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Comment by criddell | Hacker News Reader

You're making a lot of assumptions about how they will run the stores.

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.

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As someone who lives in a state with state-run liquor, this is the exact opposite of how it actually plays out. Prices are anywhere from 30-100+% more than across the border in a state without a state-run liquor policy. Because the government has a monopoly there is no competition to drive prices lower and since the government monopoly gets to keep the profit there is no incentive for them to lower prices. Furthermore, a big part of the reason that liquor is state-run where it is, with few, scattered stores that close at 7:00 PM and on Sunday and holidays, is to encourage reduced alcohol consumption. Raising prices is an effective mechanism for that too.

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.

I think costing more and making the government more money are intended features of this system, not side-effects.

'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?

is taxation not a simpler and more direct way to achieve higher prices without granting practically irreversible monopoly rights?

Simpler in terms of not handling retail operations directly. More complicated as now you have to employ an army of regulators to make sure the regulations aren't being skirted in favor of higher sales numbers.

> advocating for the people by working to proved the lowest possible prices

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.

>Other people have already mentioned how the government runs the alcohol stores and (IMHO) they do a pretty good job of it.

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.

On non-holiday weekends, the stores are open Sunday. If you aren't happy about the stores closing for holiday weekends, blame the union. That's something they protect for their members.

> 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.

They are open for only a few hours on Sunday. Blame the union? Lets not shift the debate. The government could open later and longer and unions could not stop them.

"Blame the union"

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.

Opinions differ, but I would say weakening the union would be a bad thing.

>If you aren't happy about the stores closing for holiday weekends, blame the union. That's something they protect for their members.

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.

Aside from the hours of operation which really has nothing to do with the LCBO (complain to your MLA), yes they do. They are well stocked, very clean, their employees are trained and treated maybe too well, they run tasting bars and even offer loyalty points.

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."

> they can negotiate ruthlessly and drive prices down to maximize profit for the people of Ontario

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.

> Being the sole seller also means that they can negotiate ruthlessly and drive prices down to maximize profit for the people of Ontario.

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?

Governments are beholden to people, not markets. Profit is not their main incentive.

You can tell yourself that, but the purpose of LCBO at this stage is the money it makes for government. Liquor prohibition is a distant memory. If you don't realize that, you risk buying into their rhetoric about "protecting children" that they're peddling for weed monopolies.

> 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.

There is incredible mark-up in alcohol prices - there is little to no benefit of their bulk purchasing to be seen. The taxes are pretty high.

One aspect no one seems to mention is just how absolutely terrible the selection is at the LCBO. They want consistency at every location, so if you're looking for small-batch or a wine that isn't grossly mass-produced, you have no choice at all. It basically means that unless you have a small producer locally, you only have access to huge corporate producers. It is hugely boring compared to the scene I see in most of the US.

Personally, I make a point of maxing out my alcohol import limits every time I come back.

Yep. This is what's so depressing about the cannabis stores in Ontario being state run. I LOVE the fact that depending on the store in Colorado I'm in, there will be completely different strains from different producers present. They are all subject to strict and rigorous testing mandated by Colorado's government, so you get the best of both worlds.

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.

The LCBO doesn't negotiate. The vendors set their price, LCBO adds its automatic markup and thats it. Of course, they will only stock your product if people are buying it.

They are one of the largest purchasers of alcohol in the world, of course they negotiate.

Being the sole seller and negotiating "ruthlessly" leaves a lot of room for black market.

Not anymore. Beer, cider, and wine are available in some supermarkets since 2016. see https://www.ontario.ca/page/beer-wine-cider-sales-grocery-st... .

But it's not like the USA, where cigarettes and beer are the first things one sees when walking into a 7-11.

Who supplies them with beer?

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.

FYI:

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.

> 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.

The last time I was in Ontario, the grocery store did have a beer and wine section, but it wasn't part of the store. It was basically a separate store within the store.

Usually beer is along the back-wall of every single US 7-11 I've entered. Cigarettes are behind the counter, by law.

You can buy beer in (some) grocery stores, this is a recent development after pressure on the province to open things up.

>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.

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.

Not sure how local or new this is but in Waterloo I can buy beer and cider at Sobeys.

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