Liquor Control Board of Ontario

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Liquor Control Board of Ontario
Type Crown corporation
Industry Retail (Department & Discount)
Founded 1927
Headquarters Toronto, Ontario
Number of locations 853 stores (2013)[1]
Key people Edward J. Waitzer - Chair of the Board of Directors [2]
Products Liquor sales and distribution to both consumers and businesses
Revenue $4.7 billion CAD (2011-12)[1]
Employees 3,680 (full-time as of May, 2012) [1]
Website lcbo.ca vintages.com

The Liquor Control Board of Ontario (LCBO) is a non-share capital provincial Crown corporation in Ontario, Canada. It is accountable to the Ministry of Finance (Ontario). It was established in 1927 by Lieutenant Governor William Donald Ross, on the advice of his Premier, Howard Ferguson, to sell liquor, wine, and beer through a chain of retail stores. Such sales had been banned outright in 1916; thus, the creation of the LCBO marked an easing of the province's temperance regime (see Prohibition in Canada).

Under a franchise-like agreement with existing retailers, typically is smaller communities, there are 219 Agency stores. They could be considered a contradiction to the LCBO's social responsibility stand, as they demonstrate how alcohol can successfully be sold in smaller stores which are not operated by the LCBO itself.

The LCBO is one of the world's largest single purchasers of alcoholic beverage products.[3] Beer is also sold by the Brewers Retail Inc., which operates using the name The Beer Store, and is owned by Molson Coors, Anheuser–Busch InBev and Sapporo Brewery. Wine, beer and liquor can also be found in a number of stores operated by producers, which are licensed to sell their own brands. Some of these stores are located at wineries, breweries or distilleries. Others (which are owned and operated only by the largest wineries) are located within grocery stores. The LCBO has plans to also open its own outlets within some grocery stores.

Licensed bars and restaurants may resell alcoholic beverages, but they must be consumed on the establishment's premises. The bars and restaurants themselves must buy their products from the LCBO, The Beer Store, or directly from Ontario wineries and breweries.

Mandate and accountability[edit]

LCBO in Toronto

The mandate of the Board is to supervise the business affairs of the LCBO. Among its responsibilities are:

  • ensuring that the LCBO provides high-quality service to the public;
  • developing and approving the strategic plan and monitoring management's success in meeting its business plans;
  • approving annual financial plans;
  • ensuring that the organization remains financially sound;
  • assessing the management of business risks;
  • submitting an annual financial plan to the Minister of Finance;
  • ensuring the organization has communications programs to inform stakeholders of significant business developments;
  • ensuring that the LCBO performs its regulatory role in a fair and impartial manner.[4]

The LCBO is accountable to its stakeholders in a number of ways, including:

  • its Annual Report, required to be tabled in the Provincial Legislature and available for all Ontarians to review, either in print or online at [1].
  • annual audits of LCBO financial statements by the Office of the Provincial Auditor, as well as internal value-for-money audits of specific LCBO programs, including store planning.
  • public access to records under the Freedom of Information and Protection of Privacy Act.
  • Board Members appointed by the Lieutenant-Governor, through Orders-in-Council, on the recommendation of the Premier and the Minister of Finance.
  • various statutory reporting requirements under the Liquor Control Act to the Minister of Finance.
  • compliance with Management Board's Agency Accountability Directives.[4]

The LCBO and the Ontario Ministry of Finance, to which it reports, have no Code of Conduct. Conspicuously absent from the LCBO's published mandate and accountability guidelines are:

  • any mention of clarity in labelling and signage, particularly related to contentious issues such as "Cellared in Canada" wine. There is also no mention of clarity in labelling on the website of the Ontario Ministry of Consumer Services.
  • any mention of fair and responsible treatment of stakeholders such as wine agents, wineries and breweries. Many of them are small businesses which collectively contribute much to Ontario's economy.

Pricing[edit]

An LCBO store in Richmond Hill, Ontario
An LCBO store in Toronto

While it is impossible to generalize comparative pricing for the thousands of different alcoholic beverages available through LCBO, the stores have acquired a reputation for high prices. Online price comparisons with independent wine retailers such as Sherry-Lehman[5] in neighbouring New York can indicate price differences ranging from 10% (in LCBO's favour) to 30% (in the independent retailers' favour). However, wines and spirits sold in Canada is subject to the Excise Act, 2001,[6] which contributes greatly to the cost of beverage alcohol, although most liquor tax is provincial. Wine Access,[7] a Canadian food and wine magazine, has claimed that high-end luxury brands sell in Ontario for up to 60% more than in New York.[8] Excise duties on beer and malt liquor are taxed under the Excise Act.[9]

The LCBO pricing policies are designed to control alcohol consumption, generate revenue for the provincial and federal governments, and to support the domestic alcohol beverage industry, especially by providing incentive to purchase Ontario wine. Within this framework, the prices of LCBO products are subject to three policy constraints:

  • All prices are uniform throughout the province, despite inevitable differential costs incurred by transportation and distribution. This policy effectively subsidizes the transportation of goods into the rural parts of the province. However, store managers have the right to reduce prices of 'bin-end' items at their discretion.
  • The LCBO uses a system of "floor pricing", or minimum selling prices, using price control as part of its social responsibility mandate to discourage excessive alcohol consumption. This has been criticized as being a legally sanctioned price fixing mechanism to guarantee profits and discourage price competition, thus protecting established major producers.[citation needed]
  • Less-intoxicating beverages such as light wines and beer are in effect sold by the LCBO at reduced prices, again with the stated object of influencing consumption patterns as part of the Board's social responsibility mandate.[10]

Profits[edit]

The company is considered profitable for the provincial government, returning $1.7 billion to the Ontario government in its most recent fiscal year. Some critics[who?] claim it is not profitable enough, especially considering the large market share it retains.[citation needed]

The figures quoted above do not include the 13% sales tax the Ontario government levies on retail sales,[citation needed] or the 10% tax charged on alcohol sales in licenced establishments. By comparison the provincial portion of the Harmonized Sales Tax rate in Ontario is only 8%.

History[edit]

The LCBO was created in 1927 with the end of prohibition which had been introduced in the province in 1916. The Liquor Control Act (1927) authorized the LCBO to "control the sale, transportation and delivery" of alcoholic beverages in Ontario.[10] Brewers Retail was created to sell beer in a controlled manner while wines and spirits (as well as beer) were sold in LCBO outlets. Wineries and breweries were also allowed to sell from their own stores, which were limited in number.

In the 1924 Ontario prohibition plebiscite Ontarians voted narrowly, by a margin of 51.5% to 48.5%, to retain the Ontario Temperance Act as opposed to the government-controlled sales of beverage alcohol.[11] The Conservative government of Howard Ferguson contested the 1926 provincial election on a platform of easing the temperance law. On being re-elected, it introduced the Liquor Control Act as a compromise between the complete prohibition demanded by the temperance movement and the unregulated sale of alcohol. Premier Ferguson stated that the Liquor Control Act was "... to allow people to exercise a God-given freedom under reasonable restrictions". Ferguson was further quoted as saying the purpose of the LCBO was to, "promote temperance sobriety, personal liberty and, above all, to restore respect for the law." .[12] To achieve these goals LCBO was mandated by Ferguson’s Government to employ an oversight mechanism in order to know “exactly who is buying and how much, and what disposition is being made of it.” [13] From 1927-1962 the LCBO people who wanted to purchase liquor needed to possess a permit. They had to present these permits at the point of purchase, and the clerk at the liquor store would enter information about what, precisely, the individual purchased. [14]

Residents applied for and received individually-numbered (5 digits) liquor permits. A temporary permit was a single sheet form with 6 digit number with effective and expiry dates. This was issued until the yearly permit form was received. It was also provided to non-resident visitors.

Between 1927 and 1957 these permits came in the form of passport sized books that consisted of two separate sections, the first which included the permit holder’s personal information (place of residence, marital status, occupation/employer, notes change of address) and a second section which kept a record of the individual’s purchase history (date, quantity, value, store number and initials). [15] In 1957 Permit books were replaced with permit cards. These cards held the permit holder’s name and their permit number and also were needed in order to purchase liquor at the LCBO. [16] When an individual wanted to make a purchase at an LCBO store he or she had to fill in a purchase order form that included their name, address and permit number as well as the kind and volume of liquor that they wished to purchase. [17] The purchase order form would be handed to an LCBO employee along with the individual’s liquor permit and he would “examine [the] permit and see to what extent the purchaser has been buying liquor. If purchaser has exceeded a reasonable quantity per week, note permit number and address and refer to vendor.” [18] Under the Liquor Control Act the LCBO was to promote temperance through facilitating education and moderation.[19] This meant a store employee could deny a sale to a customer if his intended purchases may be considered too large for one person to reasonably consume.[20]

Purchase order forms were also used by the LCBO as a means of tracking irregularities in liquor purchases and sales and had to be stamped by the employee who had approved the sale and had filled the order. After the liquor permits books were phased out in 1957, purchase order forms were used as a means of establishing individual’s purchase histories in cases legal investigations and the LCBO’s own control processes. [21] Purchase order forms remained in use into the 1970s when the LCBO changed to a self serve format.

To control what it considered to be excessive purchases or other abuses of the permit privilege the LCBO employed the use of a list called the interdiction list. Although interdiction was initially a formalized legal process imposed by a judge upon those found in open court to be “drunkards,” the Board was charged with maintaining the list between 1927 and 1975 and employed its own standards in adding individuals to this list without any involvement of the justice system. [22] [23] The list was circulated to all liquor stores and drinking establishments, and was sent to local and provincial police forces to whom it was explained that it was a crime for listed individuals to possess or be sold any liquor. Between 1927 and 1975 the LCBO conducted its own investigations into over consumption, employing a staff of investigators that visited individual’s homes, work, banks, neighbors and even churches to determine if an individual should be restricted from purchasing liquor. [24] From 1927-1935 the LCBO own investigations resulted in the cancellation of over 33,138 liquor permits and the names of these individuals were added to the circulated interdiction list. [25] In 1929 the LCBO’s use of the interdiction list was expanded to include those on social assistance as well as others whom the Board felt should be prohibited from purchasing liquor permits entirely. Between 1929 and 1951, when the LCBO ceased publishing interdiction data in its annual reports, 125,218 individuals had been added to the interdiction list in this way. [26]

In 1934 the mandate of the LCBO was expanded to include the oversight of by-the-glass sale of alcohol in standard hotels and other drinking establishments. As part of the LCBO's regulations licensed establishments were required to adhere to a wide variety of regulations including a limitation on singing, the number of patrons allowed to sit together and most importantly the segregation of female from unmarried male drinkers (women were only allowed to drink in the presence of a “bona fide escort” in a segregated "Ladies and Escorts" room).[27] The task of overseeing the sale of alcohol in drinking establishments was later passed in 1944 to a short lived government licensing agency and later to the Liquor Licensing Board of Ontario in 1947.

The first self-serve store where customers did not have to rely on a clerk to retrieve alcohol was introduced in 1969.[10] In the 1970s the stores changed to become more inviting with decorative displays of alcohol, and in the 2000s many of the stores were renovated and enlarged to provide larger product selection. Most current stores have Vintages sections with rotating selections of vintage wines and premium spirits.

In 1990s the LCBO rebranded stores by removing the Ontario Coat of Arms and wording "Liquor Store" with the more stylized LCBO logo.

In 2013, executives announced plans to build 34 new retail outlets by 2016.[28]

Debate over privatization[edit]

There have been numerous discussions about whether the province should sell, or privatize, the LCBO. It has been argued[by whom?] that the main benefit would be the billions of dollars that would be the immediate windfall from any sale. However, this sale would only deliver a one-time profit, and the province would lose out on a source of steady yearly income. It has also been argued[by whom?] that the government could actually earn more money by dismantling the high-margin retail stores while keeping the lucrative wholesale business as Alberta's privatization of the liquor business suggests. The LCBO's 2006-07 net income was $1.3 billion Canadian dollars (excluding tax revenues generated by Brewers Retail and the independent wine stores), and a sale has been estimated to reap about six billion dollars.[29] Former Premier Ernie Eves stated that when he investigated this possibility, he found that a 100 per cent sale through an income trust would generate 16 billion dollars.[citation needed]

In an attempt to find more revenue for the government within the current system, former Ontario Finance Minister Greg Sorbara ordered a review of the province's liquor distribution methods, under the supervision of John Lacey, a former LCBO board member and grocery executive. Sorbara had stated that any option, other than the complete privatization of the LCBO, would be open for discussion. Subsequent to the release of the report, known as the Beverage Alcohol System Review (BASR),[30] Sorbara rejected the report's recommendations and argued for the continued public ownership of the LCBO. Rejection of the findings notwithstanding, the 2005 report [31] defined the potential benefits of privatization alternatives as greater consumer, convenience and choice via a competitive retail environment, a reduction in government-held investment risk while simultaneously increasing its annual revenues.

An earlier 1994 report from York University, created on behalf of the Ontario Liquor Boards Employees' Union, concluded there to be little governmental or public support for privatization.[10] There may be political motivations to keep alcohol sales public as well, as the LCBO is an excellent source of sinecures for the sitting government. Current LCBO Board Chair, Philip J. Olsson, a long-time Liberal supporter, was appointed by the Liberal government shortly after they took power. The previous Chair, Andy Brandt, was appointed by NDP Premier Bob Rae in 1991, even though Brandt had been a Conservative Member of Provincial Parliament for a number of years. In 2007, LCBO separated the Board Chair and President/CEO functions, making the Board Chair position part-time. Olsson receives a per-diem for his work as Board Chair,[32] which he donates to the United Way.

Recycling program[edit]

The LCBO has phased out its plastic shopping bags, as part of its efforts to become a greener organization. LCBO customers are encouraged to bring their own reusable bags, but can also request handle-less LCBO paper bags or buy reusable bags at the store. Cardboard carrying boxes have also been phased out. It is unclear what options, if any, will be available for spontaneous purchases by pedestrians who do not want to buy a bag each time they shop at the LCBO. The LCBO says the new limited options are expected to eliminate approximately 80 million plastic bags a year from landfill.

In September 2006, the Government of Ontario announced the Ontario Deposit Return Program, a recycling program for LCBO and winery store beverage alcohol containers. The program, which commenced operations on 5 February 2007, is administered and operated by Brewers Retail Inc. Under the program, consumers may return empty bottles, tetra paks, PET plastic and bag-in-box containers, to The Beer Store outlets. This program has been highly criticized by members of the public and employees of The Beer Store. Beer Stores were seeing upwards of 50,000 LCBO containers per week while the unprofitable nature of the program forced wage cuts and staff reductions across Ontario's primary beer distributor.

The deposit rates for the bottles are as follows:

  • Large bottles (greater than 630 ml) - $0.20 each
  • Small containers (equal to or less than 630 ml) - $0.10 each

Through its Natural Heritage Fund, LCBO and its suppliers have raised almost $2 million for projects to restore and rehabilitate Ontario wildlife habitat. This includes Bring Back the Salmon, which helps the return of Atlantic salmon to Lake Ontario after its local extinction over 100 years ago.

Controversies[edit]

Cellared in Canada[edit]

In late 2009, local and international criticism of the "Cellared in Canada" practice and the LCBO emerged. Under the "Cellared in Canada" label, which is now often known as "International - Canadian blends", Canadian wine producers are allowed to import pre-fermented grape must from grapes grown in other countries to produce wines under their own wine label. In Ontario, producers are allowed to designate these wines as being "cellared" in Canada if they contain at least 30% local Ontario grapes. As of April 1, 2014, this percentage will change to 25% Ontario wine, which may be from labrusca varieties. Historically, this percentage has fluctuated wildly, due to periodic shortages and surpluses of Ontario grapes, and lobbying by both the grape growers and the producers.

Grape growers in Ontario have protested against this practice as being a threat to their livelihood, asserting that thousands of tons of Canadian grapes are left rotting on the vine, while large producers use imported grapes to make wine labelled as "Canadian". Growers and producers have criticized this practice as tarnishing the reputation of Canadian wines and misleading consumers. They have also petitioned the government for several changes in the practices, such as making the origin of grapes clearer on the wine label, and increasing the visibility of 100% Canadian Vintners Quality Alliance (VQA) wines in province-run liquor stores. As of August 2009, the stores of the LCBO featured less than 2.5% Canadian wine produced by VQA members, with the vast majority of its wines produced under the "Cellared in Canada" designation with up to 70% foreign grapes.[33] In LCBO stores, such wine is currently under signage which says that they are "International Canadian Blends".

Age verification[edit]

In May 2011, a study[34] was conducted by Statopex Field Marketing on behalf of the Ontario Convenience Stores Association and found that the LCBO fared poorly when checking for age of minors. Minors between the age of 15 and 18 were used to determine how often LCBO store staff would check for ID before selling alcohol. Minors in the test were accompanied by an adult at a distance to verify any sales that occurred. The test determined that 1 in 4 minors were able to purchase beer at the LCBO without ID. This was poorer than the results shown for The Beer Store, where 1 in 5 minors could purchase beer, or chain convenience stores in Ontario where as few as 1 in 8 could purchase tobacco. The LCBO countered by stating its "retail staff challenged 3.6 million people who appeared underage or intoxicated in 2010 and refused to serve more than 190,000 customers."[35]

See also[edit]

References[edit]

  1. ^ a b c "LCBO Quick Facts". 2011. 
  2. ^ Benzie, Robert. "Kathleen Wynne names new chairs for OLG and LCBO". Retrieved 16 March 2014. 
  3. ^ FAQ - LCBO Media Centre, accessed January 24, 2008
  4. ^ a b http://www.lcbo.com/aboutlcbo/media_centre/corporate_structure.shtml
  5. ^ "Sherry-Lehman's Web Page". 
  6. ^ http://www.taxandtradelaw.com/alcoholtaxesandduties.html
  7. ^ "Wine Access Magazine". 
  8. ^ Thurlow, S (2006). "Controlling the Flow of Wine from Coast to Coast". Wine Access. 
  9. ^ http://laws-lois.justice.gc.ca/eng/acts/E-14/
  10. ^ a b c d Jazairi, Nuri T. (1994). "The Impact of Privatizing the Liquor Control Board of Ontario". 
  11. ^ "Referendums In Ontario: An Historical Summary". Legislative Library of Ontario. July 2007. 
  12. ^ Ferguson, Howard (1926). "Speech delivered at Kemptville". (Speech)Outlook. 
  13. ^ ""To the People of Ontario." Papers Concerning the Temperance Question in Ontario 1907–1929. Archives of Ontario: Howard Ferguson Fonds F 8, MU1029, File: Ferguson, George Howard Papers.". 1927. 
  14. ^ Thompson, Scott; Genosko, Gary (2009). Punched Drunk: Alcohol, Surveillance, and the LCBO 1927-75 - Liquor Permits. Fernwood Publishing (Halifax)p.45-55. 
  15. ^ Thompson, Scott; Genosko, Gary (2009). Punched Drunk: Alcohol, Surveillance, and the LCBO 1927-75 - Liquor Permit Books. Fernwood Publishing (Halifax)p.45-53. 
  16. ^ Thompson, Scott; Genosko, Gary (2009). Punched Drunk: Alcohol, Surveillance, and the LCBO 1927-75 - Liquor Permit Cards. Fernwood Publishing (Halifax)p.83-84. 
  17. ^ Thompson, Scott; Genosko, Gary (2009). Punched Drunk: Alcohol, Surveillance, and the LCBO 1927-75 - Purchase Order Forms. Fernwood Publishing (Halifax)p.56-59,83-84. 
  18. ^ "LCBO Instructions to Vendors Regarding the Issuance of Liquor Permits for 1927–1928. AO: Administrative Records of the General Manager of the Liquor Control Board of Ontario, RG 41-3, box: 8, file: 1-200.". 1927. 
  19. ^ Malleck, Dan (2005). "The Bureaucratization of Moral Regulation: The LCBO and (not-so) Standard Hotel Licensing in Niagara, 1927–1944". Histoire sociale / Social History (University of Ottawa). 
  20. ^ "LCBO Circular 497 page 1". 1928.  "LCBO Circular 497 page 2". 1928.  "LCBO Circular 497 page 3". 1928. 
  21. ^ Thompson, Scott; Genosko, Gary (2009). Punched Drunk: Alcohol, Surveillance, and the LCBO 1927-75 - Process. Fernwood Publishing (Halifax)p.84. 
  22. ^ "LCBO Circular 904". 1930. 
  23. ^ Thompson, Scott; Genosko, Gary (2009). Punched Drunk: Alcohol, Surveillance, and the LCBO 1927-75 - Interdiction. Fernwood Publishing (Halifax)p.91-105,117-123. 
  24. ^ Thompson, Scott; Genosko, Gary (2009). Punched Drunk: Alcohol, Surveillance, and the LCBO 1927-75 - The Interdiction Process. Fernwood Publishing (Halifax)p.87-115. 
  25. ^ Liquor Control Board of Ontario (1927–1935). Annual Reports of the Liquor Control Board of Ontario. 1927–1935. Toronto. 
  26. ^ Liquor Control Board of Ontario (1929–1951). Annual Reports of the Liquor Control Board of Ontario. 1929–1951. Toronto. 
  27. ^ Thompson, Scott; Genosko, Gary (2009). Punched Drunk: Alcohol, Surveillance, and the LCBO 1927-75 - Surveillance of Licenced Establishments. Fernwood Publishing (Halifax)p.146-153. 
  28. ^ Vincent, Donovan (18 September 2013). "Ontario liquor sales: LCBO preparing for big changes". Toronto Star. Retrieved 2013-09-19. 
  29. ^ "2007 Annual Report". LBCO. 
  30. ^ Lacey, John (chair) (2005). "Beverage Alcohol System Review". 
  31. ^ John Lacey, BASR Chair, Page 3 - Report Introduction Letter (http://www.fin.gov.on.ca/en/consultations/basr/basr_final_report_en.pdf)
  32. ^ "Public Appointments Secretariat". 
  33. ^ Ejbich, K (2009-08-28). "Protest Mounts Over "Cellared in Canada" Wines". Wine Spectator. 
  34. ^ http://www.newswire.ca/en/releases/archive/May2011/30/c8627.html
  35. ^ http://news.nationalpost.com/2011/05/30/ontario-minors-have-easier-access-to-booze-than-cigarettes-study-claims/

External links[edit]