The big but oft-ignored benefit of privatizing liquor—job creation: James Cowan

Drink more beer, create jobs

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(Brent Lewin/Bloomberg)

There’s not much industry left in the Toronto industrial park that’s home to the Amsterdam Brewery. Where once there was a Colgate-Palmolive plant and the Canada Wire and Cable company, there’s now a Home Depot, two high-end grocery stores and a cupcake shop. Those worried about Canada’s declining manufacturing sector would find no hope in the Leaside Business Park—except for the brewery, which produces more than 300,000 cases each year with double-digit annual growth.

Any other Canadian manufacturer who managed to expand in the midst of five years of economic tumult would be nurtured by politicians like a rare orchid. But brewers, vintners and distillers in this country are more often stifled than encouraged. As provinces make tokenistic tweaks to liquor distribution, the debate focuses on public health and tax revenues. Rarely is it said that better liquor laws could create jobs.

With most Canadians still stuck buying from government-owned liquor sellers, perhaps we should be thankful for the meagre reforms now underway. Saskatchewan opened its first private liquor store in late March. Manitoba this spring allowed hair salons to serve wine and beer. Ontario announced a pilot project of 10 provincially run liquor “kiosks” in supermarkets.

But you can’t satiate a thirst with a drip here, a drop there. What’s needed in these provinces is the systemic overhauls undertaken by Alberta in 1993, which privatized all booze retailers, and British Columbia in 2001, which created private competitors to the government-owned stores. In both cases, there were clear economic benefits. There are now 1,333 retail liquor stores in Alberta, compared with 208 before privatization. Along with this increased number of outlets came a nearly fourfold increase in employees within the sector.

Increasing competition can nurture an entire industry. Back in 2001, B.C. had 66 wineries and zero craft brewers, compared to 214 and 30 today. Through private competition, the province effectively created more shelf space. There are roughly 1,000 wines currently produced in B.C., but government-run stores stock only 260 of them, according to a speech given last year by Ian Baillie, executive director of the B.C. Alliance of Beverage Licensees. The remaining 740 were sold through private stores. Ontario producers lack this second option, meaning 2,800 Ontario wines—or 93%—never receive retail distribution beyond the vineyard.

More competition can create opportunity for producers without depriving the government of any revenue. The B.C. government maintained control of the importation and distribution of alcohol in the province, with private distributors buying from it. Revenue from the liquor distribution branch increased to $911 million in 2012, up from $890 million in 2011. Of that, 56% came from private stores. Increasing competition also increased the tax base.

So governments aren’t helping anyone when they shackle an innovative growth industry to an antiquated supply chain. Back when there were two big brewers, a monolithic retailer was more viable. But as the market has diversified (craft beer sales now represent 19% of B.C.’s beer market), niches and specialities develop; yet there’s no allowance in most Canadian markets for a store that offers, say, only lambic beers or just fine whiskeys. It’s like requiring all computer manufacturers to sell their products at a Radio Shack—from 1982.

Nowhere is this refusal to modernize policy to match the market more evident than in Ontario’s Beer Stores. In 1927, the province handed control of its stores to a consortium of local brewers who produced most of the product sold. But those domestic breweries were bought over the decades by foreign conglomerates. In what other industry would Canadian politicians tolerate—let alone champion—handing control to a foreign cartel? Unless politicians across Canada embrace competition in the booze market, homegrown manufacturers will succeed in spite of them—not because of them.

James Cowan is deputy editor of Canadian Business

10 comments on “The big but oft-ignored benefit of privatizing liquor—job creation: James Cowan

  1. What a crock of lying shit…there are government liquor store jobs now that are able to pay decently. Privatizing it would cost the private owner more in dollars and hence a lower paying job, all because of government intervention. They could pay the people decently if the tax the government charges wasn’t so egregious like everything they do, the small business person could make a decent living.

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    • Alberta had government liquor stores, employees had good paying jobs with benefits, jobs that could support a family and gave that person job security (or so they thought until the Conservative government under Ralph Klein privatized the liquor stores and many other government services). Today, Alberta is filled with private liquor stores, almost all providing people with low paying jobs without benefits, jobs that can no longer support a family! What has this accomplished? And, many of the less desirable location liquor stores are family owned, badly kept, and provide just enough income to eek out a living for that family. The good location liquor stores have been bought by companies who own multiple locations, make a ton of money and pay their employees Walmart and McDonalds wages. Good paying jobs have been replaced with low paying jobs! Does society really need more low paying jobs?

      Further to privatization, in Alberta, we now have our Registries privatized, a lot of our medical services run by government sanctioned conglomerates and so on – again, what has this accomplished? A lot of low paying jobs and a lower quality of service. So James Cowan, why don’t you come to Alberta and speak with those who have lost their good jobs and to those who now work for the big companies who own multiple locations and see how happy they are. Privatization did not create opportunity, it created poverty!

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  2. The article is very good to point out the sudden increase in liquor sales immediatly after the privatization takes place. This is rather obvious as there is an increase in shelf area to be filled. Are Albertains really drinking 10% more booze per capita because they do not have to go to a government liquor distributor?
    Specialization is the most efficient distribution method for the distributers. Delivering 1000. Cases to 10 stores beats delivering 10 cases to 1000 stores. Let the LCBO continue to do what it does best in distribution large market goods. If the corner stores want to help out the smaller local vinters and brewers, then let them distribute local goods.
    The tax revenue generated by the LCBO is to great to let it be erroded by “competition”.

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  3. Have you looked at the potential impact of replacing 7,500 well paying union jobs at The Beer Store with an equal or lesser number of part time and minimum wage jobs that are the hallmark of gas stations and convenience stores?

    I for one think that there are many improvements we could make to the current retail system (increasing access for craft/small breweries, listing fees based on brewery size, etc) that would expand access, create brewery jobs and protect the existing jobs that actually pay a living wage.

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  4. I’m a free-enterpriser, but one must be careful in this category. When it comes to allowing supermarkets to participate in liquor privatization I raise a red flag. This issue is this: The 3 largest chains in Canada carry a big stick because they account for 70% grocery sales. Clout in grocery retailing means brands from big companies find their way to the shelf. The small guys suffer because they can’t compete with the giants for listing allowances, promotions, and other inside monies. If beer and wine make it onto BC supermarket shelves, don’t expect to see many wines or beers from the 214 wineries and 30 craft brewers in the province over the long haul.

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  5. I’ve been involved with the BC wine industry since the time when there were only five wineries in the province. After mergers and acquisitions, these large wineries have declined to three, a couple of hundred small wineries are now spread across almost any area of farmland that can support a vineyard. The large wineries still have most of the market share and a minority of small wineries are profitable. Here in the Okanagan, the wineries, a few craft breweries and (recently) artisan distillers have become the focus of a vibrant tourism industry. The catch is that our season is short and the service jobs are low paying. I see no easy solution. Most small wineries avoid listing with the Liquor Board because of high markups and because few products are produced in sufficient volume to be listed in a large number of stores. Wineries can pick and choose listings among private liquor stores, VQA stores, pubs, and restaurants, but even there the competition with listings from the large wineries is intense. The large wineries in turn must compete with low cost imports for market share.

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  6. This is simply terrible analysis, yes more privatization creates more jobs but those jobs created are almost standard retail wage level, ie: close to minimum, as opposed to jobs in the government sector that paying living wages, provide benefits etc. The Alberta has exposed the failure of privatization, the consumer is generally faced with less selection, little or no service and marginal price reductions .

    As for why BC wines are not on the shelves in government stores it’s a matter of profits for the winery, who make more by selling direct, and supply limitations, not a draconian liquor board decision to deny shelf space to small producers.

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    • I certainly agree about the difference in wages between private stores and government owned stores. I would imagine that a private store clerk would not earn half what a government employee earns.

      As for BC wine in BCLDB stores it is great to see that BC wine is prominently displayed first and foremost as you enter a store. International wines are always along a back shelf. British Columbians are quite passionate about local wine. 40% of wine consumed in BC was grown and fermented in BC.

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  7. As a person living in South Australia but born and raised in British Columbia I see the value of government monopolized liquor sales. Keeping liquor in the hands of government keeps the regulations strong, sets a minimum price per bottle of alcohol (no 2 buck chuck in British Columbia), protects problem drinkers, and thanks to a strong union keeps the wages high. Wages in our private shops are no where near. The BC Government is the second largest alcohol purchaser in the world (second only to Ontario). As a British Columbian consumer you have the best selection of international wines in the world. Check out the international selection in Australia – it is absolutely dismal. As much as I like to see certain things privatized I feel that alcohol is something that governments should keep very close eye on.

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  8. “Back in 2001, B.C. had 66 wineries and zero craft brewers, compared to 214 and 30 today.” Er, what? Back in 2001, there were quite a few craft brewers in B.C., certainly more than “zero.” Granville Island Brewing has been around since 1984. Spinnakers in Victoria also opened in 1984. Victoria’s Great Canadian Beer Festival has been going since well before 2001, and has had no problem finding local craft brewers, as well as others from across the country. Others around before 2001 include Crannog Ales, Tree Brewing, and Vancouver Island Brewery. Who allowed this “zero craft brewers” fiction to slip through?

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