BC’s Provincial government surprised Canadians last week by announcing their intention to sell off its Liquor Distribution Branch, and the response was a collective, “Huh? The topic is bound to be discussed over pours of wine this week as the Vancouver Playhouse International Wine Festival kicks off its 34th year of wine mania.
Note to my American readers: the 90-year old BC Liquor Control and Licensing Branch (LCLB) regulates almost all booze sold in BC and sets prices at upwards of 123% markup. Its division, the BC Liquor Distribution Branch (LDB), distributes 55% of all bottles British Columbians buy. Subsequently, its BC Liquor Stores (BCLS) receive better discounts than private stores. Clearly, competition is a vague concept in the BC liquor industry.
According to the Vancouver Sun, Finance Minister Kevin Falcon said BC will make at least $700 million from the sale of two central warehouses that supply 1,400 private and government stores as well as 8,000 bars and restaurants across the province.
You’d think winos would be dancing in the store aisles knowing that the provincial liquor monopoly is finally being privatized, but the announcement begs more questions than it answers. I asked a couple of industry professionals what they think of the plan.
Benefits to Industry
Wine law activist, Mark Hicken of the Vintage Law Group told me, “I think that it causes a conflict of interest for government to be involved in the business of liquor as well as trying to regulate it properly. Significantly, it makes no difference in terms of revenue whether government privatizes … the government makes it money on liquor at the wholesale level and can make exactly the same (or more) revenue with a privatized system if they continue to impose liquor taxes at the wholesale level.”
Calvin DesChine, Sommelier and Assistant General Manager at O’Doul’s Restaurant and Bar said, “I believe there are already others involved on a massive scale (Container World, Commercial Logistics, etc…) and the BCLDB is kind of a “middle man” in the whole process. I believe the province can make the same amount of revenues without being in the liquor warehousing business.”
For retailers and consumers to benefit from the deal, they said, the Liquor Board would need to make the system fully competetive.
“At the present time, we have a messy, inefficient system which grants wildly different wholesale prices to different channels depending upon license type and which price fixes at multiple levels,” Hicken said. “If the government moves to create a level playing field, that is laudable and it would benefit everyone with better pricing and selection.”
And what about the provincial liquor stores?
“If the LDB retains their retail operations I believe they will still control pricing in the province,” said DesChene. “Until that monopoly is privatized, I don’t think anyone will benefit from the proposed sale.”
Power and Influence
Another question concerns the Liberal government’s timing and intent behind the selloff announcement, made as part of the proposed budget. Already, the privatization plan is clouded with rumors of influence peddling.
The Globe and Mail reported that Liberals were persuaded to privatize distribution by insider lobbyist Patrick Kinsella, a former campaign strategist for Liberal premiers Gordon Campbell and Christy Clark, and “a registered lobbyist for five companies that had contact in October with several cabinet ministers: Exel Logistics, Pacific Western Brewing Company, Mark Anthony Group, Great Canadian Gaming Corporation, and the New Car Dealers of BC.”
Pacific Western is, according to the G&M, “BC’s largest independent brewery” and Mark Anthony is a large wine and beer importer and distributor as well as the producers of the Hell’s Gate and Stanley Park beer brands.
“No doubt the winning bid will go to someone who is a large contributor to the BC Liberal Party,” said DesChene
So many questions, lots of answers needed. Until a final deal is done, we’ll just have to wait and see how the selloff plays out, which sounds complicated enough to drive anyone to drink.
What do you think? Do you support the Liquor Distribution Branch selloff plan or do you think it’s a mistake? Please tell. I’d love to know your thoughts.
Happy Wine Fest!