So, no matter where you buy your booze, the Ontario budget will be fine.

In 2023, the LCBO made $5.87 billion selling alcohol in its retail stores. If that alcohol were sold at another store with the LCBO simply as the wholesaler, the Ontario government would still get the lion’s share of the money. Using a conservative 80% number, the Ontario government would still make $4.7 billion on the alcohol it now sells at its stores by selling it to private vendors.

But there’s another factor to think of: Cost savings.

The LCBO spent $564 million in operating costs to run its retail operations in 2023. If people buy all their alcohol at the grocery store, the LCBO would save over half a billion dollars in retail operational costs. No doubt administrative costs, currently pegged at $252 million, would decrease significantly as well.

Let’s say the LCBO saves $564 million on retail operating costs and $126 million, or half of its administrative costs, from slimming down operations. The Ontario government would still make more than $2 billion on alcohol sales.

And the Ford government could easily make up the difference by simply cutting its corporate welfare budget – currently $9.1 billion – by just 7%.