StateWays - May/June 2016

StateWays is the only magazine exclusively covering the control state system within the beverage alcohol industry, with annual updates from liquor control commissions and alcohol control boards and yearly fiscal reporting from control jurisdictions

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Another less apparent factor helps explain how these organizations perform so well; 90% of provincial liquor control systems in Canada are operated either wholly or in part by a 'crown corporation,' as opposed to a government agency per se. Crown corporations are business entities that are formed by, owned by and answerable to either the federal or provincial government rather than shareholders. While some analogous organizations exist in the USA, such as Amtrak and the Corporation for Public Broadcast- ing, crown corporations are far more common in Canada, where they handle many business functions perceived by Canadians to be in the public interest, from national postal service to provincial auto insurance. Since they exist out- side the bounds of civil service, crown corporations have more freedom in hiring talent, adapting to changing needs and adopting best practices than government agencies. For example, when Ontario's LCBO needed new leader- ship in 2001, they were able to bring in legendary retail executive Bob Peter, a former president of Canada's lead- ing department store chain, as CEO in a move that would be analogous to the Pennsylvania Liquor Control Board hiring away the head of Macy's to run its stores. Many provinces take advantage of this government- owned business model to address the public perception of conflict of interest between the parallel missions of controlling alcohol and increasing revenue. Five prov- inces split the regulatory and retail functions with a Alberta's Privatization Experiment The notable exception to the liquor control rule in Canada is the western province of Alberta, which privatized all alcohol retail operations in 1993, but does continue to serve as the province's sole wholesaler and distributor. Alber ta's wild-west ethos and oil-fueled economy make it an outlier on many fronts – essentially, it is Canada's answer to Texas. A radical approach to liquor policy reform was embraced by Alber ta Premier Ralph Klein, who came into office in 1992. The govern- ment's retail control was ended cold-turkey a year later and its standard percentage-based excise tax was simultaneously changed to a flat per- unit tax. This well-documented experiment has provided grist for the debate over privatization elsewhere in Canada, with policymakers on both sides citing Alber ta's stats, painting them as either a success story or a cautionary tale depending on their side of the argument. Some of the results had been predicted by both sides. In the first year alone, the number of retail outlets selling liquor and wine in Alberta increased by 120% and the number of SKUs available jumped by 35%. Selection has continued to diversify; Albertans have seen the number of products available increase tenfold since privatization, from 2,200 to 21,816. However, easier access also resulted in upticks in alcohol-related harms, from underage sales and drunk driving to health effects that have persisted long term. The greatest surprise to the public in Alberta was that, despite the convictions of free-market advocates, product prices went up, not down. Much as was seen recently in Washing- ton, consumers in Calgary and Edmonton complained of price increases on individual items in the immediate aftermath. Over twenty years later, Alberta consumers still pay among the high- est prices in the country for alcohol, though their flat per-unit excise taxes do result in lower prices on luxury goods. There is no consensus in Canada on whether or not Alber ta is better off post-privatization. Proponents speak of creating jobs, expanding selection and getting government 'out of the business of business.' Opponents warn of price increases, public-health harms, and the loss of tax revenue for public programs, which one study pegged at $1.4 billion for Alber ta over 20 years of private operations. It's true that one neighbor- ing province, Saskatchewan, will privatize half of its stores if the political par ty in office is re-elected, and that many others are liberalizing in ways that place some products in private stores. However, it speaks volumes that in two decades since Alber ta's daring experiment, not a single other province taken the same plunge. An agency store in Quebec. StateWays n n May/June 2016 24

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