Heat in the kitchen

The Liquor Control Board of Ontario is once again up to its monopolistic strong-arm tactics. Already loathed by several suppliers—including brewers, vintners and distillers who claim the LCBO squeezes them like so many grapes at harvest time—the booze bureaucracy is now stomping on retailers as well.

Canadian Business magazine
January 7, 2002

Heat in the kitchen
The LCBO comes under attack from housewares retailers
David Menzies

LCBO%20logo%20F.jpg

Slurp, slurp; gurgle, gurgle. The Liquor Control Board of Ontario is once again up to its monopolistic strong-arm tactics. Already loathed by several suppliers—including brewers, vintners and distillers who claim the LCBO squeezes them like so many grapes at harvest time—the booze bureaucracy is now stomping on retailers as well. At issue: the LCBO has been getting into the housewares business. Several stores are currently selling high-end, non-alcoholic items, such as fine stemware, candles and corkscrews. Just one hitch: the strategy has enraged Ontario’s mom- and-pop houseware retailers. They’ve organized a lobby group, called Kitchen Pro’s [sic], which claims the LCBO has no mandate to stock products the private sector already sells.

Brenda Murphy, who owns Cooker’s Mercantile & Café, a kitchenware store and restaurant in Goderich, Ont., says Kitchen Pro’s members are facing unfair competition. Given the LCBO’s immense buying power, opponents say, it is undercutting smaller retailers by more than 20% on some items. “They are encroaching on our territory,” gripes Murphy. “What they are doing isn’t morally or ethically right.”

Murphy doesn’t plan to take it all without a fight. Kitchen Pro’s—which she founded—has already threatened the LCBO with a $6-million class action lawsuit unless it exits the houseware business. The LCBO’s non-alcohol related merchandise accounts for about $6 million of total annual sales. And while that may be chump change for a Crown corporation with yearly revenue approaching $3 billion, Murphy says it is a significant sum for small retailers struggling to survive in an economic downturn.

In a letter to the LCBO in late October, Murphy’s husband, Goderich lawyer Patrick Murphy, wrote: “The ramifications of this type of expansion are massive….Where does the LCBO stop? If your lifestyle stores are successful, do you open restaurants? How many Ontario taxpayers will go bankrupt before the Ontario government realizes that increasing its revenue in this manner is counterproductive?”

LCBO chairman and CEO Andy Brandt, typically, was unavailable for comment. However, industry insiders say the real reason behind the LCBO expansion is to deliver one record quarter after another to the Ontario treasury, proving to its ministerial masters that it is far too valuable an asset to be sold off to the private sector. Privatizing the LCBO was one of the original mandates of Premier Mike Harris’s Common Sense Revolution in 1995.

Notably, the LCBO isn’t the only Canadian booze monopoly to dabble in non-alcohol-related products. The Newfoundland Liquor Corp.—much to the chagrin of convenience store owners—recently launched a trial project that involves some of its stores selling lottery tickets. And a few years ago, the Société des
alcools du Québec also got into the houseware business—but decided to beat a hasty retreat when retailers in the province responded with outrage.

Back in Ontario, the solution to the dilemma is crystal clear: the LCBO should follow in the footsteps of its Quebec counterpart and immediately abandon a business it has no business being in. Actually, there is another resolution to the problem: if the LCBO truly believes that competition is such a good thing, then surely it will have no problem permitting houseware retailers to sell beer, wine and spirits. But, of course, in supposedly pro-free-enterprise Ontario, what’s sauce for the goose isn’t necessarily sauce for the gander—at least, not when it comes to the province’s booze behemoth.


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Risks: Crown corporation, Monopoly or near-monopolies creates sub-optimal capital allocations, Exempt from Ontario franchise law obligations, Bad faith and unfair dealings, Canada, 20020107 Heat in

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