LCBO's tax bill threatens consumers' favourite brands.
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."
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
- Grey Goose
- Patron
- Martini
- Dewar's
- Bombay Sapphire
- Canadian Club
- Alberta Pure
- Alberta Premium
- Sauza Tequila
- Jim Beam
- Maker's Mark
- Ben Riach
- Chambord
- El Jimador
- Ford's Gin
- Gentleman Jack
- GlenDronach
- Herradura
- Jack Daniel's
- Old Forester
- Woodford Reserve
- J.P. Wiser's
- Polar Ice
- Lamb's
- Lot No. 40
- Jameson
- Absolut
- Beefeater
- The Glenlivet
- Chivas Regal
- Kahlua
- Malibu
- Altos
- Crown Royal
- Smirnoff
- Guinness
- Johnnie Walker
- Captain Morgan
- Tanqueray
- Baileys
- Ketel One
- Talisker
- Lagavulin
- Bulleit
- Gordon's
- Campari
- Skyy Vodka
- Wild Turkey
- Appleton Estate
- Aperol
- Grand Marnier
- Espolon
- Courvoisier
- Wray & Nephew
- Forty Creek
- Frangelico
- Cinzano
- 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
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
For media inquiries, contact: Via Dulay, Senior Manager, Communications, Spirits Canada, [email protected]
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