B.C. Public Sector Union Strike: Effects on Wining & Dining
A week into the British Columbia General Employees Union’s strike against the left-leaning B.C. NDP government, it’s beginning to look exclusively like a “B.C. Liquor Strike”.
Begun on August 15th, if the BCGEU strike goes on for more than a couple of weeks, it will have financial impacts not only on the Liquor Distribution Branch’s wholesale customers (retailers, restaurants) but also its suppliers, including B.C. wineries.
Machiavellian
The BCGEU’s choice of a first (so far only) picketing target - the Liquor Distribution Branch’s four distribution warehouses – is undeniably Machiavellian. By selecting distribution rather than rotating pickets at government retail outlets (GLS stores), it reduces directly annoying the liquor-purchasing public. The BCGEU must have noted the public’s pandemic-exhausted patience with every frontline service sector across the economy. As for private retail outlets, the strategy delivers a double hit: it removes the incentive to redirect customers from government to private stores (as happened in previous labour disputes), and it depletes private stores’ inventory, perhaps faster than GLS stores (it is unknown whether GLS stores built up inventory in advance of the strike).
Since private retailers, restaurants, lounges and pubs may only purchase their liquor through the LDB wholesale centre or via the GLS store system, they face an immediate and significant inventory challenge: not least due to the stringent quotas placed on purchases as of Friday August 19th, which are reminiscent of a command-and-control economy, not a resilient and dynamic first-world market economy.
Targeting the distribution centres also means the tax revenue hit to government coffers will be less driven by a drop in sales in the government-operated system, and more by the constriction of sales at private stores and on-premise establishments. The LDB crown corporation delivered roughly $1.15 billion to the provincial treasury in fiscal 2021-22. A short-lived strike will not make a significant dent in revenues, but could if it stretches longer than a month or so.
Generally speaking, it’s a bad look for lengthy public sector union job action against a left-leaning government (technically, against the B.C. Public Service Agency as the employer). As of August 23rd (afternoon), the word is that the parties have agreed to resume negotiations.
Impacts on B.C. Wineries
While behind picket lines, the LDB warehouses have effectively halted operations, both shipments to wholesale customers (private retail, government retail and on-premise, including restaurants, lounges etc) and orders from suppliers. Leaving aside that this adds to the B.C. liquor system’s poor reputation within Canada and worldwide (expensive, unresponsive, unpredictable), it is also having a two-prong impact on B.C.’s wine producers.
B.C. wine may be shipped directly to every type of customer (individual, retailer, restaurant) within the province. Some commentators have noted the strike could deliver a boost to B.C. wine: the line of thinking is that when private retail or restaurants run out of Chilean, Californian, French or American wines, just substitute with B.C. products until shipments resume. Leaving aside the importance of a diverse range of wines at various price points to the customers of those establishments – and the inappropriateness of casting B.C. wine as merely a second-tier stand-in – narrowly speaking it could benefit B.C. wineries. Anecdotally, one Okanagan winery reported that its direct delivery channel had jumped by 20% last week. Others are considering incentives similar to those during the pandemic such as free shipping.
On the other hand, wineries who rely to any degree on BC government liquor stores for their sales will not be receiving restock orders from the LDB warehouse until after the strike. This has a twofold effect on them: not only a drop in sales (for fiscal 2021-2022, BC VQA sales through GLS stores were about $348 million), but also the loss of the VQA rebate. Every sale of VQA wine through the government liquor stores triggers a 50% commission to the winery on its asking price (i.e. pre-wholesale price).
In other words, yes, B.C. wineries could benefit, but it’s a double-edged sword if they have inventory tied up in and financial projections based on the GLS store channel. If the sales analysis justifies it, wineries may want to consider a pivot (yet again) to direct delivery as much as possible in the short term. If the inventory is no longer available for an LDB purchase order later in the year, so be it.
More Questions than Answers
The cost of living has gone dramatically up, affecting nearly every person and nearly every organization (for-profit and not-for-profit). In this punishing inflation environment, and given the end of the previous public sector union collective agreements on March 31, 2022, it is not a surprise that the BCGEU membership voted in favour of strike action, and has now undertaken it.
However, B.C. wine lovers may be left with some questions for the parties:
· Why, when the union’s members work across so many fields, has it targeted liquor exclusively (so far)?
· Why has the provincial government not included liquor in an essential services designation, when it so clearly considered liquor essential during the pandemic?
· What rationale will the government (Solicitor General Farnworth, Finance Minister Robinson or Jobs, Economic Recovery and Innovation Minister Kahlon) provide for the unnecessary loss of business for a barely-recovered, mostly small-business, food and beverage sector?
· And perhaps most important for all concerned: When will it end?
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