TORONTO, May 17, 2024
/CNW/ - As Ontarians gear up to celebrate the May long
weekend, consumers of beverage alcohol in the province may soon
also have to gear up for higher prices and a dwindling selection of
well-known vodkas, whiskies, rums, gins and tequilas at the
LCBO. The makers of well-known brands like Crown Royal,
Canadian Club, JP Wiser's, Forty Creek, Bacardi and El Jimador
Tequila, among others, are sounding the alarm after months of
disappointing conversations with the LCBO. These companies
represent almost 70% of the spirits products sold in Ontario.
Sellers of beverage alcohol in Ontario have been blindsided by a staggering
multi-million-dollar retroactive tax bill from the LCBO, and the
consequences for consumers and the province are stark.
Claiming to be seeking the best price for consumers, the LCBO is
unilaterally clawing back payments on products sold in 2023, based
on claims that Quebec's liquor
board (the SAQ) obtained similar products for a lower price. But
liquor boards, not suppliers, largely dictate pricing in their
provinces. Quebec's system has
long applied a requirement for the lowest retail price.
Ontario, however, has long had a
system with a mandatory minimum retail price for consumers that
raises prices every year. Now the LCBO is applying a punitive
lowest wholesale price requirement, unfairly squeezing suppliers.
We believe the LCBO is taking advantage of its own purchasing rules
and inflating its revenues with no savings for consumers.
When consumers, bars, restaurants, and others buy beverage
alcohol in Ontario, 75% of the
price of every bottle is composed of taxes and the LCBO's generous
"markup". Further, Ontario's
legislated minimum price policy for beverage alcohol forces the
LCBO to raise prices every year. Just this year, the minimum price
markup was increased by almost five per cent, widening the gap even
further between Ontario and other
provinces. As a result, today Ontario consumers are paying $31.15 for the lowest priced 750ml bottle of
vodka, while Quebec consumers only
pay $22.25 at the SAQ.
Punishing suppliers for circumstances beyond their control is
unfair, provides no benefits to consumers, and puts suppliers in an
impossible situation. Unable to absorb these exorbitant retroactive
fees, each supplier must now consider its commitment to the
Ontario marketplace, including
potential changes to its investments and product offerings, and
consumers may no longer get the benefit of discounts or promotions
on their favourite brands.
In most markets, when it no longer makes commercial sense for
suppliers to sell to certain retailers, they can use other retail
channels to sell their products. In Ontario, neither suppliers of spirits nor
consumers of their products have any other available option. Worse,
at a time when affordability is top of mind, consumers will not
receive any benefit from this practice through lower prices or
rebates.
"In 2024, it only makes sense for Ontario consumers to have as many choices as
other provinces when buying beverage alcohol, and for distillers of
all sizes to be able to sell these products under more transparent
and growth-oriented business practices", said Lorena Patterson, Senior Vice President, Public
Affairs and Policy at Spirits Canada.
"As the sole buyer and seller of all beverage alcohol for
Ontario consumers, the LCBO's
conflicting policies are overcharging both suppliers and consumers
again and again," Patterson added. "This could drive some of
consumers' favourite brands out of the market".
The LCBO's actions act against the interests of consumers by
forcing them to pay an ever-increasing, opaque mark-up scheme.
Further, the LCBO is abusing its market dominance to force
individual suppliers to raise prices in other provinces to match
the floor price the LCBO sets; this punishes consumers across
Canada as a result.
"Distillers and the LCBO have been long-standing partners on
innovation, market growth, and charitable campaigns for many
years," said Patterson. "This partnership has helped support a
healthy dividend to the Ontario
taxpayer. This retroactive tax grab ignores our long history of
collaboration and investment in the province, and the major impacts
that all Ontario and other
Canadian consumers could now face. As a result, our companies are
compelled to examine all possible options for action."
About the companies
impacted:
We supply Ontarians, brands distilled for Bacardi Canada
Inc., Beam Canada Inc., Brown-Forman Corporation,
Corby Spirit and Wine Limited, Diageo Canada Inc., Forty
Creek Distillery Ltd. (operating as Campari Canada), and
Rémy Cointreau USA,
Inc. Together we represent almost 70% of the spirits
products sold by the LCBO and almost 35% of all products sold by
the LCBO. Here are just a few of our brands:
Bacardi Canada Inc.
- Bacardi
- Grey Goose
- Patron
- Martini
- Dewar's
- Bombay Sapphire
Beam Canada Inc.
- Canadian Club
- Alberta Pure
- Alberta Premium
- Sauza Tequila
- Jim Beam
- Maker's Mark
Brown-Forman
Corporation
- Ben Riach
- Chambord
- El Jimador
- Ford's Gin
- Gentleman Jack
- GlenDronach
- Herradura
- Jack Daniel's
- Old Forester
- Woodford Reserve
Corby Spirit and Wine
Limited
- J.P. Wiser's
- Polar Ice
- Lamb's
- Lot No. 40
- Jameson
- Absolut
- Beefeater
- The Glenlivet
- Chivas Regal
- Kahlua
- Malibu
- Altos
Diageo Canada Inc.
- Crown Royal
- Smirnoff
- Guinness
- Johnnie Walker
- Captain Morgan
- Tanqueray
- Baileys
- Ketel One
- Talisker
- Lagavulin
- Bulleit
- Gordon's
Forty Creek Distillery
Ltd. (operating as Campari Canada)
- Campari
- Skyy Vodka
- Wild Turkey
- Appleton Estate
- Aperol
- Grand Marnier
- Espolon
- Courvoisier
- Wray & Nephew
- Forty Creek
- Frangelico
- Cinzano
Rémy Cointreau USA, Inc.
- Remy Martin
- Louis XIII
- Cointreau
- Metaxa
- Mount Gay
- St-Remy
- Bruichladdich
- The Botanist
- The Hautes Glaces
- Westland Distillery
- Telmont
- Belle de Brillet
#onpoli #foodandbeverage #lcbo #qcpoli
PUBLIC FACT SHEET
Key Facts about alcohol pricing in
Ontario
- The LCBO takes home $0.59 for
every $1 in spirits sales (before the
federal excise tax and HST).
- Together, taxes and LCBO's margin form almost $0.75 of every dollar paid by consumers.
- Additional and undisclosed charges from LCBO are also
integrated into much of the remaining $0.25
cents per dollar of sales which goes to suppliers. The
suppliers' selling price to the LCBO includes:
- Production of the product, warehousing, bottling, storage,
labour
- Transportation costs (LCBO charges 137.5% markup on
transportation and other components of suppliers' costs)
- Purchase/Shelf promotions, Aeroplan, Food & Drink
Magazine
- Some products are subject to LCBO's Shipping from Source
policy, another way LCBO arbitrarily extracts dollars from
suppliers. (e.g. suppliers cannot ship products like tequila from
consolidation warehouses in the US and are forced to ship from
place of origin)
- These costs, many of which only occur in Ontario, are not included in LCBO's
calculations when they determine their 'lowest Free on Board (FOB)
price' compared to other provinces.
- Under the Minimum Pricing of Liquor and Other Pricing Matters
regulation, the "social responsibility pricing model", the minimum
price of alcohol in Ontario
increases every year by law. For example, the minimum legal price
the LCBO can sell a 750ml bottle of vodka in 2024 is $31.15. This floor price then determines what the
supplier can sell the product to the LCBO for. In Quebec, the least expensive bottle of vodka in
Quebec sold by the SAQ to
consumers for $22.25.
- In retaliation, the LCBO is retroactively applying Section 14 -
demanding the lowest price in the country from suppliers, when its
own legislation forces prices to increase every year.
- Suppliers also have a deep concern about the motives for the
LCBO's sudden application of this long dormant clause since none of
its benefits will be returned to the consumer. One must ask if the
intent of the clawback is simply to bolster provincial revenues to
cover government deficits. The LCBO has offered no plan for
reconciliation of the inconsistencies between a "lowest national
FOB" pricing model and the current social responsibility pricing
model, leading to concerns that they intend to continue this
punitive practice in the future.
SOURCE Spirits Canada