The BC government announced in late September that the liquor distribution privatisation was a casualty of the collective bargaining agreement with its largest public sector union. Thus ended a poorly designed process, for which government never clearly explained the end policy goal (in the February budget it was to sell off public real estate, but the warehouses were excluded from the subsequent bidding process – among other inconsistencies). There are many good arguments for government to get out of the liquor business (chief among them allowing the market – i.e. consumers – to choose which beverages they wish to purchase). However, privatising the distribution function was at best only half of the equation.
Last week’s “revelation” published in Business in Vancouver that adjustments to the pricing mechanism were part of the government’s liquor privatisation plan should come as no surprise to observers and participants in the system (Censored Documents Shed More Light). In fact, it is hard to imagine how the privatisation of the distribution function of the LDB could not have been the catalyst for broader reform of the wholesale and retail arms of the system. Merely replacing the public sector monopoly with a private sector monopoly would almost certainly have entailed an adjustment in prices and cost structures for all classes of liquor purchasers – from private retail stores, to restaurants, to government liquor stores, and it would likely have eliminated the direct delivery model afforded to domestic producers. What would be the private sector incentive to take over the operation if not to profit from it?
Recognising that the initiative was politically doomed – particularly in the face of a tough negotiation with the BC Government Employees Union and an upcoming election – government folded its hand, relegating true (or even partial) liquor reform to the (top) shelf, likely for another decade or so. At best, the exercise has shone a light on inadequate storage capacity at the two LDB-operated warehouses, which will likely be addressed in the near term – all without disturbing the complex and inequitable web of rules governing the importation, storage, distribution and sale of alcohol in British Columbia.