Liquor is quicker?

In October 2005, B.C.'s private liquor store interests tried to directly lobby Premier Gordon Campbell to reduce the price industry players pay for liquor. A little more than a year later, that cut - which will cost government up to $31.1 million in lost revenue - was made. In a letter addressed to the premier (which was obtained by Public Eye via a freedom of information request) the then president of the Alliance of Beverage Licensees, David Crown, informed "Gordon" his group was concerned "with the direction of government with regard to our industry."

"I have now had the opportunity to have several meetings with Minister (John) Les, and it is most apparent there is no appetite on his part to implement the initiatives that were promised us from Minister (Rich) Coleman" - Minister Les's predecessor.

Specifically, Mr. Crown referred to an anticipated three percentage point increase in the discount those stores receive when purchasing alcohol from the government - something he thought "would be achieved by November 2005."

But in a written statement, the solicitor general's ministry said the premier didn't actually become involved with the file - a statement supported by the alliance's current president Al Arbuthnot. Moreover, the ministry says Minister Coleman made no such promises, denying Minister Les didn't have an "appetite" for increasing the discount. He simply, "as per usual practice, asked that an analysis of the request be undertaken by ministry staff."

Mr. Arbuthnot agrees, adding Minister Les was probably "trying to get his head around a lot of different portfolios in the ministry." Although he maintains Minister Coleman did promise a discount.

Prior to Mr. Crown's letter being sent, a draft briefing note prepared by the province's liquor distribution branch and dated Sept. 19, 2005, stated "government will continue to review options to improve liquor pricing policies, but has no plans for further changes at this time." But, by November 2006, government had made that change, costing the province between $20.8 and $31.1 million in lost revenue each a year - a number that will vary depending on the growth of the private liquor store industry. This, according to a separate briefing note dated Oct. 10, 2006.

That note also states private liquor stores "would welcome a discount increase." Although it was "assumed much of the LRS discount will be passed on to consumers through lower prices." But any other implications for increasing that discount were severed from the note prior to its release. The following is a complete copy of the letter sent by Mr. Crown to Premier Campbell.

***

ABLE BC
FOR A RESPONSIBLE LIQUOR INDUSTRY

October 28, 2005

Premier Gordon Campbell
Legislative Assembly of British Columbia
Room 156
Parliament Buildings
Victoria BC V8V 1X4

Dear Gordon,

We write to express our concern with the direction of government with regard to our industry. I have now had the opportunity to have several meetings with Minister Les, and it is most apparent there is no appetite on his part to implement the initiatives that were promised us from Minister Coleman. The two initiatives industry is depending on are:

* That our retail operations would be given a minimum of a 3% increase in discount and that this would be achieved by November 2005. The goal is to somewhat level the playing fiel, allowing our members to compete with existing government stores.

O/S

Many of our operations throughout the province are borrowing on equities achieved over the last thirty years to survive, while they try to gain the market share that was promised us. We request your assistance on the immediate granting of the 3% discount.

O/S

We are certain that with these two initiatives in place industry can meet a balance in the market place.

O/S

Our Members are small business people located throughout the province and for the most part we are strong believers and supporters in the direction you have taken this province. We thank you for your dedication and hard work, and ask that you will take a moment to direct your people and grant these requests.

Sincerely,

Dave Crown
President

6 Comments

"That note also states private liquor stores 'would welcome a discount increase.' Although it was 'assumed much of the LRS discount will be passed on to consumers through lower prices.'"

Yes, our benevolent private liquor stores would be more than happy to forgo profits by passing on discounts to consumers. In other news... It was announced today that Premier Campbell will be performing Gay marriage ceremonies at his home on Canada Day.

The key policy question here is how much of that discount is passed on to consumers. In general, it's likely to be some significant percentage, but not 100%, depending on underlying demand conditions in the marketplace, and the degree of price competition among the retailers.

Have any more briefing notes been prepared since October 2006 which would shed more up-to-date light on how the situation has played out? Have any price measurements been undertaken to see what the degree of pass-through to the consumer has been? Remember, a 3% price change on a $20 case of beer is 60 cents. It's not the sort of thing all consumers would necessarily notice, though some would. It needs to be measured by a crew of price checkers going from outlet to outlet.

Maybe now some who post will see that the cross-fertilisation of personnel is only a part of this story. The lobbying for the 3% is only a part of the story. The sympathetic approach by the Liberals must have some explanation as the introduction of private stores has certainly not been of any benefit to consumers (see the Consumers Association of Canada study) or public policy on the control of a dangerous drug.

Two aspects of the ABLE position in "Gordon's" letter are worthy of comment. My information is purely anecdotal, but there is no evidence the wholesale change has meant lower prices. Second, the assertion that private stores are all "mom and pop" operations is a fallacy. The operators either have other liquor businesses or are part of the significant concentration that is occuriing in the bootleg trade (see Liquor Barn, Liquor World, etc.)or both.

Speaking of return on the dollar, is it just me or can everything the Liberals do be traced back to a history of hefty donations to the party?

I can't understand why folks buy from these private guys. Their prices, variety simply doesn't interest me. I know I mentioned before my family is quite ready to pass by two private grog shops to buy at the provincial store. It's nothing to do with liking or disliking "Dear Gordon". We prefer to buy from staff who have some knowledge of brands, and are not in a entry level job

Now that the government has successfully banned smoking in public areas, I wonder if he shall consider banning drinking in public areas given that so many people got arrested for DUI, here or in Hawaii.

I can certainly understand where this is coming from, the premier like always is trying to encourage competition with various sectors which the province desperately needs. I am no heavy drinker as my faith keeps me away from that, but I dont see how encouraging more beer sales will actually boost our productivity and I would also say a casual drinker is no better than a casual pot smoker, probably worse given the number of vicious acts he can commit while drunk. I would say that it is a good way to encourage competition, but the lost revenues should be recovered through alcohol tax levy like the one we will soon have on tobacco.

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