Save the Ontario Hospitality Industry by Reducing the LCBO Markup on Alcohol for Licensees
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In anticipation of the upcoming Provincial budget, I write to you today to let you know of my support for a reduction in the LCBO markup on alcohol sold to licensees. Restaurants, bars and event venues have been devastated over the past year, revealing many structural issues with our business models alongside Ontario’s 100 year agreement of alcohol sales.
The most glaring challenge to a sustainable business model for restaurants and bars is that we pay more on average for alcohol than the consuming public. Those of us who sell alcohol for a living (and collectively purchase over $577 million annually, 2019 fig.) are forced to pay more for it than any one consumer, and then turn around and attempt to sell it to our customers for a profit. We are collectively of course, the largest purchaser of alcohol in the Province.
Ontario is one of the very few jurisdictions in the world that does not have wholesale pricing for its licensed sellers of alcohol. It is time to bring Ontario’s alcohol pricing into the 21st century. LCBO markups range from 71.4% to over 140% before additional provincial taxes are applied. We have seen alcohol markup reductions in Provinces across the country, including most recently in British Columbia.
Here are the results of a recent survey¹ of Ontario hospitality businesses:
54.8% said their business lost 75% or more of its staff
92.8% said their business sells alcohol
54.3% rated their profit on alcohol sales since COVID as ‘terrible’, while 5% rated it ‘good.’
73.3% are relying on government support for survival
94.1% said their business would benefit from a reduced cost for alcohol
While we are grateful for the regulatory change that has allowed us to sell alcohol with take out, the truth is that the single most important thing that can be done to ensure the prevention of a catastrophic collapse of independent restaurants is a reduction in the LCBO markup. Climbing out of this pandemic will not be like flipping a switch. Restrictions implemented for the health and safety of Ontarians have been devastating for us and convincing the public that restaurants are safe will take time. With incredibly diminished sales and already razor thin margins, restaurants and all licensees will need to find a way to turn a profit. The answer is obvious.
We as the hospitality industry, collectively request that the Provincial government make a regulatory change allowing for a 25% reduction in the LCBO markup for all purchases of all alcohol by licensed establishments. This reduction in mark up will create newfound margin and will preserve thousands of jobs across Ontario on the main streets of large cities and small towns alike. It will help restaurants return to their role as the fabric of their communities providing neighbourhoods with the places to celebrate milestones and reunions without being on the knife’s edge of bankruptcy. It will, in a short amount of time, also return huge dividends to the LCBO as this reduction in markup will be the single most effective investment in future sales that the LCBO will ever make.
Policy changes put forward in the upcoming budget are of paramount importance to the recovery of our economy across Ontario. With over 30,000 establishments and well over 300,000 employees, it is hard to imagine a more effective way to jump start the economy than improving the fate of independent restaurants. Bringing Ontario into the 21st century by taking this next step in the modernization of the antiquated structure of the LCBO is desperately needed. Our communities across Ontario depend on it.
(¹Results from a survey of 222 respondents directly or indirectly working in the Ontario hospitality industry.)
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