Archive | December, 2012

10 Reasons Why The Liquor Control Board of Ontario (LCBO) Should Be Demolished Immediately

22 Dec

The Liquor Control Board of Ontario (LCBO) is the single largest purchaser of alcohol in the World. This is an easy feat when you have a government monopoly annihilating any competition and a population of 13,000,000 to supply. However, like any monopoly, this comes with a host of inefficiencies which end up costing you, the consumer and taxpayer. Here are the top 10 reasons why the LCBO should be demolished immediately:

     1) Time – Do you enjoy having to drive to a completely separate location or locations to purchase your alcohol? Having to purchase wine, spirits and beer could mean two separate trips which are usually followed by a third to purchase accompanying mixers or snacks. This contrasts the US where you can make all alcohol related purchases in your local grocery store.

     2) Environmental Waste – The carbon footprint of Ontario’s 124 million annual LCBO transactions, where consumers are forced to drive to two separate locations, is massive. The LCBO’s very own Carbon Calculator will show you exactly what your carbon footprint is… Here is mine (Notice the largest impact?):

LCBO Carbon Footprint Calculation

     3) Inconvenience – Refer back to point number 1.

     4) Hyperinflated Salaries – In light of the recent report on Federal Bureaucrats costing us taxpayers almost $44 billion a year, it is no surprise that the average full-time LCBO salary is over$100,000 as well. Taking into account the wages and salaries expense of $424,177,000 per year, this money would be instantly saved by being absorbed into existing free-market infrastructure.

     5) Oversight (Or Lack Thereof) – When government institutions watch over other government institutions, it can be argued that this may lead to a lack of proper rules enforcement. When the government itself benefits from any form of collusion, this results in a catch 22 scenario. For example, although brought to the public’s attention in 2011 that the LCBO was found to be overcharging us taxpayers by colluding with suppliers to artificially markup prices, where was the punishment? What corrective actions have been taken since?

     6) Variety – Is there a special type of alcohol you like, but cannot get? You can thank your government for that. Centralized purchasing power has eliminated the possibility of obtaining special alcohol brands of wine, beer and spirits. The World is a big place, but it gets a lot smaller when a single government purchasing authority makes all the decisions. Centralized purchasing power also leads to a much larger chance of collusion as larger contracts invite larger perks.

     7) Cost – If privatized, the cost of alcohol may or may not go down. Applied government taxes could largely affect the overall cost of a bottle of alcohol when sold at the store level. What would most certainly go down however, is government expenses:

  • The cost of running and maintaining the over 600 LCBO locations would be instantly absorbed into existing business infrastructure, saving almost half a billion dollars in costs and expenses.
  • A further $110 million dollars would be saved in administration expenses, although a large portion of this would be required to allow for the transition to privatization and eventual monitoring of retail outlets similar to tobacco (A further $424 million would also be saved in salaries and expenses as mentioned earlier).
  • The almost $90,000,000 in annual warehouse expenses would be completely abolished.
  • Finally, if there is only one coffee shop in town, would it really be necessary to market that coffee shop to patrons as with the LCBO’s printed Food and Drink magazine?

     8) Concentration of Power – Centralized purchasing power is not just limited to alcohol itself, it extends to the outsourcing of special projects like the $49 million spent on capital improvements to its stores in 2010/11 which would be saved immediately if the LCBO were dismantled. Once again, large purchasing power and lack of government oversight leads to a larger chance of collusion… Who is watching over how these contracts are awarded?

     9) Inefficiencies You can be the judge of whether you believe government run institutions are efficient, however the biggest difference between private and crown corporations is that private corporations always have more skin in the game. If you run your own business and lose sales or do not cut costs, you go bankrupt and lose your house while the government gets bailed out by taxpayers. In 2012, it was revealed that the LCBO, the single largest purchaser of alcohol in the world, pays too much for the alcohol they purchase. If it was your business, would you not continuously negotiate with your suppliers?

     10) Value of a Monopoly – As a businessman myself, I do not and cannot agree to a perpetual monopoly under any circumstance. In my opinion, it is not the role of the government to play God with a product or service. The role of the government is to protect consumers and taxpayers from any potential harm of the free market economy by taxing and regulating what the free market does, not participating in the free market itself.

Do you disagree? Please let me know your thoughts and ask yourself one question the next time you drive to a separate location to purchase alcohol… Is this really necessary?

Oh yeah, and why isn’t there a tax breakdown on your receipt when you go to the LCBO?

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