A report on the liquor industry in western Canada has been sitting on my desk for the past few weeks awaiting me to get around to reading it. The time off during the holiday season gave me a little free space to finally pick it up (yes, reading policy wonk reports on my Xmas holidays – feel free to call me a loser). The report, called Impaired Judgement, conducted by the Parkland Institute at the University of Alberta examines liquor policy and outcomes in B.C., Alberta and Saskatchewan (here is a link to the report).
Here are some of the highlights:
- liquor prices are consistently higher in private retail stores in B.C. and Alberta than in publicly-owned stores. For example, a 12-pack of Canadian is 11% more in Alberta than Saskatchewan (they only priced common items, so no sense of the craft end).
- Alberta’s per capita and per-litre revenues from liquor have dropped substantially since privatization, due to its flat-rate approach to taxing liquor.
- The report suggests Alberta’s liquor retail system is in danger of becoming an “oligopoly”.
- Alberta has higher store density, longer hours and less enforcement of minimum drinking age laws than the other provinces. The report argues these tendencies undermine public health.
Much of this is not new. Multiple reports and studies have demonstrated that Alberta has the highest beer prices in the country (I have reported on this a number of times - here and here for example). Alberta’s decision to move to a flat rate per volume tax levy, rather than the more common percentage of price, occurred in 1993 and it has been known for a while that it led to a reduction in revenues gathered from alcohol (page 11/12 of the report does a nice job summarizing the difference between the two types of taxation).
Why write about it here? For a couple of reasons. First, this website is interested in the mechanics of the beer industry as much as the product it puts out. Second, liquor privatization is once again becoming a hot political topic. B.C. recently backed away from plans to privatize liquor distribution. Saskatchewan continues to mull privatizing the retail system (and is making baby-steps towards it), and the Ontario Tories have made it a key plank in their platform. Third, I get tired of people talking about “how much better” Alberta is for liquor than other provinces, despite ample research showing the picture is far more mixed. So I like to put the information out there.
For me, there are three takeaways from this report. First, the case that privatized retail has led to higher prices is a slam dunk. Repeated studies (with different methodologies) have come to the same result over an extended period of time. Add a couple layers of middle men and the profit motive and, viola, higher prices. Besides, public monop0lies can take advantage of economies of scale that the (increasingly rare) mom and pop shop cannot. Maybe that is an acceptable consequence if other outcomes improve – but that is in the eye of the beholder.
I can hear many of you muttering that you don’t care about the price of Molson Canadian. Fair enough. Neither do I. But those extra layers of profit-takers affect the price of my favourite beer, too. In general, I am an advocate for consumers, and soa move that takes money out of Joe and Jane Six Packs’ pockets and into a corporation’s, for little discernible advantage, raises a red flag for me. Plus, I care about good public policy. Learning about the unintended consequences of policy decisions helps us prevent mistakes in the future.
Second, the report echoes my growing concerns of the concentration of retail store ownership in the province. A handful of companies control a large portion of Alberta’s liquor sales. If we replace a public monopoly – with some semblance of a public interest mandate and accountability – with a private oligopoly, with no accountability, are we really improving the system? Yet another unintended (but not unpredicted) consequence.
Third, the report causes me some discomfort when it discusses public health and liquor. I understand very well the social, physical and mental consequences of liquor consumption – I am no denier around this stuff. Liquor is a factor in a variety of social ills and medical ailments (including cancer). There are significant social and financial costs to liquor use. The report authors make perfectly valid (and troubling) points about the lack of enforcement around sales to minors and the problem with high-octane discount liquor.
But the authors have a subtle moralistic tone to their argument that reveals an assumption that the way to reduce alcohol’s negative consequences is to restrict access to alcohol. Of that I am not convinced. The problem feels far more complex and multi-layered – poverty, mental health, inadequate social safety nets and family support structures, a culture of consumerist excess, a moralist message to youths that alcohol is “forbidden”, and so on. Alberta doesn’t have alcohol-related social ills because we have more retail outlets. Saskatchewan is not safer because the government has more control over what product gets sold.
I know the authors are economists simply discussing the economics of the issue – which is fair. But embedded in their numbers are some moral assumptions that reflect what I think is a growing trend. In recent years public debate about alcohol has been imbued with this sense that it is inherently “bad”. We are back to talking about “just say no” rather than responsible consumption. I am broadly concerned with where this tone is taking the debate. I suspect this is a topic for another day, but I thought I should highlight that lingering concern.
In summary, the report proves to me, yet again, that making policy in liquor is no easy task. So anytime a politician tells you that all your problems will be solved if we just privatized our liquor stores, don’t believe them. And ask them who is donating to their campaign. Because it isn’t the consumers’ interests that politician is looking after when they tell you that. That I do know.