There is always someone complaining about the high price of alcohol in the SAQ. It’s quite ironic when we look at the battle that broke out in Ontario because the price of spirits is lower in Quebec.
Too low, apparently, for the Liquor Control Board of Ontario’s (LCBO) liking, sparking a trade dispute with makers of popular spirits like Absolut vodka, Jack Daniel’s, Grand Marnier and Don Julio tequila.
Some examples: at the LCBO, Aperol is sold for $31.95, compared to $25.25 at the SAQ. In Ontario, the cheapest 750 ml bottle of standard vodka is sold for $31.15, while consumers in Quebec pay $22.25.
The amounts involved are so high – we are talking about more than $100 million – that the withdrawal of certain well-known brands from the SAQ shelves is being considered, as I will explain later.
To understand what is happening, you need to know that the LCBO requires its suppliers to sell their bottles to it at the best price in the country. In other words, the LCBO does not agree to pay more for its whiskey and gin than the SAQ or any other public alcohol purchasing organization. The LCBO, which is Canada’s largest buyer of alcoholic beverages, swears that this type of contract clause is “common practice” among retailers with immense purchasing power.
The LCBO discovered, somehow, that it might have been fooled. In March, it issued a curious press release that sounded more like a warning than a public service announcement: “We have reason to believe that a small number of suppliers are not complying with this requirement. »
THE Toronto Star then revealed that spirits manufacturers had already received “fines” from the LCBO ranging from a few thousand dollars to a million. The Spirits Canada association did not want to go into details or criticize the state monopoly.
Two months later, things have changed. The war is fought in front of the public. Spirits manufacturers issued a press release on May 17 to denounce the methods of their largest customer. A first.
Spirits Canada estimates that its members and other distilleries were assessed more than $100 million in “penalties” by the LCBO in the past year.
The Ontario monopoly did not deny it. But he insists that it is not a retroactive tax or fines or a tax grab or penalties, terms used by Spirits Canada. It would rather be a “chargeback”. In short, the LCBO is reducing the payments it makes to its suppliers to reimburse itself.
SMEs fear for their survival if they continue to pay the bill. The giants are looking for a way out.
“One potential solution is to stop selling in Quebec. Given that the Ontario market is twice as big, it makes sense,” Lorena Patterson, senior vice-president, public and policy affairs at Spirits Canada, told me.
By avoiding the SAQ, we avoid price comparisons. Price increases could also be passed on to the SAQ. This would also be the ultimate goal of the LCBO, according to Spirits Canada, since price differences encourage Ontarians to shop in Quebec. In short, the litigation in Ontario could have quite unfortunate consequences in Quebec.
Small distilleries have agreed to reveal the wholesale price paid by the SAQ, according to Spirits Canada. In their case, the chargeback is equivalent to the amount “overpaid by the LCBO” in 2023, on each bottle. Companies that refused to provide this information were charged an amount equivalent to the difference between the retail price at the SAQ and the LCBO… without any regard to the wholesale price at the origin of the dispute. A curious calculation, nonetheless.
If this story had taken place behind closed doors, it would be like many others. Loblaw, Sobeys (IGA), Metro and Walmart have all already unilaterally reduced the amounts paid to their suppliers for various reasons such as an acquisition or a marketing program. No one ever complains publicly for fear of reprisals. This time, we are witnessing a counterattack.
Additionally, in this case, the LCBO is a monopoly. Dissatisfied suppliers have no alternative, which increases their irritation. In terms of food, the options are more numerous, but still very limited. Withdrawing your products from Loblaw means losing a third of your Canadian sales, potentially.
Spirits Canada believes that the LCBO is dipping into the pockets of its suppliers to increase its profits, which fell by 3.4% last year. The association is devastated to the point where it calls for government intervention.
Rather, the LCBO says that it enforces its contracts out of concern for fairness, since 90% of its suppliers respect its policies, and for the good of its customers. “It would be unfair to allow a few suppliers to exploit Ontario consumers. » With such accusations, a settlement does not seem imminent.
The big question now is whether this campaign will lower the price of spirits in Ontario or whether it will remain advantageous for Ontarians to purchase their supplies from the SAQ. It would be inappropriate for a state-owned company to put so much financial pressure on its suppliers without benefiting its customers after having spoken of exploitation.