The cost of allowing grocery, big box and corner stores to start selling alcohol later this year could be far higher than the government has let on — at least according to calculation from the Ontario Liberal Party.
The Ford government announced last week that, after Sept. 5, eligible convenience stores will be able to sell beer, cider, wine and ready-to-drink alcoholic beverages and, after Oct. 31, all eligible grocery and big-box stores will be able to sell beer, cider, wine and ready-to-drink beverages, including in large pack sizes.
Premier Doug Ford acknowledged the government will pay up to $225 million to The Beer Store, "to protect jobs across the province and to keep The Beer Store locations open for the continued availability of recycling and bottle return."
It's necessary because the government has renegotiated a contract with the big brewers that own The Beer Store that had given them a quasi-monopoly over beer sales in Ontario until the end of 2025. A copy of the new agreement shows the $225 million is meant to compensate the big brewers — Labatt, Molson and Sleeman — for costs related to moving forward before the previous agreement expired.
The government also acknowledged that the province will incur further costs in lost revenue from the LCBO every year.
The LCBO pays its profits to the government in dividends, which the government uses to fund public services. In 2022-23, the LCBO paid $2.58 billion to the government in dividends, according to its annual report for the year.
The impact the new deal will have on government revenues will depend on the pace retailers enter the market and take market share away from the LCBO, a spokesperson for Ontario's finance minister said. In a statement, Colin Blachar said the government will continue to monitor the impact and report on it each quarter.
The Liberals estimated the hit to the provincial treasury would be $150 million over two years. The LCBO will sell alcohol to the new retailers at a 10 per cent discount for them to resell. If the new retailers take a 10 per cent share of the LCBO's sales, which totalled $7.41 billion in gross revenue last year, the Crown corporation would lose $74 million a year to the wholesale discount.
The LCBO — and by extension, the government — is also going to forego some of the fees it currently charges brewers. The Liberals estimated the loss of these cost-of-service fees would be $300 million by the end of 2025, just for the big three brewers that own The Beer Store. The government's estimate is far lower. Blachar said the decision to rebate the fees for all brewers will cost the government $45 million a year — $67.5 million by the end of 2025.
Finally, the Liberals argue the government missed out on the opportunity to generate a windfall for the provincial treasury by not charging new grocery store and convenience store chains a one-time fee for their licence to sell alcohol, which they've pegged as being worth $300 million. They noted that Saskatchewan sold 35 liquor store licences for $45 million.
Blachar did not dispute that the government opted not to raise funds this way.
"By expanding the marketplace, the government is providing more opportunities to businesses and did not choose to add increased cost to business through a model that auctions licences," he said.
The Liberals added up the up-to-$225 million payment to The Beer Store with their estimates for what the LCBO is forgoing in lost revenue from the wholesale discount and rebated fees and what they believe the government could have gotten if it chose to auction off licences instead of giving them away. They found it totalled just over $1 billion, giving them the handy "billion-dollar booze boondoggle" tagline.
They also asked the province's auditor general and Financial Accountability Office to report on the true cost of the decision.
