Privatizing the liquor trade

Privatizing the liquor trade: should alcohol sales be controlled by government monopolies, private businesses or some mix thereof?

Canada has two jurisdictions that have privatized liquor sales (not including the private retailers, such as wine specialty shops and "agency" liquor stores in rural areas, that exist in most provinces).

Alberta privatized all of its liquor stores in 1993-94.

B.C. began closing government stores in 2002 and allowing private retail outlets. It currently has a dual private-public system, with more than 600 private stores and over 200 government-run stores.

Quebec has a government liquor monopoly but allows wine and beer to also be sold in grocery and convenience stores.

Ontario considered privatization but rejected the idea in 2005 as not in the interest of consumers despite the proposals of a government-appointed panel that recommend deregulation.

Studies of the Alberta and B.C. systems by the Centre for Addiction and Mental Health (CAMH) and the Consumers' Association of Canada have found that privatization has generally led to a greater number of liquor stores (in Alberta, they increased form 300 to 1,200), more products and longer opening hours; however, consumers have had to pay for that convenience in the form of higher prices.

B.C. consumers pay "tens of millions more dollars per year" when they shop at private liquor stores, the Consumers' Association found. A 2006 survey  by the association that compared 43 products at private and government stores found prices were between 10 per cent and 20 per cent (and for some products up to 35 per cent) higher at private stores.

Privatization also generally means a pay cut for retail employees. A Fraser Institute study found that in Alberta, wages for non-management liquor store employees were about half of what the most senior unionized employee would earn at a government store.

Overall product selection increases with privatization (in Alberta, the number of available products rose from about 3,000 to 15,000), but what is actually available on store shelves varies widely by retailer and depends primarily on the size of the store. The B.C. study found that for the individual consumer, the range of products can actually be more limited in a privatized system since the average size of private liquor stores is smaller than that of government liquor stores.

In Alberta, the privatized system has also been criticized for retaining a de facto government monopoly when it comes to distribution, thereby handicapping the free market. Distribution is controlled by two government-contracted companies — one for wine, spirits and imported beer; another for domestic beer — which, some suppliers allege, has at time stalled the supply chain resulting in sporadic flow of goods.

In terms of the social implications of privatization, opinions vary on whether the increased availability of alcohol that comes with deregulation leads to increased consumption and more alcohol-related crimes.

A CAMH policy paper noted that in Alberta, alcohol consumption went up in the years following privatization, as did some criminal offences such as liquor store break-ins, but acknowledged that "a number of factors might have contributed to the rise."  

The CAMH paper as well as another study of Alberta's privatization, titled Sobering Result: The Alberta Retailing Industry Ten Years After Privatization, argue that in a privatized system, profit comes at the expense of public welfare.

Motivated by their bottom line, private retailers are more likely to push sales and less inclined to monitor some of the health and safety issues surrounding the sale and consumption of alcohol that make up part of the mandate of a publically owned liquor distribution system, the papers conclude.

For example, low-paid store employees are not as well trained as unionized staff at government stores and thus less likely to prevent sales to minors or intoxicated customers, and profit-driven retailers have little incentive to engage in socially responsible marketing campaigns about the dangers of drinking and driving, fetal alcohol syndrome or other public health issues.

"The objective of private firms is to sell product. The public's objective is to minimize the abuse of alcohol through the limit and control of the sale of liquor," writes Calgary economist Greg Flanagan, the author of Sobering Result.

"The policy changes implemented in Alberta in 1993/94 have considerably diminished the government’s ability to implement public control of liquor distribution. Additionally, the government has downloaded the consequent problems to municipal jurisdictions [and the criminal justice system] … [and] the public welfare has been reduced with the loss of tax revenue."

YOUR VIEW: Tell us about your experience with alcohol privatization. Should alcohol sales be controlled by government monopolies, private businesses or some mix thereof?