The Shape Of Things To Come?

Over the past several years, I have become a bit of an aficionado of bourbon. Given that most of my life I have never cared for the taste of straight liquor, how I came to fancy it is something of a mystery, but it is now my hobby that whenever I see a new listing in the LCBO (Liquor Control Board of Ontario), if it is within my price point, I will buy it. The other frequent purchase is red wine.

My imbibing habits are really not the subject of this post; rather, it is a disturbing trend I have noticed upon visits for the past several weeks. Product prices are rising, not by ten or twenty cents, but by dollars. For example, a bottle of Barefoot Merlot, a California wine, was retailing about six weeks ago at $9.95. It then went up to $10.05, and quickly jumped thereafter to $10.95. A bottle of Eagle Rare bourbon, (a rare purchase for me, given its price) jumped from about $49 to $54.65. I could give numerous other examples, but I think you get the picture.

Given the relative stability, even upward trend of the Canadian dollar, these increases on American products cannot be attributed to currency fluctuations nor simply a cash grab by the province. I believe there is something more insidious at work.

I believe that the Ontario Liberal government, should it win re-election in 2018. is planning to privatize the LCBO, surely one of our crown jewels, given the huge profits that go into the provincial treasure each year. Indeed, in fiscal 2013-2014, it made a record profit of $1.74 billion, more than our formerly wholly-publicly-owned Hydro One.

What is my evidence, other than the rising prices that would make the LCBO's sale even more attractive to private investors? Consider the pattern:

Before privatizing Hydro One, the government engaged in a series of price increases for electricity, culminating in the current peak rate (weekdays 11 a.m.-5 p.m.) of 18 cents per kilowatt hour. One of the reasons cited is that Ontarians' conservation efforts reduced Hydro One's revenues. Left unsaid is the fact that lower profits would have also resulted in a lower IPO when the first 15% of Hydro One was sold off.

But wait. There's more.

Ontario Premier Kathleen Wynne has made a big play to offer a wider distribution of beer, which will ultimately be available, but only in six-packs, in 400 grocery stores. Prior to that, she had expressed public outrage over the virtual monopoly enjoyed by the privately-owned Beer Store, whose proprietors are multinationals: Molson-Coors, Labatt (owned by Anheuser-Busch InBev) and Sleeman (owned by Japan’s Sapporo). At the time, she suggested a licensing fee would be imposed on that monopoly. Needless to say, that never happened, but the fact that beer is now allowed, albeit in limited distribution and quantity in grocery stores, suggests an effort to change the public perception about the virtues of privatization.

Next, there is the recently-announced LCBO delivery service. Finance Minister Charles Sousa said,

the creation of LCBO.com shows the government-owned liquor agency's commitment to evolve and modernize, and will provide greater convenience for consumers.

"The virtual shelf space now available to small wineries and breweries is fantastic," said Sousa.

The online sales site will be a huge boost to Ontario wineries, breweries and cider producers, predicted LCBO president and CEO George Soleas.

As well as a boost to their already fat bottom line, no doubt, thereby enhancing its attractiveness to future private investors.

Consider as well the recent hiring of Bonnie Brooks as the LCBO's new Chair. Known as a turnaround-queen, she joined Hudson Bay in 2008, becoming

its first female president and CEO. Brooks is known for engineering a turnaround for the retailer, dropping its moribund apparel brands and bringing in mid-to-high end fashion products.

Brooks was set to retire from her role as vice-chairman before agreeing to take on LCBO role. She said this new opportunity would allow her to help “build on the great work that has already been done, and to take this exciting retail powerhouse to the next level,” with its expansion online and its new role as wholesaler to grocers.

Cynics like me would suggest that she has really been hired to complete the transformation of the LCBO prior to the start of privatization.

Expect no mention of these plans before the next election. Just as the privatization of the very profitable Hydro One came out of the blue, a cowardly and costly way to avoid tax increases while bringing in her balanced budget in time for the next election, my prediction is that Kathleen Wynne will once more betray the people of Ontario should she win another majority mandate

It is a sad thing when a citizen comes to look upon his government with suspicion and loathing. Yet it is an odium that the premier and her tired regime have justly earned.

Just A Fleeting Thought About Young Tim

I have a busy morning ahead, so just a brief post for now. That serial recycler of tired policy, young Tim Hudak, continues to maintain his naive faith in the virtues of the private sector as a panacea for all that ails us, yesterday calling for the end of the LCBO's monopoly on alcohol sales.

Trumpeting the virtues of privatization, along with the possible sale in whole or in part of the monopoly that injects about $1.6 billion per annum into provincial coffers, the never-ready-for-prime-time-politics leader of the Progressive Conservatives might be advised to supplement his populist rhetoric with a little research. As published in today's Star, Canadian jurisdictions that have privatized sales have seen an increase in prices and a reduction in selection.

Perhaps none of that, however, will matter to those who support the errant but evangelical vision of young Tim.