Restaurants to buy liquor at wholesale prices
VICTORIA The B.C. government will allow restaurants to purchase liquor at wholesale prices, reducing alcohol costs by up to 25 per cent and letting businesses bolster their profit margins during the COVID-19 pandemic.
Attorney General David Eby said Tuesday the change, effective in July, will help restaurants stay financially viable as they struggle with seating and customer restrictions required by public health officials.
Currently, businesses buy liquor at the same retail prices paid by ordinary customers at liquor stores.
The change is temporary and will be reviewed in March. Government will forgo $50 million in revenue this year due to the decision, said Eby. The average price reduction for restaurants is 20 to 25 per cent, said Eby.
“It’s temporary because it is costly and there are competing demands for government expenditures,” said Eby. “But for everybody it’s very clear this was something that was necessary given how many people work in the hospitality industry.”
Restaurants will not be required to lower their liquor sale prices after receiving the discount, meaning they can continue to charge the same amount on menus for beer, wine and spirits but make more money per sale.
“I suspect the vast majority will be using this as a profit margin on the sale of a drink to fund expenses like rent and staff wages with significantly reduced traffic coming in their doors,” said Eby.
The food and hospitality sector has been hard hit by the pandemic, with in-restaurant dining banned from mid-March until earlier this month. During the peak of the crisis, as many as 180,000 of the 190,000 workers employed in B.C. restaurants had lost their jobs.
The sector has long called on government to make the wholesale pricing change, saying it is unfair that restaurants and bars have to purchase alcohol at the same retail price as consumers.
Eby said the government had been working on a lesser liquor discount for restaurants before the pandemic, but abandoned those plans once it saw the financial hardship many businesses were facing due to COVID-19.
Restaurants will also be allowed to continue to sell liquor with takeout orders, said Eby.
The move was widely praised by the hospitality sector Tuesday, which has been advocating the policy change for 20 years.
“This is probably the biggest change in a generation in liquor policy in the province, it’s that big,” said Ian Tostenson, president of the B.C. Restaurant and Foodservices Association. “It’s absolutely historic. And it’s been talked about for years.
“It’s really going to give a lot of help and hope to the industry.”
As many as 60 per cent of restaurants that have reopened in the pandemic are still operating at a loss, according to a survey released last week by Restaurants Canada.
“This comes at the perfect time,” said Mark von Schellwitz, association vice-president. “This could certainly mean the difference between
being in a loss situation or at least break even in a return to some sort of profitability.
“It’s going to be a long road to recovery but that will certainly help.”
Von Schellwitz said it may also be the tipping point for the one-quarter of B.C. restaurants that have yet to reopen, as they examine whether to resume operations.
Tostenson said that, even with the help, he expects 20 to 30 per cent of B.C.’s restaurant sector to go bankrupt due to the pandemic.
The wholesale liquor change is particularly significant for restaurants that put an emphasis on premium cocktails and wine.
At Little Jumbo restaurant in downtown Victoria, handcrafted cocktails make up 40 per cent of the revenue, said owner Bruce Gillespie.
He said the wholesale pricing will have a significant impact on
his pricing and revenue control.
“We’ve got much greater control on the food side, but on the liquor side we’re stymied,” said Gillespie.
The pandemic has resulted in food and liquor prices increasing, and restaurants are fighting to stay alive financially. Gillespie said customers looking for a drop in the price of a cocktail due to the wholesale change have to also realize that restaurants need the revenue to compensate for a reduction in seating.
“What it will allow us to do, probably the industry as a whole, is sharpen our pencils and see where we can pass on savings,” he said. “But at the same time the general public have to understand what the losses mean for the industry and probably cut us a little bit of slack.”