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Alberta's privatized booze stores dispel myths

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CALGARY -- Twenty years ago the Alberta government swiftly and boldly threw open Alberta's markets in beer, wine and spirits. The result has been a success story of intense competition, added convenience and thousands of new jobs.

It was in early September 1993 that Alberta announced it would privatize its government liquor stores. It did so with remarkable speed. On the day privatization was announced, the province owned 202 government liquor stores.

Just two days later, the first store was shut. By Christmas, two-thirds of the government shops were closed or sold (in some cases, to government employees). The last Alberta government liquor store was out of business by early March 1994, just six months after the initial announcement.

The results speak for themselves. Pre-privatization, in addition to the 200-plus government liquor stores, the private sector operated 65 full-product outlets while 530 hotels offered up a limited product selection for sale.

In the 20 years since the Alberta government exited the retail business, private-sector retail outlets have grown to 1,982 in total. Product selection has expanded, from 2,200 in 1993 to over 19,000 varieties of beer, wine and spirits now. Employment in retail liquor stores (including the government numbers at the time of privatization) jumped from 1,300 employees to 4,000.

Alberta's privatization model has its critics. For example, the self-labelled Consumers' Association of Canada once claimed Alberta's prices were mostly higher than British Columbia. And one university think-tank claimed the Alberta government lost $1.5 billion in revenue since privatization.

Both claims are incorrect. The Consumers Association' study used median prices (not the lowest prices available in Alberta) and surveyed just 53 products. Also, the group ignored one of the cheapest sources of beer, wine and spirits in Alberta: the Real Canadian Liquorstore chain (a division of the Superstore/Loblaws group).

In contrast, 11 years ago, I conducted a more comprehensive review of prices between B.C. and Alberta using pre-tax and pre-markup prices. I made both "deep" and "wide" comparisons and looked for the lowest available price, not some "median" measurement.

On the deep comparison, I contrasted 1,845 products available at B.C. government stores with two chain stores in Alberta; 83 per cent of beer, wine and spirits were cheaper in Alberta, even including much of the wine produced in British Columbia (something I still find true in personal shopping).

On the "wide" comparison, I compared 166 products available at both B.C. government stores and 100 Alberta stores; 90 per cent were cheaper in Alberta. On a pre- and post-privatization contrast, a 2003 study by economist Douglas West based on 100 Alberta stores found retail prices rose by four per cent in the immediate years after privatization but dropped in the last half of the 1990s, in part due to increased competition.

And what about the claim of lost revenue, a red herring often advanced by privatization opponents including, for example, government employees' unions in Ontario whose members work in government liquor stores?

The data show Alberta hasn't exactly starved itself of booze revenues. Including the first fully privatized budget year (1993-94), and to the end of the last year, the Alberta government reaped $11 billion in markups (read "tax") from beer, wine and spirits. That includes $729 million in the past year alone.

In fact, it is those markups, rather than privatization, that have the most effect on revenues.

Finally, privatization opponents point to the social ills that could result from liquor-store privatization. But a 2009 Frontier Centre study found Saskatchewan, a province with a plethora of government-run liquor stores and comparatively low overall sales and alcohol consumption rates, still showed the "highest, second-highest or third-highest rates of alcohol-related harm with respect to friendships, marriage, work, studies, employment, finances, legal problems and physical violence."

Twenty years after Alberta began to dismantle and sell off government liquor stores, no other provincial governments has exited the retail side of the liquor business. This is not for economic or social reasons, but for merely political ones: too many government employees' unions have a vested interest in the status quo.

The reality is that private retailing of beer, wine and spirits is unremarkable wherever it occurs -- whether in Alberta in stand-alone private liquor stores, or Europe, where grabbing beer or wine off the grocery store shelf is considered a normal part of shopping.

 

Mark Milke is a senior fellow with the Fraser Institute.


-- troymedia.com

Republished from the Winnipeg Free Press print edition September 12, 2013 A15

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