Is it time for Canada’s provinces to privatize liquor distribution?

Outside of Alberta, Canada's liquor distribution models are just plain wacky.

In most provinces, the government controls the distribution of alcohol through publicly owned warehouses and retail outlets. In British Columbia, for example, all retail liquor sales must be purchased through the government's Liquor Distribution Branch (LDB), which acts as the worldwide buyer and distributor for virtually all liquor sold.

The system, however,  is simply a remnant of an era past when governments believed it was their right and duty to encourage moderation in alcohol consumption.

But is this really necessary in 2012?

In 1993, the government of Alberta became the first province to disband their liquor control board and replaced it with a private liquor distribution system -- albeit a still highly regulated system.   The retail system is also now fully privatized so that licensed private stores can sell liquor.

According to a 2012 analysis completed by the University of Calgary's School of Public Policy, Alberta's experience has been a success.

Since privatization, the number of liquor stores in Alberta greatly increased as did product selection and government revenues.

Prices decreased by 2.9 per cent across the board, while alcohol consumption only increased modestly.

In 2002, the Liberal government in British Columbia allowed private liquor stores into the market and are now looking at privatizing alcohol distribution.

Doing so would be in the best interest of consumers.

According to recent article for the Globe and Mail by Vancouver attorney Tom Wilson, our liquor distribution systems in Canada result in higher prices for consumers.

While liquor boards purchase large volumes of alcohol, he says, they can't or won't negotiate 'volume' discounts.

"Unlike Wal-Mart, B.C.'s LDB and other provincial liquor bodies in Canada don't negotiate price based on the volume of alcohol they purchase. They don't negotiate volume rebates at all. The LDB actually tells suppliers of certain alcoholic products to charge more, not less, because of something called social reference pricing," Wilson writes.

"The theory is, if the price for alcohol is high, people will drink more responsibly and they will buy less. So if the price of a new Finnish vodka is being offered to the LDB for lower than the usual inventory carried by B.C. liquor stores, the LDB will ask the supplier to increase the price the board pays for the product, and it can't be sold for less."

So instead of paying $6.50 for a bottle of Yellow Tail Shiraz in a chain store in California, Canadians pay $12.99 or more.

Perhaps it's time for government to get out of the liquor business.