Liquor bid promised $60 million in taxpayer savings

ContainerWorld documents revealed following cancelled LDB privatization initiative

The only B.C. company shortlisted to privatize liquor warehousing and hauling said it had a plan to save taxpayers $60 million, but the biggest sell-off attempt of the BC Liberals' pre-election year went down the drain.

ContainerWorld estimated the savings would come in the first two years of winning the 10-year warehousing and distribution contract, despite the estimated $15.9 million transition cost.

The company’s bid, obtained by Business in Vancouver, proposed closing Liquor Distribution Branch warehouses in Vancouver, Kamloops and Victoria and consolidating all operations at the 500,000-square-foot ContainerWorld Richmond warehouse.

The existing 434 LDB warehousers would dwindle to 217 by the sixth year at ContainerWorld through “the implementation of automation and efficiency gains,” according to the bid, which government records said was received on the eve of the June 29 deadline.

ContainerWorld, Exel, Kuehne + Nagel and Metro Supply Chain Group were shortlisted July 20. On September 28, the government abruptly cancelled the tender after it reached a two-year contract with the BC Government and Service Employees’ Union (BCGEU) a day earlier. A winning bidder was scheduled to be announced October 16.

In the bid documents (which do not include appendices), privately held ContainerWorld said its 2011 consolidated revenue was $57.6 million and it employs 187 full-time equivalent management and staff; 101 are hourly warehouse employees represented by Teamsters Local 31.

The proposal assumed an average hourly wage of $22.27 and union benefits at 53% of base wages. ContainerWorld also assumed all Teamsters would be displaced by BCGEU warehouse employees from the Liquor Distribution Branch (LDB), but the affiliation switch details were not disclosed.

“Because of the highly sensitive nature of the (labour relations) strategy, we will verbally provide more details of our preferred approach when we meet with you,” said the proposal.

The bid forecast such a transition would proceed “smoothly and without incident,” but the company budgeted for additional security “to safeguard assets and people.”

“We recognize and respect BCGEU member employees have options,” said the bid. “One option for BCGEU members is to express interest in joining ContainerWorld. Some employees, where eligible, may wish to explore early retirement, or voluntary departure, or bumping into another government department.”

ContainerWorld’s proposal said it already handled 65% of LDB beverage alcohol products under a pre-distribution agreement and its inventory was three to four times larger than the LDB’s.

“We handle the same number of [stock keeping units], our delivery service capability is already provincewide, our customer base includes GLS (government liquor stores), LRS (licensee retail stores), RAS (rural associate stores), licensees, suppliers, freight forwarders and import agents,” said the bid. “Our business processes are similar in many aspects to future requirements.”

ContainerWorld was founded in 1993 by president Dennis Chrismas on Annacis Island, and it acquired Commercial Logistics trucking in 2001.

ContainerWorld’s warehouse opened in 2008 at Port Metro Vancouver’s Richmond Property Logistics Hub and is leased from KingSett Capital. With a 2.5 million-case capacity and 107 truck doors, it’s B.C.’s largest liquor warehouse.

Chrismas’ minority partners include ContainerWorld human resources manager Harjeet Kaur

and Overseas Container Forwarding Services. ContainerWorld has an “exclusive corresponding agency association” with Gori Srl, an Italian subsidiary of Deutsche Post DHL, the parent company of fellow bidder Exel.

Exel’s Connect Logistics division holds the Alberta liquor hauling monopoly.

The controversial privatization was attacked by the NDP because the provincial government did not release a business plan or undertake formal industry consultation. The LDB recorded a $911 million profit on $2.9 billion in revenue in its 2011-12 fiscal year.

Exel contracted BC Liberal-connected lobbyists Patrick Kinsella and Mark Jiles to push for privatization since 2005. Over the last seven years, ContainerWorld donated $36,861 to the BC Liberals, including $500 to liquor minister Rich Coleman’s 2009 re-election campaign. Elections BC files also show $2,100 donated personally to the Liberals by Chrismas. ContainerWorld hired lobbyist Mike Bailey in 2011 to oppose privatization, but changed its tune in 2012. Chrismas and Bailey met with Coleman on March 2. The government had threatened to phase out contracts with pre-distribution warehouses, like ContainerWorld, under a private model.

When the privatization was cancelled, ContainerWorld issued a one-paragraph media statement attributed to Chrismas through the BC Liberal-allied public relations firm, Pace Group:

“We believe the evaluation process was certainly thorough and detailed, and was a valuable exercise for us. The province’s decision to remain with the current distribution system has always been one of the options. Now that the final decision has been made, ContainerWorld and our 275 employees look forward to continuing to work with the province in the months and years ahead.”

Chrismas did not respond to BIV interview requests, but Pace Group managing partner Norman Stowe said: “The statement is the extent of any comments or response to the process.” •

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