TORONTO – Ontario consumers could see major changes to the way beer, wine and spirits are sold if the Liberal government adopts the recommendations of an advisory panel it set up to find ways of squeezing more value out of Crown assets.
The panel chaired by Ed Clark of TD Bank Group looked at possible sales of Ontario Power Generation, Hydro One and the Liquor Control Board, but in its interim report released Thursday concluded all three should remain in public hands.
“Ontario can retain all three core companies and significantly improve their performance,” Clark said in the forward to the report.
However, the panel recommended sweeping changes to improve sales and profits at the government-owned LCBO, which turns over a dividend of about $1.7 billion a year to the province, on top of taxes.
It said the LCBO should move to a ‘click and collect’ model to allow customers to buy products online – including items from around the world – and be able to pick those products up at the local liquor store.
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It recommended LCBO stores be allowed to sell 12-packs of beer, not just six-packs, and said the agency should increase its service charge for beer for the first time since 1989, noting beer prices jumped 64 per cent during that time.
The panel said the Liberals should negotiate new deals with the foreign-owned Beer Store, which has 447 retail outlets, and with Winery Retail stores, which are owned by six wineries that sell only their own products at 292 off-site stores and 199 on-site outlets.
“We do not believe as a matter of principle that the government should continue to foster a marketplace that provides unique benefits to these privately owned quasi-monopolies,” concluded the panel.
“The relationship between the provincial government and the Beer Store should be revised to ensure that Ontario taxpayers receive their fair share of the profits from the Beer Store. Consumers should not see an increase in price as a result of this change.”
Canada’s National Brewers, which represents Labatt, Molson and Sleeman, has warned the panel’s ideas would add about $5 to the price of 24-packs.
The panel also said Ontario should consider a limited number of stores featuring local and international craft beers and ciders, and do the same with the wine industry and distillers to generate some limited competition for the LCBO.
“The council is open in Phase 2 to exploring the suggestions of how competition can be increased without undermining the fundamental economics and advantages of the monopoly system.”
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Clark said the panel’s final report on the Crown assets and liquor sales will be ready in time for the government to make changes, if it wants, in next spring’s budget.
On the electrical utilities, the panel recommended the province keep most of the operations in public hands, but said Hydro One should get out of the local distribution business and focus on its core transmission business.
“The system needs more capital, which is unlikely to be available from the public sector owners given other pressing needs,” said the report.
Ontario Power Generation should consider internal structural changes to effectively become two entities, one a nuclear company and the other to focus on the utility’s non-nuclear assets, but the panel said the change should be done slowly because of the demands of the refurbishment of the Darlington nuclear station.
Clark’s panel said cost savings at Hydro One and OPG “are relatively small” unless both utilities can modify their total compensation packages, which feature “above market wages, benefits and pensions.”
The panel said its proposals would help limit the growth in electricity rates, keep liquor prices below the Canadian average and free up as much as $3 billion that the Liberals promise to spend on infrastructure projects.
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