Liquor Retailers: Off the Wagon

Image by: Paul Joseph

Walking into the Penticton Plaza liquor store – one of the so-called Signature stores that mark the forward-looking direction of B.C.’s government-run liquor stores – my visitor from New Brunswick is anxious for a beer. The temperature outside is approaching 35 degrees Celsius, and warnings that a cold beer might be hard to find in a government outlet go unheeded.

Sure enough, my guest walks in, does a circle of the floor and can’t find the walk-in cooler that’s at the back of most of New Brunswick’s government-run liquor stores. With a sense of the moment, I step up to a clerk stocking shelves.

“Do you have any cold beer?” I ask, launching into an impromptu skit.
“No, I’m afraid not,” he says affably.
“And why is that?” I ask, baiting my unwary straight-man with the question on my guest’s mind.
“We’re a government liquor store,” he says. “To accommodate a greater selection of products, we don’t have a cooler. But if you go to Summerland, our store there does have a cooler, but not as many products.”
“There you go,” I tell my visitor. “It’s a government liquor store. You can have cold beer, or you can have choice.”

The scenario epitomizes the problem that is B.C. liquor retailing five years after the Campbell government turned its back on plans to privatize the province’s liquor trade. Rather than privatize the wholesale and distribution business – which racked up revenues of $2.5 billion in its most recent fiscal year – the B.C. Liquor Distribution Branch (LDB) has expanded its distribution activities, set up 20 large-format stores and renovated 60 of its smaller stores. And while private stores now total 654 – up from 327 in the 2002-03 fiscal year – they depend on the government distribution system for product, and are in direct competition with the government when it comes to price. Private stores can set the price of the items they sell, but the province establishes the discount from the government’s list price at which the private stores buy product. BC Liquor Stores, the province’s retail network, offers the same product at the government’s list price.

It wasn’t supposed to be this way. Retailers-to-be and consumers alike expected a dramatic overhaul of provincial liquor regulations when the BC Liberals under Gordon Campbell swept to power in May 2001. The sweeping review of government services that followed the election determined that government shouldn’t be in the liquor business and, accordingly, the LDB prepared itself for privatization. “It is not a core service of government to be directly involved in the warehousing, distribution and retailing of beverage alcohol,” wrote Jay Chambers, general manager of the branch in a letter prefacing the three-year service plan for the Crown corporation that followed the review.

The plan set forth a program to close up to 40 government liquor stores by the end of March 2004 and a further 30 to 40 stores in the following year. In total up to 130 government stores were to be shut by March 31, 2006, with sales projected to shift to the new private stores that were expected to open. Moreover, private licensees were promised the opportunity, by July 2003, to receive product via private distributors rather than through government channels. Other changes were already in progress: cold beer and wine stores were allowed to carry spirits in April 2002, and a long-standing moratorium on new licence applications was lifted that summer, which opened the door to the involvement of new private-sector retailers. Restrictions on the size of private stores were also lifted.

Indeed, full-blown privatization seemed a sure thing – until the union backlash. Despite promises of a “new era” that would “unleash the power of a thriving free enterprise economy” in the province, in October 2003 the Campbell government negotiated a contract with the B.C. Government and Service Employees’ Union that swapped privatization for contract concessions. The details of the contract were never disclosed, but the agreement effectively put an end to plans for the closure of government-run stores and the privatization of the liquor business in B.C. Only six government-run stores had been shut by the time the deal with the unions was struck.

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