Liquor Control Board of Ontario - Pricing

Pricing

While it is impossible to generalize comparative pricing for the thousands of different alcoholic beverages available through LCBO, the stores have acquired a reputation for high prices. Online price comparisons with independent wine retailers such as Sherry-Lehman in neighbouring New York can indicate price differences ranging from 10% (in LCBO's favour) to 30% (in the independent retailers' favour). However, alcohol sold in Canada is subject to the Federal Excise Tax Act, which contributes greatly to the cost of beverage alcohol, although most liquor tax is provincial. Wine Access, a Canadian food and wine magazine, has claimed that high-end luxury brands sell in Ontario for up to 60% more than in New York.

The LCBO pricing policies are designed to control alcohol consumption, generate revenue for the provincial and federal governments, and to support the domestic alcohol beverage industry, especially by providing incentive to purchase Ontario wine. Within this framework, the prices of LCBO products are subject to three policy constraints:

• All prices are uniform throughout the province, despite inevitable differential costs incurred by transportation and distribution. This policy effectively subsidizes the transportation of goods into the rural parts of the province. However, store managers have the right to reduce prices of 'bin-end' items at their discretion.

• The LCBO uses a system of "floor pricing", or minimum selling prices, using price control as part of its social responsibility mandate to discourage excessive alcohol consumption. This has been criticized as being a legally sanctioned price fixing mechanism to guarantee profits and discourage price competition, thus protecting established major producers.

• Less-intoxicating beverages such as light wines and beer are in effect sold by the LCBO at reduced prices, again with the stated object of influencing consumption patterns as part of the Board's social responsibility mandate.