According to the Ontario Auditor General report, the LCBO is not using its buying power to negotiate best prices. So by extension, we the public end up paying more then we should had they done their job right.
My thinking is since their margins are so high and their pricing formula (at least their floor pricing) is based on cost, then it actually benefits them to pay higher cost to achieve greater margins. Either that or LCBO management should be fired for incompetence. Either way, Ontario residents are screwed.
I have known that for years.....someone should have to answer to this.....where is Shari?
I also heard this on CBC this evening on my way home. Was not in the least shocked. You are correct Machine, it's pretty simple in my view:
1. LCBO is a revenue generating entity for the Ontario gov't.
2. LCBO sets pricing policy that appears to be in the consumers best interest (i.e. fixed markups on cost)
3. LCBO follows their mandate of generating revenue by using the pricing policy to their advantage: not negotiating lower cost by using their buying power and in some cases not listing producers that do not meet pricing thresholds under the guise of social responsibility.
Let's be realistic though, even if this was addressed sufficiently to the public's liking it would probably only impact the sub-$20 bottles and we'd still be paying the same prices as we are now. I suppose the only way to sort this is to get the gov't out of the alcohol business but given how broke this province is I don't even think Hudak would have killed a cash cow like this.
that is worse than PA.
Only death is free, and even that costs you your life
Full article HERE.
Like I said, the only way that this makes sense is if their pricing algorthm is set so that the higher the supplier cost, the higher the gross margin and the higher the profit. But it can't be so high that it turns customers (i.e., you and me) away, thus there's a sweet spot that LCBO tells the supplier to charge, which is higher than the supplier's list price.
So it's a win-win situation for the LCBO and its suppliers, but the public is screwed. It's great to be a monopoly indeed.
Away to where?
This story sounds eerily similar to a news story a couple of years ago about the SAQ vice-presidents who did something similar, albeit regarding conversion of prices. The incentive to keep prices high was a motivating factor as well.
"I have drunk not to the clouding of my reason, but just so much that I can still surely distinguish the syllables with my tongue." Athenaeus
"Mimik" on cellartracker.com
When I say "it can't be so high," the "it" means that particular wine, not LCBO. Even for a monopoly, there's a price above which people would simply say no. It's not an unlimited ceiling. For example, if the $30 Pipeau is priced instead at $90, it would be sitting on the shelves for a long time until they need to be reduced to clear.
I dunno. I get the impression the vast majority of Canadian wine drinkers (outside of AB) will pay the going rate, oblivious to the fact they are being gouged. Without competition, there's no knowing if you're paying a good price or not.
It's interesting to me when Beppi Crosariol lists other provinces' pricing in his reviews as it's the only glimpse we get at a 'competitor's' price:
Château Pontet-Canet 2008 (France)
SCORE: 95 PRICE: $129
What a splendid effort from the 2008 vintage of this fifth-growth red Bordeaux. Good fruit purity and concentration are complemented by traces of mineral and earth. It starts smooth, then astringent tannins tighten their grip in the second act. Cellar it for two decades or more if you can or decant it and serve it with rare beef or lamb chops. The B.C. price is $188.
This wine is available for less than $100 in the US. A singular example? Maybe. Indicative of the overall mindset? Probably.
I'm not clear whether the Auditor was referencing all wine the LCBO procures -- or just the wine it buys directly from producer, without using an agent.
I feel bad for the average Ontario consumer who drinks $12 bottles of wine regularly; who could be paying $10.50 or $11 for the same bottle; and who would probably not consume more with a price reduction.
For folks like us who regularly drop $50+ a bottle, I just don't see prices coming down. The pricing formula would be adjusted and we'd end up paying the same.
It's a real crap shoot.
I picked up a bottle of 07 Pahlmeyer at Binny's for $99 USD, while the same bottle was sold for $132.95 by the LCBO.
In the meantime, I don't know how many places are selling 2009 and/or 2010 Chateau Petrus for less than $2000/btl (if they are even available).
I agree it's crap - but without the shoot. The auditor has simply publicised what we have all known for many years. It is absolutely frustrating to have Uncle Dalton dictate what wines I can buy, and to know that the money paid for this privilege is used to buy votes for the Liberal party. Getting an occasional Petrus for $2000 doesn't soften my irritation.
I am still completely disgusted with the $300 cheque I received from the Chairman to buy acquiescence to the HST. (That was last year. Why haven't I received any more cheques this year!)
I'm pretty sure it would be no different whoever was in power, since the system has been in place for decades, most of those under a Conservative government. I give the Liberals credit for some positive steps, like BYO and the auctions, while recognizing that those are long-overdue baby steps on a very long road to normalcy, a trip that we will probably never make.
The voice of reason follows in the footsteps of my trash-talk! You are right, of course, our system of treating alcoholic beverages as the devil's own brew stems from our Presbyterian origins.
I grew up in Toronto-the-Good where blue laws governed societal behaviour. Pubs had separate entrances for 'Gents' and 'Ladies and Escorts'. I grew up chafing at the leash to get out of here all through my adolescent years. Thank God for all the immigrants from Italy, Greece and Portugal who had such a prominent role in humanising this place.
Now if we could just do the same thing in small-town Ontario, we might just end up with a good place to live!
Not sure I've ever been called the voice of reason. Voice of many other things, but never reason.
And you are right about it all. I remember going into the LCBO, where there was no booze in sight. Instead there was a table of laminated pages of catalogues of stuff for sale, and little pieces of paper and pencils to write the number and description of the bottle you wanted, which you got a few minutes later from a hidden room in the back. In a paper bag, of course.
Commentary from Toronto Star. Sad, but funny part:
You have to wonder what a winery in Italy or Chile would think if an email arrived from the liquor board during negotiations, complaining that their proposed wholesale price was too low — and beseeching them to reconsider:
“Sir, we respectfully request that you bump up your wholesale price. The LCBO would feel guilty profiting from bigger markups. Kindly avoid low bids in future.”
Doubtless the winemakers of the world would raise a glass to toast the generosity, obstinacy and lunacy of Ontarians handing them more money.
But they already know the LCBO’s dirty little secret: It robs Peter (you and me) to overpay Paul (winemakers).
If that were true, then all those winery owners would be blowing kisses our way. But I find quite the opposite. I have found many smaller winemakers in my travels who seem to abhor the LCBO and refuse to have any dealings with them.
If this tongue-in-cheeck criticism has any validity, then the LCBO must be screwing things up from both ends.
More HERE from this continuing saga from Martin Cohn of the Toronto Star. In his reference to the 2009 Lafite, he confirms what some have been saying here that the Classics lottery is rigged and LCBO gives preference to "longtime customers."
Such backroom dealings and favoritism to a selected few "friends" just reeks of a shady business to me and government agencies such as LCBO should be above this. I guess I'm being too idealistic.
Valid points made. No argument.
But, yes, you are.
I 'won' some of the DRC in the last Classics lottery. Two weeks later after I had paid for it, they phoned me and said that I would not be getting it. I half-jokingly asked who they were giving my wine to, but was told that this was not the case. But I wonder what the real story was...
Some of the Star writer's comments in his most recent article were overly simplistic, to the point of being inaccurate. For example...
-- AirMiles are in no real way an incentive to over-consume alcohol (re:" loyalty programs push the envelope by encouraging alcohol consumption"). 1 AirMile is awarded for every $30 spent at the LCBO. An AirMile is worth about 12 cents in terms of cash redemption value. Basically, the LCBO is giving back about 40 cents for every $100 spent. To get the equivalent of $5 in AirMiles currency, I'd have to spend $1250 at the LCBO. Does anyone with a brain think the LCBO is encouraging alcohol consumption, or abuse, at this marginal AirMiles accumulation rate?
-- AirMiles give marketers/agents a mechanism to test the effectiveness of non-price based reductions. I.e. as a marketer, I can decide if I want to take a buck off as an LTO, or offer, say, 10 bonus AirMiles, and see what pulls better.
-- Giving past purchasers of certain few wines preferential access to a new vintage is what most businesses do anyway for the "regulars". In fairness, access should be lottery based for all past purchasers of said wine. I have been the beneficiary in a few cases, and would thank the LCBO for not breaking up the few verticals I have going.
Indeed, the LCBO should negotiate the lowest price with suppliers and certainly not encourage any to raise their wholesale prices.
More than anything Martin Regg Cohn talked about, I want the entire consignment buying process to be revamped. Consumers in Ontario should be able to buy single bottles of any wine from an agent, as they do from the LCBO -- not be obligated to buy a case. Almost overnight, agents would see consignment sales increase, and the LCBO would make every penny it normally would along the way. And we consumers would be thrilled to taste a variety of wines agents have and which we're now avoiding because of the case purchase mandate.
I'm 100% in agreement with your thoughts.
But can you imagine the new offshoot arising from MADD - might be called something like - MOTHERS GONE WILD! I'll be looking for their DVD on late night infomercials.
It's the perception that a program that gives more "rewards" for purchasing more that's the issue here regardless of any real benefit or lack thereof that the math says. Air Miles is one of the worst rewards program out there, but they have stats that say they're effective regardless of what "anyone with a brain" may claim otherwise - just like $29.95 will sell more than $30.00.
But the major claim the writer makes is not even this. It's that the AM program is not cost free even if they pass that cost up the supply chain, because wherever that cost sits, it's eventually passed on to the consumer and we all pay. So at the end of the day, remove this cost from the equation and your margins are better off.
I see nothing the writer says that is inaccurate.
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