In the eyes of fans of the free market, the fact that Crown corporations are granted exclusivity over certain sectors of the economy comes across as one of the most scandalous of aberrations. For this reason, the idea that the Société des alcools du Québec (SAQ) should be privatized pops up periodically in public debate. The project is motivated by a desire to free consumers from the grip of the "Soviet des alcools du Québec," as some of its critics call it.
The short-lived Commission de révision permanente des programmes (CRPP), tasked with reviewing government programs and headed by Lucienne Robillard, was swayed by the argument. In its summer 2015 report, it recommended that "that the government liberalize the trade in wines and spirits while taking the necessary means to protect current dividends payments to the government" (vol. 2, p. 40). At the moment, only beer and certain wines and coolers are open to the private sector.
The Commission defended its position by claiming, as many have argued before, that allowing private retailers to compete with the SAQ would force it to drive down both its administration expenses and the price of its products. The commissioners pointed to the example of British Columbia, a province that liberalized the trade in alcohol in 2002.
To verify these arguments and to respond to the CRPP's recommendations, IRIS conducted a comparative study of the trade in wines and spirits in Quebec and in British Columbia. It looked into how alcohol prices and consumption have evolved, as well as administrative expenses in Crown corporations and government revenues from the sale of these products.
The authors also conducted a pricing study, travelling to the West Coast to compare 584 bottles sold at the SAQ, at BC Liquor Stores (the provincial government retailer), and in privately-owned stores there.
The study found that the SAQ is able to offer prices that match those in British Columbia. We also found that in BC publicly-owned stores display the best prices. Private retailers are 9.6% more expensive than their public-sector competitor: the average cost of a bottle of alcohol at BC Liquor Stores is $17.24 compared to $18.89 for private retailers.
The SAQ is able to offer prices similar to those at BC Liquor Stores, even without private competition. According to the data gathered in our pricing study, the average cost of a bottle of alcohol was $17.24 in BC Liquor Stores and $17.71 at the SAQ in Quebec. BC Liquor Store prices are therefore 2.6% lower than those at the SAQ. BC Liquor Stores have the edge for the average price of wines ($14.68), 5.7% cheaper than at the SAQ ($15.57), but Quebec wins out when it comes to a bottle of spirits: $24.72 vs. $25.64.
Our analysis of the macroeconomic data also shows that the SAQ is a well-managed business. Its administrative expenses have decreased in relation to its sales in the last 10 years while the ratio BC Liquor Stores has not changed significantly. Moreover, the dividends that the SAQ pays to the government have increased. The revenue that the government of Quebec collects from each litre of alcohol sold has increased 65% between 1997 and 2013, while in British Columbia it only went up 14%.
Finally, wine and spirit consumption in Quebec has increased over the period studied, which shows that SAQ prices are not discouraging consumers. The number of litres of alcohol consumed per capita has increased 84% for wine and 72% for spirits, higher increases than in British Columbia.
Alcohol is not just another product. The public sector's presence in the sale of alcohol stems from the desire to restrict its trade because, when abused, this commodity can lead to health problems and public security issues that are far from negligible.
The comparative data on the price of wines and spirits does not allow us to conclude that consumers in Quebec would be better served by a market in which the private sector competes with the public sector. We came to the same conclusion in our previous study that looked into Alberta's market, where the sale of alcohol has been entirely privatized. Once more, when thinking of the hypothetical advantages of liberalizing the SAQ, the facts don't add up.
Julia Posca and Simon Tremblay-Pepin are researchers with IRIS, a Montreal-based progressive think tank.