The sleeper issue in all the liquor-policy changes announced this week is the one that was considered off-limits during all the consultations.
It鈥檚 the surprise change in the pricing system. That was folded into all the news about grocery stores and beer gardens, and it could turn out to be a late-blooming highlight.
The new wholesale pricing system probably won鈥檛 do much to the shelf price consumers see. That鈥檚 kept comparatively high, partly to feed government revenues and partly as a deterrent to creating more social problems than already exist. And changing the shelf price was never an objective of the liquor-reform push.
But the new approach could gradually change the retail landscape, apart from the grocery store angle. It puts government liquor stores and private liquor stores on exactly the same footing. And it鈥檚 not hard to imagine some government liquor stores gradually fading out of the picture, once the pricing system takes hold. That鈥檚 something close to what the B.C. Liberals considered years ago, when full privatization was on the table. But they didn鈥檛 act on it.
Under the current system, the government determines a price for all different forms of booze sold in government stores. Then a complicated series of discounts off that price are applied when different private retailers buy product for their shelves.
For example, rural agency stores get a 12 per cent discount, regular private stores get a 16 per cent discount and independent wine stores get a 30 per cent discount.
The new system will set a standard wholesale price. All retailers, including the government stores, will purchase from the Liquor Distribution Branch at the same price.
Private stores will lose the discount. But the wholesale price 鈥� yet to be set 鈥� could be in the same range.
Officials at a briefing said it will be much simpler, will level the playing field and encourage fair competition among retailers. And there were clear signals that government stores will be expected to improve financial performance.
鈥淭he expectation of government is that if the stores are not performing they will either perform or a change has to be made,鈥� said one official. The government will also expect all the government liquor stores to be profitable. It鈥檚 hard to tell if they all are now, because they only post gross revenue figures, not store-by-store bottom-line margins. But it鈥檚 unlikely. Transparency is considered one of the watchwords of the new approach. So individual stores may eventually be posting performance results.
If they don鈥檛 meet their numbers, well, see above. Maintaining the $900 million-a-year revenue stream to government is paramount. The new approach could refocus attention on the question: Why does government incur all the costs of running a retail network when the private sector can do it at no cost to government?
The government 鈥渟ignature stores鈥� will likely survive. And some government stores have been raising their games over the last few years. The CEO鈥檚 outline for the coming year, written last month, said: 鈥淲e are modernizing our stores, identifying and securing convenient locations, better tailoring product selection to the preferences of each marketplace, and most importantly, making sure staff has the knowledge and tools they need to provide first-rate customer service.鈥�
They鈥檙e trying out chillers in some locations and they鈥檒l be eligible to move into grocery stores. But overall, they have higher staff costs and stand to lose other advantages if the playing field really is levelled.
The new wholesale price will come as a surprise to some of the players. It came up intermittently during Liberal MLA John Yap鈥檚 consultations over the past several months. But he said it was outside his terms of reference. In his final report, he noted concerns about pricing only in passing.
He said this week that others in government were looking at pricing, independently from his work. That look turned into something that could become significant.
Just So You Know: The new happy-hour pricing will have a set minimum, and the minimum price for all products is going to be reviewed to make sure it鈥檚 appropriate. Combined with a new tie-in to alcohol content, if retail prices do anything overall, they鈥檒l likely edge up.
