Return of Ford Nation

[PrivatePilot]

One only need look outside our borders or to the US to see that governments can still make a tidy profit off of alcohol without needing to be involved in it directly.

Right now our beer and alcohol prices are amongst the highest in the world under the current system, so forgive me if I don’t defend it. I don’t drink a whole lot, but it does stick in my craw when a 12 pack of beer here costs me as much as multiple 24’s elsewhere.

Looking in my liquor cabinet and what little beer I have on hand right now it all came from either the USA, Cuba, the Caribbean (all brought back from various trips over the years) or (in the case of the beer), Quebec.

In the summer when I end up drinking more beer poolside I begrudgingly buy it from “the beer store” which is a whole other ball of wax as well that the province could use to fix. Again, the stupid nanny state system where only a token number of other retailers are now blessed to sell it as well is just stupid.

 

[GreyGhost]

One only need look outside our borders or to the US to see that governments can still make a tidy profit off of alcohol without needing to be involved in it directly.

Right now our beer and alcohol prices are amongst the highest in the world under the current system, so forgive me if I don’t defend it. I don’t drink a whole lot, but it does stick in my craw when a 12 pack of beer here costs me as much as multiple 24’s elsewhere.

Looking in my liquor cabinet and what little beer I have on hand right now it all came from either the USA, Cuba, the Caribbean (all brought back from various trips over the years) or (in the case of the beer), Quebec.

In the summer when I end up drinking more beer poolside I begrudgingly buy it from “the beer store” which is a whole other ball of wax as well that the province could use to fix. Again, the stupid nanny state system where only a token number of other retailers are now blessed to sell it as well is just stupid.

PP you need to be careful to separate the obscenely high booze tax from the LCBO profit. I haven't seen an analysis of how much LCBO makes on each bottle/can. I think most of the price difference we all complain about is tax. According to Global news, wine tax is ~70%

 

[PrivatePilot]

PP you need to be careful to separate the obscenely high booze tax from the LCBO profit. I haven't seen an analysis of how much LCBO makes on each bottle/can. I think most of the price difference we all complain about is tax. According to Global news, wine tax is ~70%

Fair argument, but those several billions of dollars the LCBO made in profit is also a massive contributor to the inflated prices - the money comes from somewhere - that’s the pockets of Ontario’s consumers.

 

[GreyGhost]

Fair argument, but those several billions of dollars the LCBO made in profit is also a massive contributor to the inflated prices - the money comes from somewhere - that’s the pockets of Ontario’s consumers.

Agreed. I think that private enterprise would produce less profit (and therefore cheaper prices). The interesting parts are things caboose brought up like 5 managers per store making decent coin (and in turn presumably spending it). I don't know what the net effect would be on society.

The steep taxes are justified by arguing that cheap booze causes problems (obviously up for discussion). Fine, I'll buy the argument that a minimum price makes sense, but that argument makes no sense on a bottle of wine that was $30 before tax. An inverted tax scheme (as the price climbs the percentage drops) would even things out. The alternate argument is that nobody needs booze so this is purely a luxury tax and it can go to the moon without affecting anyones ability to eat or have housing. Any tax/profit the government can suck out of this mitigates alternate tax collection (eg income, property etc).

 

[caboose56]

Fair argument, but those several billions of dollars the LCBO made in profit is also a massive contributor to the inflated prices - the money comes from somewhere - that’s the pockets of Ontario’s consumers.

I don't think it's as simple as you and others make it out to be.

Given the size of the LCBO, number of locations, number of employees, total sales, etc... What would a realistic profit $ be? Can anyone answer that?

Without knowing their margins and profit vs sales revenue, and without knowing how the lesser buying power of retailers who aren't going to have nearly the volume of the LCBO will affect the cost, it's really difficult to predict if a free market will result in lower prices.

 

[caboose56]

Agreed. I think that private enterprise would produce less profit (and therefore cheaper prices). The interesting parts are things caboose brought up like 5 managers per store making decent coin (and in turn presumably spending it). I don't know what the net effect would be on society.

The steep taxes are justified by arguing that cheap booze causes problems (obviously up for discussion). Fine, I'll buy the argument that a minimum price makes sense, but that argument makes no sense on a bottle of wine that was $30 before tax. An inverted tax scheme (as the price climbs the percentage drops) would even things out. The alternate argument is that nobody needs booze so this is purely a luxury tax and it can go to the moon without affecting anyones ability to eat or have housing. Any tax/profit the government can suck out of this mitigates alternate tax collection (eg income, property etc).

I'm reminded of the OLG terminating it's agreement with the horse racing organizations several years back. On paper it looks great, they get to keep all the slot machine revenue instead of just half of it.

What about the harness racing industry that all but collapsed?? What about all the income tax collected from people selling equipment, supplies, trailers, trucks, veterinary services, farriers, etc, etc? What about all the sales tax collected from their sales and services? What about the road and sales tax collected from fuel consumed by that industry?

There's a lot of "big picture" questions that no one can confidently answer.

 

[caboose56]

Here's some reading on the markup and revenue distribution numbers for the LCBO

https://hellolcbo.com/ci/fattach/ge...bg==/filename/Pricing+Examples+2018_COSD_.pdf

Markup/profit on a $12 bottle of wine is $3.74
Markup/profit on a $2.50 can of cider is $0.68
Markup/profit on a $26 bottle of whiskey is $13.16 < that's a healthy margin

Looking at the other examples I just don't see the obvious cost savings that will come from privatization that others see. You can be certain that the gov't will still collect their cut of the tax (HST and the alcohol taxes) so I don't see how the consumers will see lower prices. In fact, in some cases, I can see prices going up.

 

[RockerGuy]

I don't want the government to control my booze. Too much taxes on it & no convenience. I want to be able to pick up my booze at the supermarket just like the rest of the world!

 

[Mad Mike]

I don't think you can say with certainty that their revenue would go up, but I guess I also can't say with certainty that it would go down.

The LCBO does have a significant operating budget but a quick google shows me that their dividend to the provincial gov't last year was just over $2 billion.

Their dividend is set by virtue of a monopoly. If the distribution setup changes, the monopoly money is converted to real money to keep the revenues the same. Instead of having a price model that sets 50% margins to deliver $1 to the gov's, the tax model changes to deliver that $1 - revenue neutral.

Lets also factor in the economic stimulation they provide through good paying jobs for employees who pay income tax. So what's the net tax revenue between that dividend, income tax paid by direct employees, plus the tax collected on downstream spending by those well paid employees?

Selling off the LCBO and allowing companies like Walmart, Loblaws, etc to take up the distribution would mean that employees supporting alcohol sales would be paid at or near minimum wage. The LCBO dividend would vanish, the profits from alcohol sales would become corporate profits instead. The downstream spending and economic benefit from well paid employees would decrease.

Not necessarily. Non management LCBO workers make about the same as they would in the private sector -- at or near minimum wage.

You'd have to make a pretty strong business case to satisfy my concerns that privatization of alcohol in Ontario would result in a greater economic stimulus than the $2 Billion dividend currently being paid.

Hmmm... using your argument WalMart and Loblaws should also be taken over by the gov't. That sounds silly, if alcohol was currently distributed by the private sector, forming an LCBO would sound equally silly.

You only get a good economic benefit from gov't spending when things are done at or above the efficiency of the the other option, in this case the private sector. It's hard to imagine a botique retailer (LCBO) selling a generic item (booze) could ever reach the efficiency of a Loblaws or Walmart.

The gov't should be looking at ways to stimulate private sector job growth rather than socializing it.

 

[Mad Mike]

PP you need to be careful to separate the obscenely high booze tax from the LCBO profit. I haven't seen an analysis of how much LCBO makes on each bottle/can. I think most of the price difference we all complain about is tax. According to Global news, wine tax is ~70%

The LCBO has a monopoly and is state run. Their gross margin is 50% (3 to 4 times the rate of a mass retailer). In a monopoly, this is effectively a tax as gov't sets the prices to assure a fixed profit for their business.

 

[caboose56]

My argument is that I don't believe privatizing the LCBO will result in lower prices for the consumer as many seem to think is perfectly obvious. Using that argument to suggest I'd think gov't control of Walmart or Loblaws would be an improvement in any way is also silly.

I also think it's horribly inaccurate to refer to the LCBO as a boutique retailer.... That makes zero sense to me... I'm not in favour of the gov't taking more control of any sector but the LCBO is an established model with an established supply chain and massive buying power.

The only certain benefit from privatizing that I agree with is the convenience of having more locations to buy from.

Will prices go down? Maybe... If anyone thinks privatizing is going to result in prices similar to the US, they're an idiot.

 

[Mad Mike]

Here's some reading on the markup and revenue distribution numbers for the LCBO

https://hellolcbo.com/ci/fattach/ge...bg==/filename/Pricing+Examples+2018_COSD_.pdf

Markup/profit on a $12 bottle of wine is $3.74
Markup/profit on a $2.50 can of cider is $0.68
Markup/profit on a $26 bottle of whiskey is $13.16 < that's a healthy margin

Looking at the other examples I just don't see the obvious cost savings that will come from privatization that others see. You can be certain that the gov't will still collect their cut of the tax (HST and the alcohol taxes) so I don't see how the consumers will see lower prices. In fact, in some cases, I can see prices going up.

Those numbers are a bit misleading, LCBO mixes various taxes into cost to make the markup look low. Here are the exact calculations:

750 ML domestic Whisky, Rum, Gin, Vodka, Liqueurs and Brandy

Purchase price	$5.62
LCBO Markup	$13.16
Federal Excise Tax	$3.63
LCBO Levies	$0.37
HST	$2.99
Consumer Price	$25.77
Margin	$13.16
Gross Margin	70%
Revenue Distribution
Distiller/Vintner/Brewer	22%
Government of Ontario	59%
Government of Canada	18%

 

[caboose56]

Those numbers are a bit misleading, LCBO mixes various taxes into cost to make the markup look low. Here are the exact calculations:

750 ML domestic Whisky, Rum, Gin, Vodka, Liqueurs and Brandy

Purchase price	$5.62
LCBO Markup	$13.16
Federal Excise Tax	$3.63
LCBO Levies	$0.37
HST	$2.99
Consumer Price	$25.77
Margin	$13.16
Gross Margin	70%
Revenue Distribution
Distiller/Vintner/Brewer	22%
Government of Ontario	59%
Government of Canada	18%

Do you think those taxes are just going to go away with privatizing?

 

[Mad Mike]

My argument is that I don't believe privatizing the LCBO will result in lower prices for the consumer as many seem to think is perfectly obvious. Using that argument to suggest I'd think gov't control of Walmart or Loblaws would be an improvement in any way is also silly.

I also think it's horribly inaccurate to refer to the LCBO as a boutique retailer.... That makes zero sense to me... I'm not in favour of the gov't taking more control of any sector but the LCBO is an established model with an established supply chain and massive buying power.

The only certain benefit from privatizing that I agree with is the convenience of having more locations to buy from.

Will prices go down? Maybe... If anyone thinks privatizing is going to result in prices similar to the US, they're an idiot.

Prices could go down however like Loblaws beer sales, the gov't maintains their established share so there is no opportunity for Loblaws to reduce prices by much.

At the end of the day you're really arguing about socialism (gov't running businesses). There is no business argument that would make the LCBO the best option, it's purely a social argument.

 

[caboose56]

Prices could go down however like Loblaws beer sales, the gov't maintains their established share so there is no opportunity for Loblaws to reduce prices by much.

At the end of the day you're really arguing about socialism (gov't running businesses). There is no business argument that would make the LCBO the best option, it's purely a social argument.

I want someone to make a solid business case, presenting it using math and actual data, that privatizing it will be a net benefit (job growth, net economic stimulus, etc). Simply stating that the government isn't very good at running a business isn't a solid business case.

Convince me that it is better using facts.

 

[JTR]

I don't mind it when gov't exits businesses that can be done more efficiently by private sector firms. I do mind when they meddle and make it impossible to deliver a service any better than if it were gov't workers doing the work.

For example, Service Ontario could offer self serve kiosks and more online services - but no, Kathleen and Dalton say people, not technology.

I'm not saying anything about that. I'm talking about the control of things that private entities have no business controlling, such as dealer licensing, driver and vehicle licensing, hey did you realize that the most powerful agency in the country is a private entity? Children's Aid Society has more authority than police, and they aren't even an arm of the government. They can enter your home, seize your children, and they don't need a warrant, and not only are police powerless to protect you against them, the police are required to aid them. They also have the ability to go to a school, pull a child out of class and interrogate them without the permission or even knowledge of their parents. This is what I'm talking about, controlling the populace shouldn't be profit driven, and it's not free market when it's monopolized.

Now, where the government has no business being, is in a liquor store or head shop. Revenue still generates from licensing and taxing the sale of controlled substances like alcohol and marijuana. BUT, huge caveat, it cannot be monopolized. The government has to stop building and propping up monopolies, but of course as long as we keep allowing it, it willl continue unabated.

 

[JTR]

I want someone to make a solid business case, presenting it using math and actual data, that privatizing it will be a net benefit (job growth, net economic stimulus, etc). Simply stating that the government isn't very good at running a business isn't a solid business case.

Convince me that it is better using facts.

Fact, alcoholic beverages are cheaper literally everywhere else outside of Ontario's borders. Is that good enough or do you want us to track down price lists for you. I can tell you from experience, because I have left the province, that a 48 pack of Budweiser was purchased by me for under $55 at a Couche Tard
(Mac's) inside Desjardins mall in Montreal. I have also purchased a 40oz of Jack Daniel's whiskey in rural Quebec at a general store for roughly $25. I can look right now using the amazing Google machine, and find out that Costco has insanely low prices, and even their own brands of beverages just across the border, where you can pick up a 48 pack of Kirkland light beer for, get this, $21.99USD.

The government over-reach on alcohol is insane. The monopolies, the over-taxation, etc. Hey guess what, beer has been privatized for decades, and 90% of the population had no idea, they think it just went private a couple years ago. And that little scam was so lucrative for Brewers Retail, that it even restricted the government from competing with them, let alone anyone else.

Those are just the ways that free market helps the consumer, that is if the market is truly free. If you want an example of how the government survives without operating retail stores, well you can look that up yourself, we aren't anyone's personal google butlers. But some places you can look are USA, other provinces(Montreal still has SAQ though, which is similar to LCBO, along with similar pricing).

 

[caboose56]

Fact, alcoholic beverages are cheaper literally everywhere else outside of Ontario's borders. Is that good enough or do you want us to track down price lists for you. I can tell you from experience, because I have left the province, that a 48 pack of Budweiser was purchased by me for under $55 at a Couche Tard
(Mac's) inside Desjardins mall in Montreal. I have also purchased a 40oz of Jack Daniel's whiskey in rural Quebec at a general store for roughly $25. I can look right now using the amazing Google machine, and find out that Costco has insanely low prices, and even their own brands of beverages just across the border, where you can pick up a 48 pack of Kirkland light beer for, get this, $21.99USD.

The government over-reach on alcohol is insane. The monopolies, the over-taxation, etc. Hey guess what, beer has been privatized for decades, and 90% of the population had no idea, they think it just went private a couple years ago. And that little scam was so lucrative for Brewers Retail, that it even restricted the government from competing with them, let alone anyone else.

Those are just the ways that free market helps the consumer, that is if the market is truly free. If you want an example of how the government survives without operating retail stores, well you can look that up yourself, we aren't anyone's personal google butlers. But some places you can look are USA, other provinces(Montreal still has SAQ though, which is similar to LCBO, along with similar pricing).

Privatizing the LCBO will not make the ridiculous taxes we pay on alcohol disappear. Fact.

 

[JTR]

Privatizing the LCBO will not make the ridiculous taxes we pay on alcohol disappear. Fact.

Don't pretend like you read what you quote, you're still spouting about the whopping $6.99 in taxes and levies from Mike's post, while blatantly ignoring the $13 monopoly markup that they are enjoying from having full control.

 

[caboose56]

Don't pretend like you read what you quote, you're still spouting about the whopping $6.99 in taxes and levies from Mike's post, while blatantly ignoring the $13 monopoly markup that they are enjoying from having full control.

So how much would that same bottle cost at a Walmart and how much tax would be applied? Can you give us an answer?