When the Liquor Control Board of Ontario announced it would award a multi-million dollar paper bag contract to an out-of-province company earlier this year, it sparked immediate backlash. Now, in what appears to be a significant reversal, that decision has been overturned, with the contract going to Ontario-based Atlantic Packaging.
The original decision to award the contract to a Quebec-based company left many questioning the provincial government’s commitment to supporting local manufacturing. Atlantic Packaging, which employs approximately 150 workers at its Scarborough facility, had been producing paper bags for the LCBO for nearly three decades before learning they’d lost the contract.
“This reversal represents more than just a business decision—it’s about maintaining manufacturing capabilities within our provincial borders,” says Greg Morrow, an economic policy analyst with the Ontario Chamber of Commerce. “When governments choose local suppliers, the economic multiplier effect is substantial.“
The contract, valued at approximately $25 million over three years, became a political lightning rod when news broke that it would be sent outside Ontario’s borders. Opposition parties quickly seized on the issue, with the NDP’s Catherine Fife calling it “another example of this government saying one thing about supporting Ontario businesses and doing another.”
Atlantic Packaging’s reprieve demonstrates the complex interplay between government procurement, local economic development, and political pressures. While procurement processes typically prioritize the lowest-cost provider, the controversy highlights growing calls to consider broader economic impacts when awarding government contracts.
Finance Minister Peter Bethlenfalvy confirmed the contract change, stating the government had “reviewed the decision” following concerns raised by stakeholders. Though government officials haven’t explicitly detailed what prompted the reversal, sources familiar with the process suggest mounting political pressure played a significant role.
For Atlantic Packaging, the decision means continuity for their workers and operations. The company has been manufacturing in Ontario since 1945, and the LCBO contract represents a substantial portion of their paper bag business.
“When you consider the full economic picture, local manufacturing creates ripple effects throughout the economy,” explains Darren Williams, an economist with the University of Toronto. “Beyond direct employment, there’s the supply chain, logistics, maintenance services—all economic activity that stays within the province when contracts remain local.”
The LCBO’s paper bag requirements have increased substantially since Ontario banned plastic bags in 2020, making this contract even more significant for suppliers. The crown corporation distributes approximately 85 million paper bags annually across its retail network.
This situation mirrors similar procurement controversies that have erupted across Canada in recent years. In 2021, the federal government faced criticism for awarding ventilator contracts to foreign manufacturers despite domestic capabilities. These cases raise important questions about how governments should balance fiscal responsibility with economic development objectives.
“The lowest bid doesn’t always represent the best value,” notes procurement specialist Jennifer Hardie. “When you factor in tax revenue, employment benefits, and economic multipliers, sometimes the slightly higher-priced local option delivers better overall value to taxpayers.”
For Ontario’s manufacturing sector, which has faced significant challenges in recent decades, government procurement represents a crucial source of stable demand. Industry advocates have long pushed for procurement policies that give preference to local suppliers, similar to “Buy American” provisions in the United States.
The provincial government has repeatedly emphasized its commitment to Ontario’s manufacturing sector, with Premier Doug Ford frequently highlighting the importance of supporting local businesses. This contract reversal suggests those political commitments can sometimes override standard procurement procedures.
What remains unclear is whether this represents an isolated decision or signals a broader shift in procurement philosophy. The Ford government has previously championed red tape reduction and cost-cutting measures, which sometimes conflict with proposals to favor local suppliers that may charge premium prices.
As governments across Canada grapple with supply chain vulnerabilities exposed during the pandemic, procurement policies that strengthen domestic manufacturing capabilities may gain further traction. The LCBO paper bag contract, though seemingly mundane, illustrates how something as simple as a shopping bag can become a focal point for these larger economic debates.
For Atlantic Packaging’s workers, the immediate impact is clear—job security and continued production. For policymakers, the challenge remains finding the right balance between fiscal responsibility and nurturing local economic development through government purchasing power.
When Ontario consumers carry their wine and spirits home in those familiar paper bags, few will consider the complex economic and political considerations that determined who manufactured them. But as this case demonstrates, even the most ordinary items can reflect important decisions about what we value in our economy.
