Liquor control boards across Canada typically labour under contradictory objectives. Historically they were constituted to explicitly discourage the consumption of the very products they sold. Today that mandate has expanded to promote—“in a responsible manner”—the sale of alcoholicbeverages. So long as the primary motivation was to deter drinking, government distribution monopolies made sense—they lived up to their “control” function by operating in inconvenient locations staffed by surly attendants with rigid hours and limited variety.
Today, New Brunswick Liquor employs advertising and social media to promote special sales, prizes and “Saturday Sips” and proudly proclaims the opening of larger more convenient stores,the establishment of brew pubs and microbreweries. Like similar provincial agencies across Canada they arestriving to achieve their corporate vision “of being a high performance retailer.” At the same time they contribute $162 million to the province’s general revenue and an additional $46 million in taxes to the federal government.
With such a clear effort toreach out to customers, why has the government hinted that the corporation might be for sale? Money! What the Premier asked when NB Liquor’s new CEO Daniel Allain was appointed was that the corporation examine ways to improve the profitability of operations—without excluding the possibility of putting the retail distribution in private hands. Dismantling the monopoly makes sound economic sense. Sales volumes and earnings have proved sluggish—demonstrating that there is a lot more to successful retailing than creating designer floor space—and that is certainly true when the product demand is driven by demographic changes. Moreover the franchise value of the point-of-sale rights is substantial, as is the physical value of the corporation’s 47 non-agency outlets. The accountants can crunch the numbers, but getting out of the business can mean a pretty significant contribution to debt reduction.
Critics may bemoan the loss to government of all those millions of annual profits, but there is no reason at all to equate privatization with lower prices—although consumers might wish that were the case. By virtue of their excise and taxation powers the government can simply replace NB Liquor’s profit remittances with higher alcohol consumption taxes. That is precisely what happened when Alberta privatized inthe 1990s. In fact, one of the explicit stipulations by the province was that revenues would not be diminished.
An economic purist might well decry the continuing market distortion that such a tactic represents, but it is no different from the manner in which another socially-contentious product is handled—tobacco. Because of their perceived health significance, cigarettes are taxed at arbitrarily high ratesto discourage use—and their distribution is entirely in private hands.
As with tobacco—or even lotteries (another privately-distributed government-operated “sin” item) responsible access demands effective limitations. Governments have clearly recognized that those restrictions should include effective controls on how and when alcohol is consumed. For example, government,through the legal system and organizations such As MADD Canada through public opinion, have dramatically shifted attitudes towards a zero tolerance policy for drinking and driving. Whatever reasoning that may have existed in the post-prohibition era for government monopoly as a constraint on consumption is clearly outdated.
So long as responsible alcohol consumption has been established as a legitimate activity, purchasers should be entitled to the service and diversity that a “high performance retailer” provides. The Liquor Control Board of Ontario has an inventory of 21,000 products. NB Liquor carries less than 2,000. Not that the Ontario monopoly should be congratulated—that province’s Auditor General recently criticized the LCBO for its failure to employ its massive purchasing power towards negotiating price reductions on behalf of its clients.
Indeed, reducing such inherent inefficiencies and ensuring competitive employment practices are amongthe more obvious reasons for abolishing liquor monopolies. Alcohol merchants in New Brunswick should be focussed on providing optimum product variety at an economic and reasonable price—even if the definition of that price should be constrained by the perceived need to discourage excess consumption and to provide government with appropriate revenue. That is best accomplished by privatization.
Don Mciver is Director of Research at the Atlantic Institute for Market Studies, an independent social and economic policy think tank based in Atlantic Canada.