Hold off on the liquor
Don’t expect to buy booze in B.C. grocery stores any time soon as confusion reigns over new rules.
B.C.’s new liquor laws are supposed to kick in on April Fool’s Day. Big grocery stores can start selling liquor, a new one-sizefits-all wholesale pricing model takes effect, and government liquor stores can open on Sundays and sell cold beer and wine.
But chaos seems to be reigning supreme behind the scenes as government officials scramble to tweak the rules to placate angry stakeholders and meet the self-imposed April 1 deadline.
Many in the industry feel the government should take more time to get it right. “We have a communication issue, and that’s creating a lot of uncertainty and misinformation in the marketplace,” said B.C. Restaurant and Foodservices Association president Ian Tostenson. “No one really knows what’s going on.
“It shouldn’t be about getting it done by April 1 just because it’s a new fiscal year. It’s about getting it right and getting everybody on the same page.” But Attorney General Suzanne Anton insists the new liquor law will be a reality in just two months.
“We have been working very hard to get to this date, and I think the industry should know the lay of the land for April 1 at this point,” she said in an interview.
The government made a significant move Friday to allay concerns of many industry stakeholders by announcing changes to its new wholesale prices for wine so that retail wine prices don’t suddenly increase significantly.
Critics had claimed the wholesale price model announced last fall would have hiked the retail price of a $30 bottle of wine to as much as $40, while a $100 bottle would have jumped to between $126 and $151.
A base wholesale markup of 89 per cent would have been applied to the first $11.75 per litre of wine, with a second-tier markup of 67 per cent being applied to the remainder.
Under the adjusted model, the second-tier markup will be reduced from 67 per cent to 27 per cent.
But even if the wholesale pricing controversy has been solved, other issues threaten to scuttle the province’s dream of a smooth transition to a new liquor retailing landscape.
The government plans to issue a “limited number” of new licences to allow grocery stores to sell B.C. wine on their shelves after April 1.
But California wine producers claim the plan violates international trade agreements — including NAFTA, GATT and the Canada-EU agreement on wine sales — because it raises a new barrier to trade.
University of B.C. political science professor Max Cameron says the Americans have a strong case.
“NAFTA provides for national treatment of foreign products,” he said. “So a product in Canada made by a U.S. company should not be discriminated against. On the face of it, (only allowing the sale of B.C. wines on B.C. grocery shelves) seems discriminatory to me.”
Cameron said it wouldn’t be the first time NAFTA has thwarted a Canadian province’s best-laid plans. He noted that former Ontario premier Bob Rae had to scrap plans for a new public auto insurance company 20 years ago because it would have violated the trade deal.
Anton feels the B.C.-wines-in-grocery-stores model can still proceed as long as only a limited number of licences are issued, probably fewer than 60.
“We know we have to comply with trade rules, so the number of new licences will be limited,” she said. “People in B.C. like B.C. wine and we’ve had VQA stores (that sell only B.C. wine) for a long time now. Our intention is to find the balance that meets with trade requirements.”
Grocery stores — excluding convenience stores such as 7-Eleven and “big box” outlets like Costco — will also have the option to create a liquor store-within-a-store by acquiring an existing private liquor store licence or by co-branding with current licence holders.
The grocery store liquor outlets can’t operate within one kilometre of existing public or private liquor stores — a rule that means just two grocery stores in Vancouver will qualify. But government officials say grocery stores can work around that rule by buying out the nearest liquor store or by entering into a joint venture with the licence holder.
But don’t expect to buy booze when you go grocery shopping any time soon in B.C. because Canadian grocers are still trying to figure out the rules of the new liquor retailing game.
Loblaws spokesman Kevin Groh said the grocery giant is “absolutely interested” in selling liquor in its B.C. stores, but needs more information before it can proceed.
“The government has laid out a solid plan to date, but final details are still pending,” he said. “We would never say never for (selling liquor in B.C. stores on) April 1, but we simply don’t know.”
Loblaws’ B.C. grocery brands include Real Canadian Superstore, Extra Foods, No Frills and Loblaws City Market.
B.C.-based Overwaitea Food Group — with brands such as Save-On-Foods, PriceSmart Foods and Urban Fare — is also interested in liquor retailing, but wants more information.
“We would be pleased to be able to offer this choice to consumers in our stores and we look forward to better understanding the opportunities as information becomes available,” the company said in a statement.
Marquis Wine Cellars owner John Clerides, who operates one of 12 independent wine stores in B.C., said the business faces an uncertain future after losing the 30-per-cent wholesale price discount they received under the old system. They will have to deal with increased competition from grocery stores that sell wine and from government stores that will open on Sundays.
“It’s a lousy place to be after 28 years in the business,” Clerides said. “We’re having to reinvent our business at a competitive disadvantage. Tell me how that’s fair with a government that promises a level playing field.”
He said he was pleased with the adjusted wholesale price model that will keep retail wine prices at current levels, but still feels independent wine stores need the right to sell beer and spirits or the right to sell wine to restaurants — currently the exclusive purview of government stores — to better compete under the new system.
“If they give us nothing, that’s an admission that the wine stores are collateral damage and they just don’t care about them,” Clerides said.
The 12 independent wine stores collectively generate more than $50 million in annual sales.
Anton doubts there are any more significant changes to be made before April 1.
Alliance of Beverage Licensees (ABLE) B.C. executive director Jeff Guignard, who represents B. C.’ s private liquor stores, fears the province is moving too quickly and not “listening adequately” to concerns about the new liquor regulations.
He noted the LDB won’t announce its new wholesale prices until March 6 and government liquor stores won’t publish their new retail prices until March 20, giving private stores little time to prepare for April 1.
“That’s an extremely tight timetable for any business,” Guignard said. “There’s no reason to rush through to an arbitrary date and then get a lot of things wrong. We should take our time and have a proper dialogue and figure out a way to make this work for everybody.”
He said private liquor store owners feel betrayed by the decision to allow government stores to open on Sundays and have refrigeration units for cold beer and wine, which he estimates would cost from $40 million to $60 million to install in all 196 government stores.
“The current system was set up by government and they told us they wouldn’t do anything like this, so people invested millions of dollars (in private stores),” Guignard said. “It kind of feels like they broke a deal.”
He fears grocery stores will dominate the B.C. wine retailing industry if they are allowed to sell wine on their shelves.
“When you allow wine on grocery shelves, about 65 to 70 per cent of all wine sales in the market end up taking place in grocery stores,” Guignard said.
Vancouver wine industry lawyer Mark Hicken said B.C. wineries might have a hard time keeping grocery store shelves filled, noting there are just three fairly large wineries in the province — Mission Hill, Andrew Peller and Vincor.
“Supermarkets generally work on high-volume, lower-priced wine, so it could be a challenge for B.C. producers to meet the demand,” he said.
Hicken claims that a significant number of government stores — up to 38 of the 196 outlets — lose money, and he thinks some should close if that trend continues under the new liquor retailing system.