A cash cow called LCBO
Every Christmas season, my girlfriend and I hit the snowy road. Destination: The Hawkesbury LCBO, where I always leave the store with two cases of red wine.
Hundreds of Quebecers make similar pilgrimages every year.
Why? Most bottles are cheaper there than in Quebec. (Like the SAQ, the LCBO is a state monopoly. Just less rapacious.)
But I shouldn’t have to go to Hawkesbury. Consumers in Quebec, and elsewhere in Canada, could find cheaper wines home … if we could just break the liquor boards’ monopolies across the country.
In Quebec, defenders of the status quo keep repeating that the SAQ is a “cash cow” for the State. But this generous yearly dividend comes from our wallets. We, captive consumers, pay a premium for our bottles of Merlot and Cabernet Sauvignon. The only reason the SAQ makes an abnormally high profit is because it’s a monopoly. Without competitors, it can bleed consumers.
The SAQ takes a margin of 40 per cent to 135 per cent on each bottle it sells. It pays $5 to a producer, takes a $7 cut and sells the bottle for $15 (including taxes). Yes, the SAQ is a cash cow for politicians. But it’s us, the consumers, who are being milked!
Should we privatize the SAQ? Not necessarily. A private monopoly would be no better than a public one. What we need is more competition. We need to allow entrepreneurs to open wine shops and compete with the SAQ. We also need to allow people to buy bottles from around the world over the Internet, without having to go through the SAQ.
For example: You like the Jacob’s Creek Shiraz 2007? A store in New Jersey is selling it for $6.53. On the SAQ’s shelves, the same bottle will set you back $14.90. This wine can be bought on the Internet and delivered to your door in less than two weeks.
The problem is not the SAQ itself, or the LCBO. The problem is the prohibition of competition. In Belgium, a non-producing country whose population and culture are similar to Quebec’s, the wine market is completely free. Hundreds of retailers compete with each other.
As a result, they have three times the wines, for a third of the price.
Quebecers and other Canadians like wine. Many are connoisseurs, and eager to try new varieties and vineyards. They deserve better than a state monopoly that is clearly corked.
David Descôteaux est chercheur associé à l’Institut économique de Montréal.