August 20, 2014 – The lack of competition in Ontario’s system for alcoholic beverage retailing causes higher prices for consumers and foregone government revenue, according to a report from the C.D. Howe Institute. In “Uncorking a Strange Brew: The Need for More Competition in Ontario’s Alcoholic Beverage Retailing System,” authors Paul R. Masson and Anindya Sen call for a more competitive system in alcoholic beverage retailing in Ontario, which would result in increased government revenue, lower prices, and more convenience for consumers.
“Ontario’s system of alcoholic beverage retailing is a holdover of the temperance movement in the 1920s,” state the authors. “As a result, Ontario consumers have restricted choice in where they can buy their alcoholic beverages, and they pay higher prices for beer compared to customers shopping in Quebec grocery stores.”
The current Ontario system suffers from various inefficiencies and disadvantages for purchasers of alcoholic beverages. The report details how the government-created quasi-monopolies for wine and beer retailing impose excessive costs on consumers and restaurants, restrict their menu of choices, and limit the accessibility of stores retailing alcohol. Masson and Sen add that “this also imposes a distortion on small domestic breweries and wineries, putting them at a competitive disadvantage relative to a few large Canadian and foreign producers.”
Masson and Sen rebut defenders of the status quo who argue that increased competition would lead to lower government revenues. Based on the experience of western provinces, they argue that increased competition can lead to higher government profits from alcohol sales.
The report offers policy recommendations that would help level the playing field:
- Allow grocery and convenience stores to sell beer and wine.
- Open up the right to operate off-winery stores.
- Further open up beer retailing by licensing other retail outlets.
The authors conclude that these changes would increase the choices available, and reduce prices, for Ontario consumers.
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada’s trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review. It is considered by many to be Canada’s most influential think tank.
Click here for the full report.
For more information contact: Paul R. Masson, Principal, Weatherstone Consulting; Anindya Sen, Professor of Economics, University of Waterloo; or Benjamin Dachis, Senior Policy Analyst, C.D. Howe Institute, at 416-865-1904; E-mail: amcbrien@cdhowe.org.