As the BC government lurches toward the April 1 2015 launch of major changes to how wine and liquor are priced and where they may be sold in this province, the whole process is taking on an ever more Alice-through-the-looking-glass quality. Bearing in mind that the goal is a level playing field and a more market-friendly and transparent approach to wholesaling and retailing wine, some of the events of the past couple of weeks are mystifying at best, and shocking at worst. Bear in mind too that suppliers/agents only learned the new retail prices for (most) of their products after the government’s self-imposed deadline of March 20, despite having supplied “shot-in-the-dark” wholesale prices to the BC Liquor Distribution Branch (LDB) a month earlier.
- Several oddities emerged in the information the LDB published in early March about the wholesale changes:First, of the approximately 5,300 products (or 17% of inventory) that are expected to have higher wholesale prices, the Board took it upon itself to speculate on the economic reasons (exchange rate, inflation) for the increases – without a shred of evidence or apparent expertise in this type of analysis.Second, it reported that its staff had been in contact with suppliers with “significant price increases and have strongly encouraged them to review their pricing practices.” The explanation for this highly unusual step (in the real world at least) was a desire to avoid passing on excessive price increases to industry or consumers. In most consumer product segments, the price is either widely acceptable to consumers or it is not: they will vote with their wallets. This intrusive management of the pricing process demonstrates just how far BC has to go to get to a truly market-based system.
- Events then spilled over to the BC legislature in the subsequent days. Keen leg-watchers were treated to Liberal Attorney General Suzanne Anton criticising businesses for “taking advantage” of the government’s wholesale changes by raising their prices unnecessarily. Meanwhile, New Democrat liquor critic David Eby – somewhat unexpectedly – took the side of the small businesses in the province (retailers, agents) who will very likely be hurt by the price increases resulting from the wholesale pricing model change.
- Last but not least, it is an ongoing mystery that the restaurant/hospitality industry was completely bypassed in the wholesale pricing reform, and is still required to pay full (likely higher) retail prices. That restaurants may only purchase wine for resale from the Government Liquor Store (GLS) system deals a further blow to private retailers who will soon have to compete with the emerging grocery store segment (a topic that deserves a post all to itself).
In sum, given the performance of the past few weeks, a well-intentioned set of changes to modernise and improve the way wine and liquor are sold in BC is highly likely to founder on a rushed, incomplete and incoherent process that has not taken account of unintended consequences for the (mostly small) businesses that underpin the system.