The government's decision to put liquor in corner stores is proving to be an expensive one.
The Financial Accountability Office of Ontario (FAO) released a report today that estimates the financial impact to the Province of the decision to expand Ontario's beverage alcohol marketplace, including the cost to speed up that expansion to begin in 2024.
In September, the Ontario government allowed eligible convenience stores to sell beer, cider, wine, and ready-to-drink alcoholic beverages, such as coolers, hard seltzer, and other blended cocktails.
In its report, the FAO estimates that expanding the beverage alcohol marketplace in Ontario will result in a net cost to the Province of $1.4 billion over the term of the Early Implementation Agreement, which expires on December 31, 2030. Of the $1.4 billion net cost, the FAO estimates that $817 million relates to the planned expansion of the alcohol beverage marketplace starting on January 1, 2026, and $612 million relates to the decision to accelerate that expansion to begin in 2024.
Read the full report here.
"The projected $1.4 billion net cost consists of $489 million in support to Ontario's wine industry and Brewers Retail, which operates as The Beer Store, $1,280 million in lower tax revenues, primarily for beer, wine, and spirits taxes, and $14 million in other expenses. These costs are partially offset by a $353 million increase in LCBO net income, largely related to increased wholesale activity," says the report.
The actual financial cost to the Province will depend on how retailers and consumers respond to the expanded marketplace.
"The cost would be lower than projected by the FAO if the marketplace expansion results in higher per-capita alcohol consumption. The cost would be higher if more grocery and convenience stores participate and capture a larger than expected market share, or consumers shift their purchases to new retailers more quickly than projected."
After accounting for these and other factors, the FAO estimates that the financial cost to the Province could range from $529 million to $1.9 billion by Dec. 31, 2030.
On Dec. 14, 2023, the Province announced that the beverage alcohol marketplace for beer, wine, cider and ready-to-drink alcohol beverages would be expanded to participating convenience, grocery and big-box stores across Ontario “no later than Jan. 1, 2026”.
On May 24, 2024, the Province announced that the beverage alcohol marketplace expansion would occur “earlier than planned” with a phased rollout to begin in 2024.