snowywolfowl | The economics of Smashbomb denial...or a straight take on the LCBO's decision

The economics of Smashbomb denial...or a straight take on the LCBO's decision

So, about that last post. I hope it was entertaining, at least on some level. And I do promise that I was 100% sober when I wrote it. :)

To provide some background though it's a very confusing situation the LCBO has created. There are lots of interesting alcoholic products sold in Ontario and the article I got the pictures from* pointed out that there is very little consistency in what is acceptable, packaging wise, and what isn't. Wines with names like "Fat Bastard" and "Son of a Bitch", chocolate bar flavoured liqueurs, and alcoholic energy drinks that teens would probably love are fine, but vodka in a skull? No way. Small micro breweries with 1960's Batman graphics? Way too risque for the LCBO.

Now, while I was trying for (and hopefully achieved) some sarcastic humour there are some serious economic consequences for small business here that I don't think any of the states in the US face due to the LCBO's presence in Ontario.

To begin with, let me make one thing crystal clear. I like the LCBO. I really do. It’s a great money maker for the province of Ontario and in these difficult economic times anything that can help keep roads fixed and hospitals running is a good thing. I like the fact that it’s harder for underage kids and inebriated customers to get alcohol because the sales people in the store are mandated to control access to alcohol as a key part of their job. When I contrast that with the number of local bars here that have been hit repeatedly with citations for serving minors and drunken patrons its existence on the whole is a positive for Ontario.

However, one of the economic prices of the LCBO’s near monopoly on alcohol sales is that distribution channels for breweries, wineries and others are either controlled by the LCBO, or by the privately owned BEER Store chain that is run by the very large Molson and Labatt breweries. This means that brands like Smashbomb, which is a small microbrewery, are essentially forced to pay very large stocking fees to the BEER Store chain (which is quite happy to take the money, and rightfully so) to be distributed. As a result this is an example of a government agency (well, actually a Crown Corporation) needlessly restricting the growth of a small business who’s continued growth and profitability can help keep its local area’s economy going on the dubious grounds of not liking the colour the cardboard is printed. It’s not like the product is made of wood alcohol, or being marketed to children. It’s a beer, marketed to adults, that just happens to have louder graphics than Moosehead.

So what is the solution? To the possible surprise of some people who have read my blog, I’m playing the Adam Smith card here. While it is true that I’ve never advocated unrestrained free market capitalism I think that the LCBO should put the beer (and other assorted spirits) on the shelves, stand back, and let the consumer decide. If they like the graphics and think the drink is flavourful it will rise on its own merits, and if people think the graphics are infantile and the hooch more tasteless than old newspaper it will fall flat on its face. If it’s not obscene packaging there is no reason for the LCBO to hold back producers like this, and who knows? Maybe if the LCBO loosens up a little maybe we can reverse the flow of crossborder beer shoppers a bit. It certainly wouldn’t hurt our small micro brewers or our finances.

http://torontoist.com/2011/03/is_local_beer_culture_being_smashed_bombed_by_the_lcbo.php