The cost of your favourite tipple could be going up next year if the province goes ahead with a plan to privatize its Liquor Distribution Branch, according to craft brewers around B.C.
Originally Published in The Times Colonist on May 28th, 2012
By Andrew Duffy, Timescolonist.com
Vancouver Island Brewery general manager Jim Dodds says increased distribution costs would be passed on to consumers. Photograph by: Darren Stone
The cost of distribution, currently estimated at 78 cents per case of beer in B.C., could nearly double to $1.53 per case. That’s what craft brewers pay for distribution in Alberta’s private system and those increased costs will have to be passed on to consumers, said Jim Dodds, general manager of Vancouver Island Brewery.
“It affects everything, our entire business,” said Dodds. “If we go to a similar model as Alberta, we will be looking at double the cost and that has to be passed on.”
The province announced in February it wanted a more modern and cost-effective way to warehouse and distribute liquor.
A request for proposals, which has to be returned by the end of June, asks the private sector for a plan that involves warehousing of liquor products currently done by the LDB and the distribution of warehoused products to government liquor stores and wholesale customers.
The government said it would like to be in position to sell LDB assets, warehouses in Kamloops and Vancouver, by March 2013.
Dodds said the move is bewildering to the craft-brewing industry, which has not been consulted. “There’s no transparency here. They are trying to blast this through, and we can’t figure out why,” he said.
Tod Melnyk, chairman of the B.C. Craft Brewer’s Guild and owner of Tree Brewery in Kelowna, said the impact of such a move would be felt throughout the province, and not just on the price of suds.
“The private Alberta model is more expensive to distribute your beer, and if we were to privatize it here from what we know it would become more expensive, too,” Melnyk said, noting private companies have shareholders who need to see profit at the end of the day. “If we put that cost onto consumers we have to ask: Will they buy our product?”
Melnyk said if sales drop off, brewers may have to start looking at curtailing production. “As you look at the beer industry as a whole, it’s the craft industry that’s growing, and there are more than 50 of us in B.C. who provide meaningful jobs in each of the cities and towns we do business in. A decline in production has an impact on everybody,” Melnyk said.
In its quarterly review in December, the B.C. Liquor Distribution Branch showed larger brewers, defined as producing more than 150,000 hectolitres annually, saw a four per cent drop in sales last year, while smaller brewers’ sales increased by 19.3 per cent.
The larger breweries still accounted for the vast majority of beer sales — $770 million last year, according to the LDB. But the smaller brewers saw their sales grow to $130 million in 2011 from $106 million in 2010.
Melnyk said despite raising its concerns through the media, the brewers still haven’t heard from government on the issue.
And they may not.
Rich Coleman, minister of energy and mines and the man responsible for the Liquor Distribution Branch, doesn’t seem to think there’s a problem and dismissed concerns over increased costs. “If they read the RFP it says we won’t do it if it does drive up the cost, so it’s just one of those things people are afraid of changing,” he said.
During question period Monday, Coleman added the move is about trying to find out if the private sector can do the job better and cheaper than government.
That did little to assuage the concerns of NDP critic Shane Simpson, who maintained the government has yet to provide a business case or any kind of proof there’s a need to privatize the LDB.
There have also been concerns raised about one of the companies expected to offer a proposal.
Exel Logistics, which operates the liquor distribution system in Alberta through Connect Logistics, is expected to put in a bid. That company employs Patrick Kinsella as a lobbyist. Kinsella, considered a Liberal party insider, was an adviser on Premier Christy Clark’s 2011 leadership campaign.
On Monday, Coleman dismissed as sheer conjecture any suggestion there’s an inside deal being made. “The reality is I haven’t talked to [Kinsella] about it,” he said.
— with a file from Rob Shaw
aduffy@timescolonist.com
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