Wednesday, December 16, 2009


The Globe and Mail reports that the Ontario government has hired two banks to provide advice, in about two months, on selling off the LCBO. Haven’t we been here before? A decade ago, rumours floated regularly that the Ontario government might sell off the LCBO. Now, with the recession and the government’s $25-billion deficit, selling off its most attractive assets is once again on government’s table.

Whether or not you believe the government should even be in the business of selling liquor, it’s there now, and the government has some angles to consider:
  1. How much can they sell the LCBO for?  The Globe and Mail’s report says, “For example, the LCBO's valuation could top $10-billion, based on the trading prices of private liquor stores in Alberta.” For a business that generated $1.4 billion in net profit for its owner (the government) last year, a $10-billion sales price would be the bargain of the century. The government cannot turn its back on that annuity without getting full-price for the business.
  2. What about a partnership?  The government doesn’t have to sell off 100 percent of the LCBO. It could enter into a public-private partnership with a private sector group, or a pension fund that’s looking for a lucrative investment with a steady return. This way, the government gets an immediate injection of capital to reduce the deficit, but still has an annuity from the LCBO’s operations.
  3. Is it in the best interests of the consumer?  Although every Ontario wine consumer probably has a list of “what I wish the LCBO would do better”, the transition from a government-run near-monopoly to a “free-market” would not be easy. Frankly, the last thing we want to see is a mass shift to stores with shelf after shelf of Fuzion and [yellow tail]. Let’s learn from Alberta’s experience. Plus, with its monopoly, the LCBO is the largest single buyer of wine in the world. Do Ontario consumers benefit from that buying power with lower prices…or does the LCBO’s 48 percent profit margin tell us just the government gets the benefit?
  4. Is it politically popular?  Actually, I should probably list this one first! Previous polls have shown that Ontario voters like the idea of the government controlling the sale of the demon rum. Right now, this idea of selling the LCBO is a trial balloon. You can bet the government will poll voters to find out if this idea is a winner.
What do you think?  Leave a comment by clicking on the link below.


Subscribing to this blog through RSS or email is easy!  Just click on the subscribe link to the left.

No comments:

Post a Comment