Liquor Control Commission headquarters in Charlottetown
The P.E.I. Liquor Control Commission (PEILCC) recently announced a five per cent increase to the price of liquor sold in private agency stores, which is a net loss to consumers, and the decision deserves more scrutiny.
In 2012, P.E.I.’s provincial government amended the Liquor Control Act to expand alcohol sales in the province and “[improve] consumer convenience across the Island” by permitting private agency stores to sell liquor products. These amendments allow vendors to purchase alcohol wholesale from the PEILCC and sell it at scheduled prices in their establishments.
It is, perhaps, too early to tell definitively whether P.E.I.’s experiment with private agency stores has been successful, however, the preliminary results of it are encouraging. Between 2012 and 2013, when the PEILCC contracted six private agency stores to sell alcohol in the province, gross revenue and profit grew by 2.8 and 3.9 per cent. Furthermore, as indicated in the PEILCC 2012-13 annual report, cash transfers to the province and provincial sales tax revenue grew collectively by 3.2 per cent, representing “… the best year ever by the commission in terms of contributions to the Provincial Treasury.” Lastly, in a Guardian report discussing the PEILCC’s financial performance in 2012-13, CEO Jamie MacLeod confirmed P.E.I. to be the only province in Atlantic Canada “… on the plus side of sales overall year-to-date.”
Permitting the sale of alcohol in private agency stores, therefore, appears to have resulted in increased sales, larger profits, and higher provincial revenues. Moreover, despite concerns about public safety and social responsibility, investigators from the PEILCC recently made 130 visits to liquor stores in the province and found that “… cashiers checked IDs 80.5 per cent of the time [at private agency stores]. At government-run stores, it was 62 per cent.” Instead of embracing the agency model, however, the PEILCC decided to levy a five per cent premium on liquor sold in private agency stores. This action will constrain an innovative service delivery model that meets consumer demand safely, resulting in healthier profits for the Island’s liquor commission and greater revenues for the provincial government.
Minister Robert Henderson, who is responsible for overseeing the PEILCC, initially argued the five per cent levy reflected the convenience that private agency stores offer: “We felt that, based on the premise of convenience, the consumers who are going there are saving the distance they’d have to drive to another store.” This argument is dubious, however because, for some customers, provincial outlets are closer and therefore more convenient than private retail stores. The president of the P.E.I. Union of Public Sector Employees, an organization that welcomes the PEILCC’s price increase and ultimately opposes private agency stores, for example, argued this past May that “… in many cases, the provincial outlets are closer to Islanders and offer a much better selection at a better price.”
Mr. MacLeod’s recent interview with the Guardian revealed an apparent motivating force behind the decision: “The 19 provincially owned and operated liquor stores saw a drop in sales of approximately 5.5 per cent.” In fact, Minister Henderson confirmed this to be the case when he argued the price increase “… does also provide our corporate stores with a little bit more of an advantage and for those that are price conscious, they still have the corporate stores, which will go on the same pricing concept as in the past.”
First, the PEILCC exercises monopolistic control over the distribution and sale of liquor in P.E.I. and if its goal is the success of government-run liquor stores, it should prohibit private agency stores altogether and embrace monopoly. More importantly, however, is that providing government-run stores with “more of an advantage” should not be an objective of government policy, particularly when it hurts taxpayers, who, in this instance, act doubly as consumers. Government should exist to serve the electorate, and to serve it in a financially prudent manner; it should not exist to serve itself or political interests.
Raising the price of liquor sold in private agency stores by five per cent is a net loss for consumers and may handicap private agency stores, whose initial success has also benefitted the provincial government and PEILCC. Given the success of P.E.I.’s experiment with private agency stores, it would be more appropriate to expand the initiative, rather than constrain it with a mandated price increase. Let P.E.I. consumers keep the extra change.
Shaun Fantauzzo is a policy analyst at the Atlantic Institute for Market Studies (www.aims.ca)