The privatize British Columbia Liquor Distribution Branch (BCLDB) chorus is getting louder but it’s volume will have to be raised significantly to convince solicitor general Rich Coleman that government should get out of the liquor retailing business.
Coleman told Business in Vancouver that he’s reluctant to privatize the BCLDB because:
- the stores are profitable;
- he does not want to negatively impact negotiations with the British Columbia Government Employees Union (BCGEU), which represents most of the 3,500 BCLDB employees as well as many times that number in other government departments; and
- he doubts the private sector would provide as many large supermarket-style liquor outlets as the province does with its 21 Signature liquor stores.
“Is the private sector willing to come to the maturity level to produce the stores that we want – ones like the Signature stores?” Coleman mused. “Or are their stores going to be more the size of 7-Eleven convenience stores?”
Recent large private liquor store openings, however, demonstrate that entrepreneurs are willing to risk opening large stores.
In late November, the Granville Entertainment Group (GEG) opened an 8,600-square-foot private liquor store in the former Olympic Athletes’ Village that’s quickly becoming a destination store because of its wide selection.
Its sales in January were considerably up from those in December, which is traditionally the biggest month for liquor sales. GEG principals want to operate more large stores across Metro Vancouver, but Darryl Lamb, the store’s general manager, said they’re being stymied by the BCLDB’s moratorium on new private store licences.
“BCLDB is a dinosaur. It’s an outdated, century-old throwback to prohibition,” Lamb said.
“Why do we need to have $70,000-per-year unionized workers selling Kokanee?”
Lamb’s employees are usually paid less than their BCLDB counterparts.
But Lamb said he pays BCLDB-level wages to employees who have taken sommelier training.
Vancouverite Paul Clinton is another entrepreneur keen to operate supermarket-sized liquor stores. He launched Everything Wine several years ago and now has three stores, including a 12,000-square-foot wine shop in North Vancouver that opened in 2008.
Marquis Wine Cellars owner John Clerides said he’d be interested in opening a liquor store 6,000 square feet or larger if the BCLDB closed its Signature stores.
Shea Coulson, a lawyer with Farris, Vaughan, Wills and Murphy LLP, and other advocates of privatizing the BCLDB say the branch’s expected $296.9 million operating cost in the current fiscal year is too high.
Coulson argues that the government could save that $296.9 million if the BCLDB closed its 197 stores, two distribution centres and head office. Granting new licences would enable entrepreneurs to open new stores and fill the void, he said.
The BCLDB generated $877.3 million in profit in the year that ended March 31, 2010.
Coulson said that same profit could be realized if the government charged it on the front-end as part of the wholesale markup that it charges private operators.
“The private sector’s argument is, ‘We’re more efficient. We’re better at growing this market. Sales will go up faster with us and that will translate into more taxes for government,’” Coulson said.
Coulson added that increased efficiency will lower prices and increase selection. But Coleman told BIV that privatizing the BCLDB is not as simple as Coulson seems to think.
“First of all, reaching a collective agreement on the number of [BCLDB] stores that we will operate helps us get a collective agreement across the 40,000 or so [BCGEU] employees of government. Whenever we do a negotiation for a contract, the liquor distribution branch is always part of that negotiation,” Coleman said.
“In the present three-year contract the number of stores we operate and any closures has been negotiated as part of the agreement. You can’t breach that collective agreement.”
The BCLDB released figures last week showing that, in the 2010 calendar year, revenue from all alcoholic beverage sales in B.C. grew 1.1% compared with 2009.
However, British Columbians are drinking less. According to the BCLDB’s quarterly market review, sales by volume dipped 1.3% in 2010 compared with 2009.