Ontario’s Beer Store shouldn’t get ‘monopoly for free,’ TD Bank CEO says

Share

Ontario should force the foreign cartel that owns the Beer Store to pay the province more money in exchange for its lucrative monopoly, a government panel is recommending.

"We're saying to the Beer Store: You're not getting this monopoly for free," said TD Bank CEO Ed Clark, who is leading the panel. "It's clearly more profitable to [the Beer Store] to have this monopoly than to not have it … so now let's figure out what we're going to extract from it."

Premier Kathleen Wynne appointed Mr. Clark's committee, which includes former provincial cabinet ministers Janet Ecker and Frances Lankin, to advise her on how to get more money out of government assets.

In an interview with The Globe and Mail and a subsequent speech at the Metro Toronto Convention Centre on Friday, Mr. Clark unveiled several of his preliminary recommendations.

He said the province should sell off Hydro One's distribution business; modernize the Liquor Control Board of Ontario (LCBO) by allowing it to sell 12-packs of beer and give customers the option of buying more booze – including cases of wine – over the Internet; and restructure Ontario Power Generation (OPG) so it provides more money to government. Mr. Clark estimated his recommendations would net from $2-billion to $3-billion for the province.

Mr. Clark said both the LCBO and OPG should remain in public hands.

His most unexpected move was to push for the Beer Store to pay the treasury more.

The monopoly is run by foreign-owned brewing giants Molson Coors, AB InBev and Sapporo, and controls beer sales in the province. Mr. Clark said the government has several options for making the big brewers pony up more cash. They could be made to hand over a franchise fee for every location or for a certain volume of sales. The government could also levy a larger beer tax, but create rules that prohibit the Beer Store from passing the cost of the tax on to customers.

He also took aim at the Beer Store for favouring big name brands by giving them more prominent display than smaller craft brews.

"Finding a craft beer at the Beer Store can be like a game of Where's Waldo?" he said.

Canada's National Brewers, the lobby group representing Beer Store owners, threatened to jack up beer prices if the government makes them pay the province more.

"Adding new taxes and government fees on to beer, or the retail and distribution system that delivers that beer to beer consumers, will only drive beer prices higher," president Jeff Newton wrote in an e-mail.

Mr. Clark dismissed this concern. He argued the government could make the Beer Store agree not to hike prices as a condition of keeping its monopoly.

The panel said the LCBO, for its part, does not do enough to get volume discounts from its suppliers. If it drove harder bargains, it would save money that could then be passed on to the government.

LCBO spokeswoman Heather MacGregor welcomed the panel's suggestions: "The recommendations were obviously developed with a view to maximizing profitability and certainly enhancing the customer experience, and we definitely support these objectives."

Mr. Clark said he did not go further – such as advising privatizing the LCBO or dismantling the Beer Store – because he felt Ms. Wynne has no interest in going through the hassle.

"Our reading was the government wasn't going to burn up political capital to achieve that," he said. "Nor is the population saying 'the number one problem in Ontario is I can't get beer in my variety store.'"

Progressive Conservative MPP Montre McNaughton said Ms. Wynne had artificially limited what the panel could consider.

"It seems that one hand was tied behind his back. The Wynne government clearly laid down the ground rules when it comes to what they could propose," he said.

On electricity, Mr. Clark recommended Hydro One focus solely on transmission – getting electricity from generating plants to cities and towns across the province – and privatize local distributors that bring electricity into homes and businesses, including Brampton Hydro One.

This idea is certain to run into opposition from the NDP, who oppose selling any part of the province's electricity grid. Leader Andrea Horwath called for a referendum before any government asset is sold.

"Our public institutions are not theirs to sell off," she told a caucus meeting Friday. "They belong to every Ontarian – not just the well-connected few."

The panel's recommendations are fairly incremental, compared to the mass sell-off it might have recommended. But Mr. Clark cautioned it will still take a lot of willpower to stand up to the interest groups that will fight back against these changes.

"They're going to squawk," he said. "You have to have a stiff back. You can't just cave every time someone comes after you."