Doug Ford’s change in alcohol sales could cost well over $225 million

Premier Doug Ford’s plan to bring beer and wine to convenience stores earlier than planned will cost Ontario taxpayers at least $225 million, but evidence suggests the total cost is actually hundreds of millions more.

When the Ford government announced it would pay the multinational owners of The Beer Store to facilitate the “early implementation” of expanded alcohol sales, it did not disclose the cost of other key components of its plan. These components include:

• Granting a wholesale rebate of 10 percent on the LCBO’s basic retail price to private sector retailers (including grocery stores and convenience stores).

• Breweries will be granted a full refund of what the LCBO calls “service costs” for wholesale beer sales.

• This gives more than 8,000 grocery and convenience stores the right to sell beer, wine, cider and ready-to-drink beverages at lower prices than the LCBO.

Official figures from the Ministry of Finance and the LCBO, obtained by CBC News on Monday, show that the province faces a net revenue loss of $150 million to $200 million a year as a result of the changes, in addition to the Beer Store payments.

The Ontario Liberal Party estimates the cost at $1 billion in direct payouts to the Beer Store, grocery chains and convenience store owners, as well as lost revenue for the LCBO.

Ontario Liberal Party leader Bonnie Crombie speaks with party leader John Fraser at a news conference about the cost of the Ford government’s plans to allow all convenience stores and grocery stores in the province to sell alcohol. Her party puts the cost of the changes at $1 billion. (Mike Crawley/CBC)

“This is a billion-dollar waste of alcohol,” Liberal Party leader Bonnie Crombie said Monday during a press conference in Queen’s Park.

Crombie and the Liberals base their billion dollar figure on these additional costs:

• The major grocery chains save $74 million per year by granting a wholesale discount of 10 percent.

• $375 million for the Beer Store through LCBO service fee reimbursement.

• $300 million in lost revenue due to failure to collect a licensing fee from retailers.

These amounts would be in addition to the LCBO’s loss of revenue from lower alcohol sales in its own stores and the $225 million payment to The Beer Store.

The Liberals are calling on both the Ontario Auditor General and the legislature’s Financial Accountability Office to investigate the true cost of the deal.

“Doug Ford has shown time and time again that he is in office to please his rich, well-connected insider friends at the expense of the people of Ontario,” Crombie said. “The guy who promised a dollar of beer and didn’t deliver is now squandering a billion dollars on booze.”

The provincial government is paying the beer store $225 million with the condition that its owners keep at least 300 locations open across Ontario by the end of 2025. (Jeff Walters/CBC)

CBC News reported last November that billions of dollars were at stake as the government prepared to change Ontario’s alcohol trade landscape. The province earned $2.5 billion from the LCBO last year, an amount that does not include federal taxes on alcohol.

The Liberals’ figures do not take into account the fact that the LCBO will generate additional revenue by becoming the sole wholesaler for thousands of new retail locations in grocery and convenience stores, a Finance Ministry official said.

“These are all net new revenues,” the official said.

LCBO forecasts net loss of up to $150 million

According to a confidential projection obtained by CBC News, the LCBO, as the wholesaler of the new retail stores, expects additional annual revenue of between $900 million and $1.17 billion.

However, the same forecast shows that the LCBO expects the changes to result in an annual loss of between $600 million and $915 million in retail sales – and a reduction of about $400 million in annual state tax revenue.

According to the LCBO forecast, the impact of the changes will amount to a net loss of $98 to $150 million per year.

Treasury officials estimate that beer service fee reimbursements will add an additional $45 million per year.

Confidential projections obtained by CBC News show the LCBO expects the changes to the alcohol trade to result in a net loss to the government of $98 million to $150 million a year. (David Donnelly/CBC)

However, an industry source puts the number much higher. CBC News is not naming the source because her company has not authorized her to speak on the record.

By the end of 2025, the rebate will total about $350 million, the source said. That figure is based on expected beer sales at eligible locations from now until then, multiplied by the service fee of 74 cents per liter.

The reason for the big discrepancy: The government only takes into account the service fees paid by currently licensed food retailers, while the industry source calculates the fees it expects for all sales outside Beer Store outlets.

Although the discounts and reductions are only set to last until December 31, 2025, the province will continue to have to forego this revenue in the long run, according to the source. The source’s logic: If the government does not maintain the fee reductions, the price of alcohol would skyrocket in 2026.

“They won’t put the genie back in the bottle,” the source said.

According to the source, the cost to the state treasury over the next year and a half will be closer to the billion-dollar figure cited by the Liberals than the government’s estimate.

Opposition questions Ford over payout to Beer Store

During question time on Monday, Ford defended the $225 million payout to Beer Store, which requires the companies to keep at least 300 locations open through the end of 2025.

“Why is this premier pumping money into the pockets of these big alcohol companies while our emergency rooms are closing?” asked NDP Leader Marit Stiles on Monday.

Ontario Liberal MPs are calling on the legislature’s auditor general and Financial Accountability Office to investigate how much it will cost the province to allow 8,500 grocery and convenience stores to sell alcohol. (Frank Gunn/The Canadian Press)

“We are here to support the employees of the Beer Store,” Ford replied.

In December, Ford announced plans to allow convenience stores in Ontario to sell alcohol starting January 1, 2026.

Ford’s PCs had promised this move during their 2018 and 2022 election campaigns, but an agreement with the Beer Store signed by the previous Liberal government limited the number of retail stores allowed to sell beer, wine and cider until the end of 2025.

Industry insiders told CBC News at the time that the province would face hundreds of millions of dollars in penalties if it terminated the agreement early.