Wednesday, July 22, 2015

Supermarkets Win Big in BC's New Liquor Landscape - Higher Wine, Beer and Spirits Prices, Lower Service, Less Selection Ahead

Supermarkets will end up running BC's liquor business in the long run
'Machiavellian' plan could harm union and non-union liquor workers.

Bill Tieleman’s 24 Hours Vancouver / The Tyee column

Tuesday March 24, 2015

By Bill Tieleman

"If you can't spot the sucker in your first half hour at the table, then you are the sucker."

Rounders poker movie, 1998.

Forget about alleged BC Liberal government "incompetence" handling impending April 1 liquor price increases, Sunday openings for government stores or anything else. It's all a red herring.

There is only one fundamental shift coming in B.C liquor policy and it is enormous, replacing the existing system of public and private beer, wine and spirits stores with a near-monopoly for supermarkets.

There is no real incompetence -- it's simply a distraction to fool the suckers.

What does exist is a Machiavellian plan to eventually wipe out most private and publicly owned liquor stores and move the majority of booze sales to grocery stores.

The BC Liberals are picking winners and losers with its policies, which are far from free enterprise -- since the "competition" is government-controlled.

And the benefits the B.C. government gets are huge: continue to reap windfall profits from North America's highest liquor prices while jettisoning unionized labour costs in government stores and the troublesome patchwork quilt of small private stores.

The strategy is cunning and deceptive, with an allegedly consumer-friendly face promising "convenience" while increasing government profits and making sure the suckers -- the customers paying far too much per bottle already -- even thank you for it!

BC Liberal attorney general Suzanne Anton announced the changes in March 2014 as part of the government's "modernization" of liquor laws.

Supermarkets win

After recent talks with a wide range of people from private and government stores, liquor import agents, restaurants and bars and other players, the realization is sinking in that the only true winners are the ones not yet sitting at the table -- supermarkets.

But they are about to be dealt a winning hand by government and the pot is huge -- B.C. Liquor Distribution Branch sales net the province $1.2 billion -- on gross sales of about $3 billion.

And wine sales alone in B.C. passed the $1 billion mark in 2014.

Not all in the industry are ready to speak on the record but Jeff Guignard, executive director of the Alliance of Beverage Licensees of B.C., was.

"If supermarkets get a full suite of products, it's private stores and government stores that will suffer -- that will lose sales," Guignard said in an interview with The Tyee in mid-March. "Sixty-five to 70 per cent of wines in open markets get sold in grocery stores."

Guignard predicts that supermarket liquor stores will trigger a clash between remaining private and public outlets.

"Then government stores will fight harder against the private stores," he says. "But private stores employ 10,000 people -- why would you put that at risk?"

The government offers two models for grocery store sales -- buy an existing private or public liquor store and relocate within the supermarket or sell only B.C. wines on existing supermarket shelves.

But that latter plan is already under siege by winemakers in other countries like the United States, who say it violates several trade agreements.

Guignard has no doubt foreign wineries will win.

"There will be huge pressure to open grocery stores to all wines -- not just B.C. wines," he told me. "Ultimately, less B.C. wine will be sold, not more."

Prices to rise

That's because the big wineries and their agents will demand supermarkets give them premium shelf space, promotional deals, advertising and other marketing advantages that a small B.C. winery simply can't offer. And with French, American, Italian, Spanish and other big wine producers enjoying huge economies of scale, B.C. wines will cost more.

The union representing government liquor store workers actually applauded the new BC Liberal policies, including allowing government stores to open on Sundays, have longer hours and sell cold beer and wine -- all of which will hurt private store sales.

But B.C. Government and Service Employees Union members' jobs are not really secure beyond the expiry dateof their current contract in 2019.

And government stores' ability to compete with supermarkets while paying workers considerably more in wages and benefits than grocery store clerks make is questionable at best, given that B.C. is implementing a single wholesale price for all stores as of April 1. 

Previously there were separate discounted wholesale prices for different private liquor store categories but now there's just one -- and public stores are being told to compete or close.

The supermarkets are gearing up -- food giant Loblaws has lobbyists registered on liquor issues and others are likely to follow.

Just like the "incompetence" of BC Liberal government "Happy Hour" changes that actually increased drink prices -- and helped big bar chains compete with small independent pubs, this move reeks of calculated risk.

None of it will happen overnight -- that would be too obvious, too dangerous. It will take place over a few years.

And there is still a chance the BC Liberals will bail out at the last moment, as they did after promising complete privatization in 2002. Back then, the government reneged after many LRS owners and investors spent serious money preparing to see government liquor stores closed and their own stores expand or new ones established.

Then-finance minister Gary Collins and then-premier Gordon Campbell got cold feet when they saw big risks to the government's liquor sales revenue stream after the BC Liberals' vaunted 25 per cent income tax cut blew a giant hole in the budget and forced a 0.5 per cent sales tax increase to compensate. Risking a big dip in liquor income just to keep a political promise was too big a stake then.

This time, the only outside chance of public and small private stores surviving this game is if consumers get wise to being played for suckers -- to protest the coming higher prices, smaller selection from fewer suppliers and reduced service.

But the BC Liberals, just like governments in other jurisdictions, believe that you won't care that you are paying several dollars more for the convenience of buying beer, wine and spirits in your local grocery store.

Or that if you do notice, you'll just sigh and have another drink rather than do anything about it.


Sunday, July 19, 2015

British Columbia "Chaos Cocktail" Of Liquor Law Changes Will Mean Higher Wine, Beer, Liquor Prices, Squeeze Out Small Business, Says Angry Industry & Critic

Vancouver International Wine Festival 2015 - Bill Tieleman photo

Consumers and $1-billion industry is growing 'very very nervous.'

Bill Tieleman’s 24 Hours Vancouver / The Tyee column

Tuesday March 3, 2015

By Bill Tieleman

"If the price goes up one penny from what it is now, all hell is going to break loose." 

Bill Eggert, Fairview Cellars winery owner, Oliver, B.C.

There was just one black cloud on the sunny horizon as 25,000 people attended Vancouver International Wine Festival events last week, but it was huge: Why is the British Columbia government threatening the $1 billion wine industry?

Astonishingly, that's exactly what's happening.

Just as this province hit an enormous milestone, with wine sales topping the $1 billion mark for the first time ever, changes to wine, beer and liquor pricing coming April 1 seem to guarantee that "all hell is going to break loose."

The BC Liberal government's endless and incompetent meddling with the liquor industry will lurch forward towards potential price increases for both wines from provincial wineries and those imported from France, Italy, the United States, Spain and many more countries -- on April 1.

Even worse for winery owners, private and public liquor stores, wine agents and restaurants -- the government is keeping its retail pricing plans mostly a secret deeper and darker than a bottle of old vines Zinfandel.

And it has also introduced a relocation "lottery" to decide how and who gets to move existing private liquor stores into supermarkets -- for potentially huge profits.

All this uncertainty is happening even as an international study concludes that Canada is the seventh-largest wine consumer in the world, with a market valued at US$6.1 billion. And Canada is now the sixth-largest wine importer globally.

But that's all at risk as liquor industry sources tell The Tyee that wine prices are almost bound to go up -- despite already being the highest in North America and despite the government's partial retreat on pricing connected to its controversial move to a single wholesale price for all retailers, including B.C. Liquor Stores.

Stores will suffer

And an analysis of available information by wine lawyer Mark Hicken indicates that both government liquor and independent wine stores will suffer.

Hicken wrote that one of the predicted effects on Independent Wine Stores (IWS) and government stores is that independent stores "will have to raise their prices as their wholesale prices will go up significantly for every price point. The government has indicated that end consumer prices in government stores will stay the same," Hicken wrote on his WineLaw.ca website Feb. 15.

"However, for this to be achieved, the government stores would have to stick to a margin of 15-16 per cent for wines above about $20. As noted above, this margin is below their declared operating costs and it would mean that the stores would lose money on these sales."

And Hicken says the result could be that B.C. Liquor Stores will cut the number of wines they carry that are priced over $20 to avoid losing money.

"It is possible that government stores may seek to shift their product mix to lower price points in order to create sustainable margins," he concludes.

In other words -- the new B.C. government imposed system means higher prices and lower selection are likely -- and that amazingly, stores could actually lose money selling more expensive wine!

Only in B.C., you say?

Some prices rise

Hicken thinks it's possible the very cheapest wines sold in Licensee Retail Stores -- more commonly called cold beer and wine stores -- might go down slightly in price but that wines over $20 will go up because wholesale prices will increase, so their prices may not change much overall.

Left out in the cold are 12 independent wine stores that are seeing the most dramatic change in pricing -- which they say threatens their very existence -- without being given the chance to sell beer or spirits or sell wine to restaurants to compensate for the new structure.

And restaurants, hotels and bars are also disadvantaged, as they still have to pay the full retail price for wine, beer and liquor despite selling significant volumes. That also means their prices will likely rise considerably.

Licensee Retail Stores are also unhappy, because the BC Liberal plan will allow government stores to stay open Sundays and install refrigeration to compete with private stores.

It's a mess -- and Attorney General Suzanne Anton is behind it all.

Anton's intent on Jan. 30 when she cut by 40 per cent a previously announced 67 per cent markup for wine was an effort to quell strong opposition to her plans and "to better align the new wholesale prices with the prices the industry sees today."

"Our wholesale pricing model is not intended to increase government revenue or retail prices. Rather, the model is designed to generate approximately the same amount of government revenue from each product category as we receive today," Anton said in a release.

But the reality is likely very far from Anton's stated goals.

And the uncertainty and fear created by her clumsy moves is making a $1 billion industry -- and the growing number of B.C. wine drinkers who have built it -- very, very nervous.

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