I’ve been staring at the LCBO revenue line in the 2026 budget for a while now, trying to figure out how the government squares two things it keeps saying at the same time. One: corner-store beer is a success, consumers love it, foot traffic is up. Two: the Crown corporation that used to bankroll a decent chunk of provincial services just posted its worst numbers in a decade. Both things are true, that’s the problem.
The number that matters most is $780 million. That’s the LCBO’s total profit decline across its full operation over two years, from the moment Ford allowed beer and wine into corner stores in mid-2024 through the March 2026 budget tabling. Not a projection from some think tank. The government’s own budget documents.
How the money disappeared
The LCBO pulled in $2.57 billion in 2023-24. Last year it dropped to $1.85 billion, first time below $2 billion in a decade. The 2025-26 projection? $1.7 billion. That’s a 34 per cent revenue decline in two fiscal years, and I’d argue even the people who designed this policy didn’t expect the curve to be that steep.
Context: The LCBO is a Crown corporation, meaning its profits go directly to the Ontario treasury. For decades those dividends helped fund hospitals, schools, and infrastructure. When LCBO revenue falls, the province either finds that money somewhere else or it doesn’t get spent.
Part of the drop is straightforward supply-and-demand math. Over 6,600 convenience and grocery stores are now licensed to sell beer, wine, cider, and ready-to-drink cocktails. Every six-pack bought at a Hasty Market is a six-pack not bought at the LCBO. The LCBO keeps its markup as wholesaler on those sales, but the retail margin, the part that used to flow straight to the treasury, walks out the door.
Then there’s the tax gap which nobody in government seems eager to talk about. The Financial Accountability Office put a number on it: $1.28 billion in lower tax revenues by 2030, because convenience and grocery stores aren’t subject to the same beer, wine and spirits taxes that applied at the LCBO and Beer Store. My read on this is the government built a new retail channel and forgot to wire up the tax code to match. Or chose not to.
The FAO’s bottom line: the whole expansion will cost Ontario a net $1.4 billion by the end of 2030. That range could be as low as $529 million if consumers mostly stick with LCBO, or as high as $1.9 billion if they don’t. Given the trajectory so far, I don’t think the optimistic scenario is the one we’re living in.
LCBO Revenue Decline
The US bourbon sitting in a warehouse
It’s easy to blame the revenue decline entirely on corner stores, but that’s not the full picture. In March 2025 the Ford government pulled all US alcohol from LCBO shelves as tariff retaliation. Good politics maybe. Not great accounting.
The LCBO’s markups on American bourbon and whiskey were higher than on their Canadian replacements, so replacing Jack Daniel’s with Canadian Club cost the treasury roughly $75 million in lost margin. A year later, the LCBO is still sitting on $79.1 million worth of unsold American product, expiring in warehouses.
There is a silver lining here, and I’ll give credit where it’s due. Sales of Ontario-made alcohol jumped 22 per cent in the year following the ban. Craft producers saw a 35 per cent bump. VQA wines were up 79 per cent. If you’re a winemaker in Prince Edward County or a craft brewer in Hamilton, the US ban has been the best marketing campaign you never had to pay for. Whether the province can keep those numbers once the tariff situation settles is a different question.
The wholesale pivot
Here’s where the government’s fix gets interesting, or worrying, depending on how much you trust the same people who created the problem to solve it.
As of January 1, 2026, the LCBO became the exclusive wholesaler of all beverage alcohol in Ontario. Every bottle that reaches a bar, restaurant, convenience store, or grocery shelf now passes through LCBO’s distribution network. The idea is that even if retail profits crater, wholesale margins will keep the money flowing.
Context: Before 2026, bars and restaurants could buy some products through private distributors. The new wholesale monopoly means the LCBO clips a margin on every drop of alcohol sold in the province regardless of where consumers buy it. Spirits above a certain ABV remain LCBO retail exclusives.
The government expects this to bounce LCBO revenue back by about $100 million next year. I’d take that number with some salt, given their projections on the expansion cost were off by a wide margin the first time around. But the logic isn’t crazy. If the LCBO controls the supply chain, it gets paid whether you’re buying at an LCBO store or a Mac’s Milk. The question is whether wholesale margins are thick enough to replace retail profits.
Tax simplification (or: closing the barn door)
The 2026 budget also included a long-overdue cleanup of the alcohol tax system. Before April 2026 there were separate basic, volumetric, and environmental taxes stacked on beer, wine, and spirits, all calculated differently depending on where you bought the product. The new structure collapses those into single rates: $1.18 per litre for non-draft beer, $0.90 for draft, lower rates for microbrewers.
Ontario wines sold at winery retail stores get a zero per cent tax rate. Non-Ontario wines pay 19.1 per cent.
The government also committed $200 million to reduce LCBO markups, which sounds generous until you remember the FAO says the province is losing $1.28 billion in tax revenue from the expansion. Two hundred million against 1.28 billion is not what I’d call closing the gap, it’s a rounding error with good PR.
The convenience store side
One thing that’s hard to argue with is that consumers like the new system. The Convenience Industry Council of Canada says foot traffic at licensed stores is up 12 per cent, rising to 33 per cent on long weekends. Some Hasty Market locations are doing $10,000 to $20,000 a week in alcohol sales alone. For a convenience store owner in a small town, that’s the difference between breaking even and actually making money.
Rural stores are a different story. Coverage has been uneven, with smaller operators in remote areas struggling to meet licensing requirements and absorb inventory costs for products which move slowly. The expansion was designed for urban and suburban density, and it shows.
Statistics Canada data puts one fear to rest at least. Overall alcohol consumption has not spiked. People aren’t drinking more, they’re just buying in different places. That matters for the public health argument, which was always the hardest part of the case against expansion.
Who’s paying for convenience
So here’s the thing I keep circling back to. The government is framing this as a consumer win. And for consumers it mostly is, more places to buy beer, competitive pricing, later hours. But the $780 million hole in LCBO revenue doesn’t fill itself. That’s money that used to go to provincial services, and it’s not being replaced dollar for dollar by wholesale margins or simplified taxes.
OPSEU, the union representing LCBO workers, warned during their 2024 strike that this was the trajectory. Ten thousand workers walked off the job for 17 days because they could see the math. The contract they ratified blocked store closures and capped agency stores, but it didn’t change the underlying economics. Less retail volume means less labour, and the union knows it even if nobody’s announcing layoffs yet.
The Beer Store deal cost the province up to $1.4 billion to exit early (per the Auditor General). The ongoing revenue hit is running close to another $780 million in two years. The FAO says the total bill lands somewhere between $529 million and $1.9 billion by 2030. Add it all up, and the price of convenience is starting to look like one of the most expensive retail experiments in Ontario history.
But nobody’s putting the beer back in the box. Not now.
Sources and verification: LCBO revenue figures ($2.57B for 2023-24, $1.85B for 2024-25, $1.7B projected for 2025-26) and the $780M profit decline come from the Ontario 2026 budget documents as reported by Toronto Life, Global News, and multiple Canadian Press outlets. The FAO’s $1.4 billion net cost estimate (range: $529M-$1.9B) and $1.28B tax revenue shortfall are from the Financial Accountability Office of Ontario’s report on expanding the beverage alcohol marketplace. The $75M US tariff impact and $79.1M in unsold US inventory were reported by Global News. Ontario producer sales increases (22% overall, 35% craft, 79% VQA wine) are from the Ministry of Finance via Global News. Convenience store foot traffic figures (12%, 33% long weekends) are from the Convenience Industry Council of Canada. Tax rates ($1.18/L non-draft beer, 0% Ontario wine at winery stores, 19.1% non-Ontario wine) are from the Ontario 2026 budget annex. All figures should be verified against current official LCBO and Ontario government data.
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