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An employee looks over bottles of white wine at a wine store in Penticton, B.C. October 3, 2006. (JOHN LEHMANN/GLOBE AND MAIL)
An employee looks over bottles of white wine at a wine store in Penticton, B.C. October 3, 2006. (JOHN LEHMANN/GLOBE AND MAIL)

TONY WILSON

Should the B.C. government get out of liquor retailing? Add to ...

An important policy review is under way in British Columbia, with significance for all businesses in the bar, restaurant and liquor sales industries.

The mandate is to consider all aspects of liquor policy – including control and distribution – and to provide recommendations to will help create a licensing system that does the following:

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  • Responds to emerging market realities and reflects current lifestyles and societal values.
  • Provides flexibility for businesses and removes operational barriers to help grow the economy, while protecting public safety.
  • Recognizes the importance of jobs and investment in the hospitality, tourism and agrifoods sectors.
  • Ensures a sustainable liquor manufacturing sector, and provides for an efficient and effective distribution system.

The recommendations must ensure that government revenue is maintained or increased, that health and social harms caused by liquor are minimized, that economic and social interests are balanced with public safety, and that the public interest of British Columbians is protected.

Yes, many of these principles contradict each other.

The last major review of B.C.’s liquor laws occurred in 1999, partly in response to Planet Hollywood’s failure to get a liquor licence at its then-flagship Vancouver location because it had too many TV screens. That review led to the relaxation of many rules, in particular the requirement that patrons had to order food with a drink in a restaurant holding lounge. Many B.C. restaurants are now essentially bars, and it hasn’t led to a proportionately higher level of alcoholism or drunk driving convictions compared with other provinces.

Nor has it led to the to the zombie apocalypse.

The B.C. government has sent more than 10,000 letters to liquor licence holders for their input and scheduled to go live this month is a website where members of the public can provide their input.

The province’s liquor laws are often referred to as “draconian,” “byzantine” and “antiquated,” and a lot of them have their roots in the prohibition era. Even the B.C. government has described the laws as inefficient and outdated. “Right now, some of B.C.’s liquor laws go back many years,” Attorney General and Minister of Justice Suzanne Anton said when the review was announced.

“In concert with industry and citizens, we are looking to make practical and responsible changes which promote consumer convenience and economic growth in the province, with a strong eye to maintaining public safety and protecting the health of our citizens. ... Once the public consultation process begins in September, British Columbians can let us know how they would like to see B.C.’s liquor laws reformed.”

The review will be lead by Parliamentary Secretary for Liquor Policy Reform John Yap. But reform won’t be easy because many of the stakeholders are nervous about change. For example, the Union of B.C. Municipalities (UBCM) has expressed concerns about changes that don’t involve the interests of local governments because of the impact those changes can have on neighbourhoods and community events.

“Local governments have used ... zoning and business licensing powers to ensure that neighbourhood concerns such as noise, parking and nuisance issues are minimized,” the UBCM states. “UBCM would like to see these measures maintained going forward.”

There are a few related issues that deserve attention and input from the bar and restaurant industry and from members of the public. The first is that B.C. has among the highest liquor prices of any jurisdiction in North America. But unlike any other industry in the world, where a business would receive wholesale pricing based on volume purchases, bars and restaurants are required to pay the same amount as liquor store patrons and they receive no volume discounts, even though they resell the products.

This is one of the problems the B.C. Restaurant and Foodservices Association has raised. That and the industry’s inability to buy product directly from private suppliers.

We have a mixed system in B.C., where 670 private liquor stores – which are mostly small and medium-sized businesses licensed to sell liquor at retail – compete with 197 B.C. government liquor stores. More than 40 per cent of all retail liquor sales in B.C. are generated by sales through private liquor stores. Government stores pay their unionized shelf stockers and cashiers as much as $23 an hour, plus an estimated $8 an hour in pensions and benefits. Private stores are more market driven, and they pay $12.50 an hour for, in essence, a job that involves stocking shelves and operating cash tills.

A question that needs to be addressed is this: Should the government be in the retail sale of alcohol at all, or should it be left to the private sector, with the government acting as a distributor, importer, buying group and regulator?

If the distribution and sale of liquor is essentially a tax collection function, could the provincial government earn more revenue for health education and social services if it got out of retail but stayed in the distribution business?

Acting as a buying group to obtain better pricing is the elephant in the room. Even though the B.C. Liquor Distribution Board (LDB) is the third largest buying group in the world, it doesn’t act like one. It doesn’t aggressively negotiate with liquor suppliers for the best prices possible, or for volume rebates the way Wal-Mart or Costco do.

It actually tells suppliers of certain products to charge more, not less. In part, it’s because of something called social reference pricing (SRP). The policy is that if the price for alcohol is high, people will drink more responsibly and they will consume less. However, if SRP worked in practice, California – where the price of wine is much lower – would have very high levels of alcoholism, and B.C. – with some of the highest alcohol pricing in the world – would be a province of teetotalers.

That isn't the case.

Mark Hicken is a wine lawyer in Vancouver who produces a liquor industry newsletter called winelaw.ca. He has reservations about the LDB acting as a wholesaler and negotiating on price. “I'm not sure that they would be very good at it,” he says.

“I think it would be better if they simply acted as tax collector ... which is really what they are doing now, except that it may be the world's least efficient tax collection system ... it costs the provincial government $300-million to raise $900-million in revenue from liquor sales.”

The consultation process is expected to be completed by Oct. 31, 2013, with a report produced by Nov. 25.

Tony Wilson is a franchising, licensing and intellectual property lawyer at Boughton Law Corp. in Vancouver, he is an adjunct professor at Simon Fraser University (SFU), and he is the author of two books: Manage Your Online Reputation, and Buying a Franchise in Canada. His opinions do not reflect those of the Law Society of British Columbia, SFU or any other organization.

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