DISCUSSIONS: 5-(June 30) Was the threat of a LCBO strike merely a marketing scheme?

Ontario revenue from LCBO sales is near $2 billion dollars. Yet the LCBO is criticized for not earning enough.

There are numerous valid criticisms of the LCBO. Now, here is another…

 

The Liquor Control Board of Ontario is under pressure to increase its revenues. In that light, the threat of a strike may have been a marketing strategy to increase sales.

The LCBO is a ‘quasi-monopoly” for sale of alcoholic beverages in Ontario. Though The Beer Store and a limited by growing number of grocery and confectionary stores are limited retail outlets for some alcoholic beverages, the LCBO is the big player.

In 2016, revenue returned by the LCBO was near $2 billion dollars. Yet, many critics feel the corporation is not as profitable as it could or should be.

Most prices of LCBO stock are on average 30% higher priced than competitive products sold in nearby American states. Currency exchange rates notwithstanding, LCBO pricing seems comparatively higher. Justified or not, there is no alternative to any other source of alcoholic beverage purchase.

Established in 1927 by the provincial government of Premier Howard Ferguson, the LCBO has grown into one of the world’s largest purchasers of alcoholic beverages. It was created at the end of a temperance era and thus, its pricing was tainted by the tinge of discouraging excessive consumption of alcohol. Though this could open a door to the criticism of government regulation of personal rights, the pricing policy is not likely to change as the government continually hunts for new sources of revenue.

The latter problem which imposes more pressure on the LCBO to earn more money. Raising prices risks sales reduction. Therefore, the LCBO must use the alternate marketing policy, increasing sales. Lowering prices would increase sales, most likely, but opens the LCBO to criticisms of encouraging consumption of alcohol.

The LCBO needs to use a more subtle strategy for increasing sales. Consider the following as a possibility.

When the union threatens a strike, the LCBO can use this as an opportunity of increasing sales. The LCBO underlines that the public will not be able to purchase any product if a strike takes place. A strike can mean the closure of the LCBO stores for an unknown period of time. The public frightened by the potential cut off to their favourite alcoholic beverage, rushes out to stock up, something they would not be doing under normal sales conditions. The increased sales result in increased revenue. A win/win situation for the Wynne government.

Do you think this is being too cynical about the government with its need for more money?

 

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