Ontario unveils plan for government chain of marijuana stores
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1. Provincial government is cash poor. The LCBO is a huge source of cash, what government would give up another source? This isn't taxes, this is profit. "Isn't this just another tax?" One might ask, but no it's not. The reason is that Ontario has fewer alcohol distribution centres than a free market would provide. Most people just do a bigger alcohol run and drive / walk / drive further than their American counterparts. There's queuing occasionally, but usually only before long weekends or holidays.
2. The current dispensaries are run by criminals. The optics of giving a windfall to law breakers aren't great. The police keep shutting them down, and they keep popping up. I'm not bashing them, I think cannabis should have been legalized a long time ago and I think it's unconscionable that we have Canadians addicted to heroin because they were given opioids instead of pot, because pot requires a huge hassle to get approved, and I think dispensaries alleviate that stress, but some operations are huuuuge and most certainly are funnelling money into real criminal organizations.
3. The union at the LCBO is huge and powerful. The jobs, even seasonal ones, pay well and Ontarians aren't outraged because the staff is generally competent and friendly and the stores are clean.
4. Controls over potency are a real problem in the current dispensaries and because of the sketchiness of the current people involved and their distribution networks, the government would have to get involved auditing anyway.
I hope that they keep the stores open every day of the week. Many Canadians use pot outside the medical system, but for medical reasons and fast access will mean the black market will finally collapse. I also hope there will be a system for legitimizing certain strains that gain popularity in the US, like the LCBO does for wine.
The LCBO has been playing this role pretty well and the profits go towards quality jobs and government investments for the public good. I struggle to see the societal benefit from gifting the profits to established corportations, providing more product than is necessary (or at a lower price), and letting private businesses make the right choice between effective regulation and more sales.
More spendthrift than cash poor. The province has more than enough revenue but cannot control its spending.
>The current dispensaries are run by criminals.
By definition. Just like bootleg operations during prohibition were all run by criminals. Legalization would remove this feature of the system.
>Controls over potency are a real problem in the current dispensaries and because of the sketchiness of the current people involved and their distribution networks, the government would have to get involved auditing anyway.
Again. This is where Health Canada and the Ontario government can step in and regulate standards. They do that with alcohol (hard to find anything over 40%). If there are unsafe levels of potency, regulate the potency. Government does that with everything else in the market. Pretty much every food item at a grocery store is regulated in some way. My father works at a supplier of frozen food to some of the biggest conglomerates. There are insane amount of regulations related to food safety because if you get sloppy, a Listeria contamination of a TV dinner could kill hundreds of people. And yes, they clean constantly, they have to maintain proper records and have to have an on-site lab that tests samples 3 or 4 times a day - and yes, they get audited.
This was a bad decision by a government who is on the way out.
All this does is ensure the blackmarket keeps going strong.
And oddly enough I'm perfectly happy with that. Ontario's strategy with booze is responsible consumption (or whatever it's called)... essentially price it sufficiently high that we don't get too many drunks on the street.
Given how badly alcohol abuse can mess up lives (not just the abuser but their family and friends too, not to mention random folk who they cross paths with) I think this is a sensible strategy.
As part of that strategy I don't think trying to have to the cheapest labour costs is that important. It won't change the end price of booze, it will only ensure that the jobs won't be staffed by long term employees (and hence knowledgeable employees, and employees that can save for retirement, etc).
Sin taxes are actually composed of two distinct effects: the effect of increasing price and therefore reducing negative externalities like you mentioned. In addition, a well structured sin tax should use it's gross profit to fund support services like rehabilitation and health services.
LCBO only does 1 of those things well. LCBO marks up their product by a percentage, which impacts premium products more than lower priced products[0]. If LCBO was committed to decreasing consumption of alcohol, it would apply a flat fee to each unit of alcohol, which would maximize utility and minimize the impact to the rest of the alcohol industry.
0: http://hellolcbo.com/app/answers/detail/a_id/1251/~/lcbo-pri...
Other countries don't need artificially inflated prices and a government-regulated sales to accomplish this.
I think the reality is that this is way more about national identity than it is the laws. As we have seen with legalization in Canada, the laws don't mean much anyway.
The government long ago allowed "The Beer Store", a private non-Canadian company to be part of the alcohol monopoly. It's only coming to an end now that some grocery stores are allowed to sell beer.
Come to think of it, since my local Loblaws got beer and wine, I have never set foot inside an LCBO and doubt I'll ever need to again.
I've never heard of any government at any time at any level that ever declared it had enough revenue to do its job.
In Chinese history, there was a time when the government declared a simultaneous tax increase and tax reform because taxes (in grain) often didn't even arrive at the capital. The reform turned out to be so successful that the increase was canceled.
I think they are really blowing it by making the stores government owned.
In Colorado, the stores are privately owned but very, very strictly regulated. Plants are tracked with an RFID all the way to the products derived from them, with a full chain of custody all the way to purchase.
Only adults 21 and up can enter them, with a strict dual-check of identification (once to enter, and again when paying the cashier).
The various shops actually end up being very different from each other in surprising ways. They all adhere to the regulations, but some are much larger and more corporate feeling, with lower prices, while others are boutique, specialize in higher quality product, and priced higher.
The pace with which new products can be introduced is much faster due to potential producers not having to negotiate with a giant bureaucracy to get a product on the shelves.
Considering that you can only buy alcohol through government owned stores, at least it's consistent.
Why?
The largest chain of BC liquor stores is government-owned and operated. They do a pretty decent job of it.
The convenience of buying at a corner store at a convenient time outweighs any of those things in my opinion(US, Quebec, some locations in Ont).
With the dollar going back up it'll be better to simply cross the border to buy alcohol and gas again, instead of paying the ridiculous markup.(for context, a 24 of 355ml cans of 'budget' beer is nearly $50 CAD).
The prices are very high compared to other areas that have freer access. Everything has a floor price that doesn't allow companies to sell for less than that amount.
On top of this, as mentioned in other posts, we have some of the most expensive alcohol in the world. I have travelled to several countries and have yet to find a place that has more expensive alcohol than BC.
I used to work beside a major liquor importer and after speaking with some of their employees, the general consensus in the industry is that the only people that benefit from this are the union employees that work at the government liquor stores and distribution centres. For everyone else: restaurants, consumers, independent store owners, etc. it is a negative.
edit: grammar
I owe unions for many great things like weekends, safe working conditions, etc. They worked to codify these things into law. Once these things were accomplished, they slowly turned into impediments to competition. Private businesses whose unions went too far were driven out of business or hurt by companies whose unions cooperated with management (GM vs. Toyota). It's funny how the government monopolies (education, transportation, etc) are the most unionized industries left. The unions don't have to care about their customers, so they don't. Toyota has one of the most powerful unions on the planet (Japanese laws after WW2 made sure of that), and yet they don't squeeze out benefits at the expense of customers every chance they get.
Compared to who? You have no frame of reference, because they have no competition. They could do a terrible job, and it wouldn't matter. They're a monopoly. They can do it as good or bad as they want, and you'll still go in and buy it.
Other people have already mentioned how the government runs the alcohol stores and (IMHO) they do a pretty good job of it. I live in Texas now and when I go back to Ontario to visit my family, it does seem weird that I can't buy beer in a 7-11 or a grocery store or in a drive through shop (not sure these are a good idea).
Being the sole seller also means that they can negotiate ruthlessly and drive prices down to maximize profit for the people of Ontario. I don't know if they will do that, but it sure helps.
But it's not like the USA, where cigarettes and beer are the first things one sees when walking into a 7-11.
The LCBO (and the rules to prop them and The Beer Store) cannot be the basis for alcohol distribution and retail laws.
LCBO gross margins are very high (49.8) compared to private outfits in Alberta (25%). Their employees also take a nice share in terms of benefits.
The USA isn't a monolith. Walking into a 7-11 and seeing alcohol and cigarettes everywhere is dependent upon the state you are in.
In Colorado, the only alcohol that can be purchased outside of a regulated liquor store is "Mormon" beer. This is beer whose alcohol content is less than 4%.
In Virginia, liquor can only be purchased at stores run by the state government. Same goes for North Carolina and several other states.
My experience with private liquor stores vs. the state run ones has been that the private ones were better stocked, had significantly better variety, and lower prices. However, that can vary depending on the state.
But that is often a direct side effect of the purpose of government alcohol monopolies, which is rarely to sell the most alcohol possible, but to provide a sufficient outlet to minimise black market sales yet seek to at least to some extent shape and reduce consumption.
So this is what one should expect with them. Whether or not that's what one wants is a separate issue.
No. They don't. I was recently at an Ontario beach on a long weekend - all the stores on the strip leading up to the beach were open because of the tourists and cottagers flocking into the area...except for the LCBO. The LCBO was closed because it was a stat holiday. No business would close on their biggest sales day of the year. Try buying alcohol on New Years Eve and see the insane lineup because they close early New Years Eve and are closed completely on New Years Day. Or try grabbing a bottle of liquor on your way to your buddies house for dinner in the evening on a Sunday.
Those stores don't need to exist. It is so stupid, it's beyond reason. The liquor is marked-up and expensive too.
> The liquor is marked-up and expensive too.
That's just taxes. Anybody else selling alcohol would have to add their profit on top of that. It might seem expensive, but don't forget that you are helping to pay for government provided services.
Hmmmmm. If only there was a way for stores to not all be owned by a single entity that is forced to have all of their employees be part of a union. We could call it privatization.
What are you talking about? Unions don't care about stat holidays. They care about making sure their members are paid. Plenty of people would work over a long weekend for 1.5x or 2x wage. To me seeing the LCBO closed while every other place on that strip was open and full of shopping tourists means the LCBO is completely immune to market forces. They just don't care.
As for the price, "wines and spirits sold in Canada is subject to the Excise Act, 2001,[36] which contributes greatly to the cost of beverage alcohol, although most liquor tax is provincial."
Being the sole seller also means they have a monopoly. It's much easier to run a monopoly profitably by charging high prices than by negotiating low prices. Even if they do negotiate low prices, what incentive is there to pass the savings on to the customer?
I mentioned this in another comment, but for alcohol there are a lot of external costs associated with consumption. It makes sense to try include some of those costs.
I have no idea how they will price marijuana.
I think if you set up these kind of government-run dispensaries, you have to mandate that their purpose is ensuring product and supply chain quality (not just making fat bags of cash), and that revenue above COGS has to be restricted to what it costs to run the program and maybe a small emergency/maintenance fund. Otherwise the natural incentive that apply to any monopoly encourage them to raise prices to the max the market will bear and rent-seek. It's civically conscientious to think that the government would be advocating for the people by working to proved the lowest possible prices, but that isn't how any government-run 'vices' dispensary program I've ever seen plays out IRL.
'vice' dispensaries are not meant to provide the best service to their customers. They are meant to fill a need well enough to prevent black market competitors, while at the same time making the vice inconvenient enough to discourage its use as much as possible. At the same time, they want to maximize revenue for the government.
Whether this is good or bad is up for debate, but it isn't something they are accidentally doing. When it comes to vices like alcohol or drugs, 'advocating for the people' is not a simple 'provide people what they want' equation - people are wanting something that is bad for them, so do we give it to them as cheaply as possible, satisfying their want, or do we make it more difficult, to satisfy what society wants as a whole?
Lowest possible prices for the government purchasers, not for the citizens. For alcohol at least, there are a lot of externalities associated with consumption and so it makes sense for the government to try to price the product with that in mind. In a place like Ontario where the government also runs the health care system, it makes even more sense.
They do. However there's an odd situation that has arisen at least once. The underlying strategy of the gov't is one of social responsibility... essentially not pricing booze cheap enough that you end up with a lot of public drunkenness. This means that the gov't sets a minimum retail price and the LCBO ensures they don't sell below that. The gov't also sets a maximum retail markup (which is odd, one can only assume that at some point this was an olive branch to folks upset about how expensive booze is... sort of a 'we will not charge more than x% markup' promise implemented as regulation/legislation).
Faced with a minimum retail price and a maximum markup the LCBO had to ask a wine seller to raise their prices because even after applying the maximum markup the retail price was below the minimum. Sounds crazy for cheap plonk... but that's exactly what what they're trying to avoid... winos drunk on the street from cheap Thunderbird.
Note I think this only happened the once. It made the news at the time... but I haven't heard of it happening again.
Except they're maximizing profits for LCBO, while the benefits to the "people of Ontario" are arguable. For that money to truly benefit Ontarians, it requires a certain level of faith in the provincial governments to be good shepherds with said funds.
Personally, I make a point of maxing out my alcohol import limits every time I come back.
The real shame is that this is going to encourage a few large, well-connected producers to seize the market. As in all things regulated, the people who stand to benefit the most from influencing the agency in charge of Ontario's cannabis will be these same producers. I hope I'm wrong.
I've been watching closely the way government will carry this out, and its unfortunate they aren't choosing to franchise dispensary permits out to small business. But I suppose Ontario's government would botch that, too. Hell, they're attempting to roll out the opportunity to purchase beer and wine (woo!) at grocery stores — but so far, only the franchise chains are able.
Finally, Liquor in Ontario is dumb expensive. I expect them to milk the price of marijuana for all its worth when this finally comes out.
So they provide a compromise - limited outlets, restrictions on opening hours etc. - that stave off attempts open up for wider sales and that is "good enough" to prevent most (but not all) black market sale of alcohol.
I believe that is the motivation for most alcohol related government monopolies.
It will be sad to see a government monopoly turn weed distribution into the LCBO style. Expect prices to go up to $15-20g, cut down the number of locations and closes at 9pm.
This is talking about the hell angels getting a medical supply and selling it on the black market. Not the same as running a store and none of this changes by having the lcbo run stores the supplier are licensed by government of Canada.
Maybe a good starting compromise is, ok, marijuana will be legal and people won't get arrested anymmore, but it will only be sold at a limited number of places for a limited amount of time, for an amount that will keep it from being too prevalent.
Giving government absolute control over distribution of a non-essential product/service is probably not the best idea, but at least it's better than having that product/service be completely illegal. Ideally they should allow private businesses to sell under very strict guidelines.
I lived in the states for several years and you can get liquor at grocery stores, they had private stores which were like 4 times the size and selection of any LCBO.
What i do recall seeing is Toronto Liquor being sold in Connecticut for a full 50% less (bottled in Toronto)..
I dont recall seeing any "problems", in fact it seems Ontario and Connecticut have similiar death rates and Canada is among the worlds highest despite ourarchaic liquor laws from the 1920's which are almost soviet era (wait in line for a ticket, then wait in line for your item).
http://nationalpost.com/news/canada/canadas-drunk-driving-de...
you can see canada's rates are 5.4 per 100,000 people and you can see Connecticuts rates here http://c-hit.org/2016/01/17/drunk-driving-fatalities-decline...
Perhaps you have a reason why Canada's death rate from impaired driving is actually higher then the US?
PS. I dont even drink, but find it odd the government is in this business and gouges their customers. if it is "bad" for you, why sell it? oh.. thats right.. to stop the bootleggers and fill hte government revenue?
There is a preexisting efficient network of high quality marijuana distribution in Ontario (at least here in Toronto). Even if the province does as well with marijuana as they do with booze (the LCBO is at least a pleasant retailer, aside from the rules about minors touching merchandise during shopping), the black market will be far more attractive to the mid and low shelf market.
It is considerably easier to grow and cure marijuana than it is to ferment commercially viable quantities of an attractive alcoholic drink.
The ideal legal weed situation is a legitimate version of the black market arrangement, which hasn't been a considerable health problem in any way that could be attributed to poor quality product. Pretending otherwise is just a typical legal trick pulled by established agribusiness/venture firms. Frankly it's hilarious at a time when the province is finally reintroducing private alcohol retailers.
It doesn't make sense to illegally transport marijuana across the border just so you can buy it legally from a store.
The government privatizing things such as Ontario Hydro has been a huge disaster. At least they are not stupid enough to give this up.
Right now they are paying taxes on hydro, water, property taxes and income earned, employee related taxes, insurance and some are charging hst.
The big perk about Ontario liquor is that it's the same price no matter what store you walk into. Doesn't matter if you are in a small town of 1000 people with one liquor store or in Toronto with 500 stores.
In Alberta, if you are in a small town and your only option is Joe's Liquor Store, you're going to pay $55 for 24 bottles of Canadian that go for $20 less at the Safeway liquor store in a city. And in actuality, you can pay $55 for that case in the middle of Calgary if it's a mom and pop shop.
I suspect the same will be true for marijuana. Same prices regardless of what LCBO you walk into.
You'd be surprised how self regulating the market is for marijuana though. People always want to make the alcohol analogy, but it's a totally different thing. Marijuana has a long tradition of home cultivation and use, as well as a thriving well established black market which will always pick up the slack. Prices tend to be very stable across the board in California at least. Without any government run outlets the price is the same across the entire state.
Sure this is a bit of hyperbole, but it points to one of the perks of government run/controlled distribution, namely those in the cities can help to subsidize the price for those in smaller towns across Ontario. Is this government controlled model the best? Probably not but let's remember this is unchartered territory. We can look to the individual states for learnings (ie. Colorado, Washington) but Ontario is 1 million km^2 and California is half that with a much greater population density. They are different in many ways.
I've lived in a variety of American states as well as Ontario and I really can't believe what I'm reading - anyone defending the selection, knowledge of the staff, price, hours, pretty much anything relating to the LCBO vs. a privatized but regulated market is a few Timbits short of a Snack Pack. I suspect the very same will be true with The Weed Store once it rolls out - way better than prohibition, but much worse than Colorado or Oregon or Washington.
The selection and knowledge of my dispensary in Vancouver in invaluable. They even take notes based on experiences of every strain I buy from them so that they can tailor their suggestions to me based on my history and the composition of the strain. I can't just smoke anything, my body only responds well to certain strains, and I trust nobody less than some ignorant, unionized liquor store staff to personalize my experience based on my needs.
The quote by Ms. Roach saying " … The person who smokes high-end cannabis, they don't want shwaggy, mass-produced stuff. They don't want Labatt Blue, they want craft." is completely true.
edit: spelling/grammar
Plus, the number of stores at launch is way too low - people will simply continue to purchase higher quality weed for less money from private sellers. It's a bad move all around.
Yes, yes, yes. Why can't they regulate it like cigarettes?
The argument about keeping it out of the hands of minors is bullshit. It's already illegal to sell tobacco products to people under age in Ontario.
LCBO and the Beer Store are stupid ideas from a bygone era that need to end. Legal monopolies of provincial owned entities should not be permitted.
I'm not saying full privatization is the right answer, because I don't believe the free market solution is always best, but at least allow private competition to a crown corp. LCBO has no motivation to innovate because there is little/no competition.
Having experienced both, as a consumer I prefer the Alberta model with privatized retailers because there are far more stores and the hours are better. Actually, I found this old Fraser Institute report on the privatization of liquor in Alberta to be rather interesting. https://www.fraserinstitute.org/sites/default/files/Privatiz...
It's not a big deal for me personally, but there's also more room for unique shops. For example, one of the markets nearby does a lot of specialty whiskey imports.
You have a real-life experiment with which to compare, in the LCBO, to see that progress will extremely slow, and limited. How long did it take to get beer into grocery stores (and even then with some restrictions)? That's beer. How long will it take with weed?
I really hope a major political party runs with a cannabis decriminalisation policy at the next election.
[1] http://www.independent.co.uk/news/uk/politics/all-drugs-shou...
The people who run marijuana businesses should be marijuana enthusiasts who care about themselves and their customers not some government pen pusher.
Soon they will treat it as Tobacco and will tax it to death and not to mention kill all innovation in this space.