Free Spirits: An Argument against State-Run Booze

When I lived in Oxford, I loved to go shopping for wine. There were a couple of wine stores down the street from where I lived that were clearly owned by wine-lovers. New arrivals had lovingly inscribed tasting notes taped to them. The selection in the two stores was quite different, and clearly reflected the tastes of the owners.

I don’t enjoy shopping for wine in Montreal that much. That’s because rather than being able to walk into a small store with lots of character, I have to go to the Société des alcools du Québec (SAQ) retail stores. Don’t get me wrong: these stores are bright and efficiently run. There’s nothing wrong with them, but there is nothing particularly right about them either. Each store is pretty much the same as any other. The folks who work there are unfailingly courteous and knowledgeable, but they are knowledgeable in the way you become knowledgeable when you take a 3-week training course, rather than in the way you are because you have developed a personal obsession with a particular cépage, and have idiosyncratically but charmingly stocked your store to reflect your particular obsession.

Like all provinces except Alberta, there is a state monopoly on the import and sale of alcohol in Quebec. I have never understood why this is the case. Don’t get me wrong: I can get as statist as the next guy with respect to goods and services that the market can’t be relied upon to produce enough of, or that it can’t, when left to its own devices, distribute fairly. But booze just doesn’t seem to me to meet either of these criteria. Based on my experience living in the UK, in France, and in the US, the market can be trusted to deliver alcohol to the people.

A few weeks ago, a kerfuffle erupted over an infomercial produced by the CSN, the union that represents SAQ employees. The video was essentially one long diss against Alberta alcohol retailers. Images of huge warehouse-like megastores in which people who might as well have been selling basketball shoes to you advising the intrepid, undercover SAQ wine expert that she should have red wine with her turkey abounded. There have been noises that the Couillard government was preparing to privatize booze stores in Quebec. The helpful producers of the infomercial wanted to make sure that we knew what we were in store for if we decided to let them have their way.

The arguments put forward by the infomercial got sidetracked because of one (since removed) vignette of a Quebecker transplanted to Calgary complaining about being served by Indians and Pakistanis who don’t know the first thing about wine. It was an embarrassing slip.

But it meant that, yet again, the debate over whether or not to maintain a state monopoly over alcohol failed to occur. That’s too bad, because I can’t see a single reason to keep it.

The main argument for privatization is variety. I remember a wine tour that my wife and I took in New Zealand, where we sampled exquisite white wines that I had never tasted anywhere else. When I mentioned to one of the winemakers there that I had never seen any of these in Quebec, he got visibly agitated. If you’re going to sell to Quebec (or to any of the provincial monopolies, for that matter), you have to produce enough for the whole province. Because SAQ outlets are basically the same, wherever you go, you can’t carry a charming New Zealand sauvignon blanc in Montreal unless it can also be carried in Sept-Iles.

Another way of stating the problem is that having a state monopoly places a lot of power for the shaping of the tastes of Quebeckers in a very few hands. The conservative biases of those who choose wine for the SAQ are clear after you’ve spent just a few minutes in any of our outlets. You would swear from perusing the shelves that France was still the nec plus ultra when it came to wine. The selection of wines from other European countries, let alone from the US and from Australia and New Zealand is pretty disappointing.

What are the arguments for the maintenance of the state monopoly? I have yet to hear a good one. Historically, it’s pretty clear that they have their origins in the state’s sense of itself as having a responsibility to maintain the morals of its citizens. Old-timers can still regale you with anecdotes of walking into drab alcohol outlets in Ontario and having to fill in a form and hand it to a dour white-coated clerk to receive one’s tipple of choice. (OK – I may have made up the thing about the white coat). Such temperance arguments are clearly no longer admissible today.

The argument from taxation doesn’t really hold much water either. It is perfectly legitimate for the state to fund its social programs by taxing booze, and I can even see an argument being made for Pigouvian taxes aimed at curbing consumption somewhat. But it can do this perfectly well by taxing the alcohol sold in privately run stores.

What does one make of the principal argument put forward by the ill-fated CSN video, to the effect that privatization would lead to the McDonaldization of Quebec’s wine stores? That seems unlikely. First, I am certain (Alberta friends, tell me if I am wrong here) that the infomercial just presented one side of the market in booze in Alberta. I imagine that alongside the wholesale liquor outlets there are wine stores with knowledgeable staff catering to more demanding consumers.

Second, one mustn’t forget that for all of its flaws, the SAQ has trained the tastes of Quebeckers in wine and spirits at least to some degree. Were the state monopoly on wine to be ended, we would not revert to an oenological tabula rasa. Sure, big box booze stores might crop up for people whose tastes are not too discriminating, but there are reasons to believe that many Quebeckers would not stand for being told that red wine and turkey go well together (though again, the claim that there is an a priori argument against the pairing would probably be rejected by many wine experts. The fact that the SAQ worker in the infomercial is so adamant that they should not speaks to my claim that many who work there are knowledgeable but not expert).

Consider the growth of the market for coffee. When chains like Starbucks and The Second Cup sprang up a couple of decades ago, a cup of coffee for most people in Canada basically meant a cup of bland filter coffee or even, God forbid, instant. Starbucks and the Second Cup established a quality threshold below which people are no longer willing to go. The coffee in these two chains is ok, not great, and it is basically the same whether you visit the franchise in downtown Toronto or in Fort McMurray.

The last few years have seen the emergence of higher end, gourmet coffee shops, that seem to be thriving. In Montreal and Toronto, there are places seemingly on every street corner at which “I want an espresso” is the beginning, rather than the end, of a conversation. I am quite convinced that had there not been Starbucks and the Second Cup, we would never have gotten places like Café Myriade, my own personal favorite, in the Concordia University ghetto. I do not believe that the big coffee chains are evil, at least as far as coffee is concerned. But it would be unfortunate if by law we were restricted to Starbucks-quality coffee establishments.

But that’s basically what we get with the state monopoly. We get a perfectly ok dispenser of wine and spirits that prepares our collective palate for explorations that the SAQ, with its one-size-fits-all approach, is unable to provide us with.

The only half-way decent argument I have ever heard for state-run alcohol stores is an egalitarian one. It might be frustrating for a consumer in Montreal not to be able to go beyond what the SAQ has to offer. But the presence of SAQs in the regions establishes a sufficientarian threshold for all Quebeckers. No matter where you live in Quebec (or in Ontario, or in BC), you can be sure to find a decent purveyor.

Note, however, that that is not an argument for a state-run monopoly. The maintenance of the sufficientarian threshold is compatible with a two-track system of import and retail. Such a system might make it the case that while people who live outside of metropolitan areas will be able to rely on the perfectly serviceable SAQ, those who live in places where there is a higher and more diversified demand will be able to choose between the SAQ and a variety of private shops. Competition might actually improve the SAQ by forcing it to cater to the tastes of those for whom the just-ok selection at the SAQ is no longer enough.

Now, this is, I concede, the very quintessence of a first-world problem. But that’s no reason not to deal with it in a sensible manner.


Free Spirits: An Argument against State-Run Booze — 12 Comments

  1. What are the arguments for the maintenance of the state monopoly?

    Price. As a large purchaser the LCBO is able to negotiate better prices on certain wines. Some bottles that are stocked at every LCBO store in Ontario are “special” items in U.S stores and retail for 50% more in some cases.

    This is not a great argument, but it is one argument you did not mention.

  2. I don’t buy the price argument, the province run outfits in Quebec and Ontario charge way more for the same wine than retailers in, say, the UK or Germany.

  3. Interestingly, the infomercial in question doesn’t even try to make the case that the SAQ provides its consumers with lower prices. Rather, it seems concerned mainly with offsetting the impression that the SAQ may actually be more expensive. Across a wide range of products, presumably selected to cast the SAQ in the most favorable light as far as price is concerned, it was a matter of pennies one way or the other. The price argument does seem to be a red herring.

  4. I am from AB but live in Ontario. I go back often. Leave LCBO alone although OK to widen booze sales. In AB you had better like what everyone else likes!! Because that is what you get. People DON’t stock small lines or off-beat stuff. Only what moves off the shelves. You need a big buyer like LCBO or grocery to cross subsidize rare or new things unless you go to private vintage dealers ($$$$$$). I like Pastis and still can’t find it anywhere in a Calgary. Yes I have been served by generic clerk idiots ( calling Chablis ‘chablissss). ‘Never heard of it’ I was told. I do not know how you cld think privatization widens choice! Small private dealers have to pay the bills somehow and it’s not by lowering prices. Think about it.

  5. The SAQ has one of the best labs for analysis in the world. It’s not because of the moral argument but because much of what is out there is hazardous. 2) the last thing QC needs is to take lessons from AB. 3) I would understand a very regulated system of worker self directed coops but otherwise I prefer the SAQ

  6. The main argument in support of the LCBO monopoly has nothing to do taxation and everything to do with the goal of maintaining the company’s existing unionized workforce.

    I would respectfully suggest that the likely reason no one has broached this argument has everything to do with the class of the readers and writers of this blog–i.e., upper middle class, comparatively privileged.

    For us, the loss of thousands of well-paid, unionized positions may be a small price to pay so that we wine enthusiasts can get our hands on the latest Pinot Meunier from the trendiest micro-boutique vintner, but I suspect that LCBO employees (at least those with full time status) are of a different opinion.

  7. Tristan: Apart from the Austrians who put antifreeze in their wine, I have never heard of contaminated wine, beer, or liquor sold commercially. All alcoholic beverages are hazardous, as they contain the toxin, alcohol. Don’t they have tort law in Quebec?
    As for protecting union jobs, yes, that is a real interest. I am a unionized public employee too. But I don’t delude myself that my union rights benefit my students or the public that pays my salary.

  8. Some arguments on the other side:

    1. When liquor sales were privatized in Alberta, prices went up. A single province-wide system is efficient in a way a plurality of independent retailers isn’t.
    2. The egalitarian argument is important: the LCBO gives consumers in e.g. northern Ontario a much better selection than private outlets ever would (and see the comment above about Alberta outlets). The system is also probably redistributive. The northern Ontario outlet doesn’t cover its costs but is subsidized by the profits from the big Toronto outlets. That’s why Daniel’s proposal to allow competition just in e.g. Montreal is self-defeating: it will take profits from the outlets that subsidize the more remote ones and leave the latter worse off.
    3. You can’t compare final prices between Quebec/Ontario and e.g. the US or UK, as Udo does, because those include taxes that vary from jurisdiction. I conclude with an anecdote.
    4. I asked the incredibly knowledgeable wine don at All Souls, Oxford whether I should buy some bottles from the cellar and ship them home to myself. He asked why I would do that when I have the LCBO. It’s the second largest wine purchaser in the world, he said, uses its power to negotiate lower prices, and is resented by French wine producers for that reason. He had also done an external assessment of the LCBO some years before and had high praise for its wine buyers: they would be on to high-quality new producers before they were big names and charging higher prices. And the selection in the Vintages section at one of the bigger LCBOs in Toronto is tremendous and always changing.
    5. I liked filling out the old paper slips, especially when it was for Chateauneuf du Pape at, if I remember correctly, $4.40.

  9. Thanks Tom. I am happy to concede 5. Evidence suggests that price differences, say between Alberta and Quebec, are negligible. I will not comment on 4 — I deal with the SAQ, and it may simply not be as good as the LCBO. Anecdotal evidence from some of my friends who shop at both suggests that that might be the case. You are of course right about 3. That leaves 2. Follow the logic of your argument: does it follow that the state should have monopolies over all consumer goods if it turns out that the market will not distribute them equally across regions. It is definitely harder to get good coffee in the regions, and there often aren’t any good bookstores. Now of course, there is an LCBO and an SAQ, and so dismantling them means taking something away, whereas not setting up a provincial coffee board means not setting something up. I am curious how far you are willing to take your consumer-good egalitarianism.

  10. Michael: I have a friend who imports wine and other specialty spirits. I also came across an article about the rigorous testing the SAQ conducts which confirmed some of what he described. The SAQ has a large and lucrative side business. Many private producers have their products tested here. By the way, there are many reasons why a product can fail. elevated levels of arsenic in the soil or issues with regional yeasts are examples. They won’t kill you quickly of course :-). But they are not picked up by the SAQ. And unions are a form of worker self direction. My concern here is private ownership and the belief that the market needs to be trusted for bringing us superior products.