BC Liquor Policy Review Should Remember the Consumer

Liquor distribution in BC is a fossilized monopoly, and our wine industry is an industrial fraud.

By Bob Exell 13 Dec 2017 | TheTyee.ca

Former wine importer Bob Exell is a writer and editor who worked for several Canadian newspapers as well as the Canadian Press in Toronto and New York. He was executive assistant to a Conservative cabinet minister in Ontario before moving to Vancouver in 1975 where he served as an assistant deputy minister.

Mark Hicken has a job to do, and it’s a delicate one: he needs to tell the provincial government what it presumably already knows, and he needs to couch it in terms of revelation.

Mr. Hicken is a Vancouver lawyer who specializes in wine law. Attorney General David Eby has retained him to advise the NDP government on liquor policy. He’s to consult with all segments of the industry (outreach, the government calls it), gathering input on their needs, their grievances, their hopes. They are many.

He is to propose a panel. Here Mr. Hicken’s job becomes particularly difficult. A panel do to... what? It’s a tough one because wherever and however he chooses to start out (maybe by riding off in all directions, as Stephen Leacock put it) all roads lead directly back to the B.C. Liquor Distribution Branch.

The LDB is the fossil of devil alcohol’s stone age in British Columbia, a remnant of prohibition, a calcified creature of governments past, the controller of all things booze: manufacturing, importing, distributing, wholesaling, retailing, even personal carriage.

Its bible is the provincial Liquor Distribution Act, a statute which vests in the LDB’s general manager a kind of Wizard-of-Oz, tinpot-czar status that authorizes him (the GM has always been male) or his nominee to order, direct, command, demand, control, all without challenge, all without appeal.

Attorney-General Eby, as a former executive director of the B.C. Civil Liberties Association, could probably recite by rote Section 8 of the Canadian Charter of Rights and Freedoms, which states: “Everyone has the right to be secure against unreasonable search or seizure.”

But this is B.C. If you’re involved in any way with the liquor industry in British Columbia, the general manager of the Liquor Distribution Branch may enter your premises, conduct a search, demand your records, copy them, and force you to answer his questions. That’s the law (S.11, Liquor Distribution Act of B.C.).

Mean stuff, but extraneous to what Mark Hicken will be about. He’ll be concerned with a “panel.”

It could be a board of directors — the Liquor Control Board of Ontario monopoly has one. Why not here?

Or it could be composed of individuals or experts charged with raising awareness, demanding caution, where suspect actions by a powerful entity — for instance, a monopoly with the extraordinary authority of the Liquor Distribution Branch — appear to constitute an affront to the public interest or a denial of natural justice.

Or it could be another bastard offspring of the Canadian love of process: a commission of inquiry established to hold hearings, invite submissions and make non-binding recommendations, all aimed at postponing decision-making. Politicians use this device both to buy time and to characterize the panel’s findings as the source of their decisions.

But that is how timorous governments function when they prefer to have the finger pointed elsewhere. Might the NDP take such an approach, particularly in light of the fact that a well-briefed David Eby, in opposition, so thoroughly trashed the then Liberal minister responsible for the LDB just last year in the legislature?

The interests of stakeholders, including the retail and hospitality sectors, are hardly a mystery. In his March 2016 interrogation of Liberal minister Coralee Oakes, Mr. Eby castigated her for allowing the LDB under her watch to dramatically increase the price of alcohol products not just to consumers but to independent family businesses throughout British Columbia.

“This is a sector that the minister says she wants to prioritize,” Eby said in the House. “I can’t imagine what the minister is expecting to hear from restaurant operators when she goes to consult with them on reducing the price they have to pay for beer and wine. Is she thinking that they’re going to say: 'No, we don’t want a reduction in the price that we pay for beer and wine’? What is the consultation here?”

Now, as minister responsible for the LDB, the attorney-general surely is even more aware of contradictions in the booze industry: that restaurants, bars and clubs cannot buy product at wholesale but must pay the LDB its full retail price, then squeeze their own margins as much as they can manage when reselling to their clientele.

He knows that impressive revenue numbers recorded by the LDB since 2015 haven’t been the result of shrewd marketing or improvement in the LDB’s dismal product selection. Gouging the customers works admirably and is easy when you’re a monopoly supplier and every one of your customers has no alternative but to buy directly from you.

He knows that when the Liquor Distribution Branch failed at increasing profitability via sales in government liquor stores it corrected that by the simple expedient of raising its wholesale prices to private liquor stores — “competitors,” it called them. Then it went head-to-head with them by opening all 198 government stores on Sundays and holidays, decimating the most profitable days for private stores in their communities.

As a lawyer, Mr. Eby knows that the Province of British Columbia is constantly being sued because of its protectionism. In the age of Trump and trade, when agreements like NAFTA are at risk, U.S. industry has been joined by other countries in challenging B.C.’s preferential wine and spirits policies related to domestic-only sales in grocery stores; to LDB markup favouritism for domestic products; to LDB refusal to permit direct delivery to consumers of imported product; to “commission” kickbacks to VQA wineries; to distribution system advantages for domestic wines, and more.

Presumably Attorney General Eby recognizes that British Columbia’s domestic wine industry is largely an industrial fraud. It’s as much service as it is production. Compared to other sectors, its economic value is limited. Its sustenance and growth is not so much related to the quality of its products, or to the employment it creates, or to receipts from its export sales, as it is to the sweetheart benefits that accrue to wineries by way of extraordinary provincial subsidies.

Smart entrepreneurs see it as a haven: sell a bottle of domestic wine, pay piddling tax, keep most of the proceeds. (Sell a bottle of imported wine, the government keeps most of the proceeds.) Vanity seekers (doesn’t every West Vancouver stockbroker who’s made a little money want to have his own winery?) populate the domestic sector, accounting in part for the fact that there are close to 350 winery licences in the province. Entry is easy. Regulation is voluntary. Staff needs are miniscule. A physical plant is not necessary. Grapes can be bought, a winemaker rented, and if marketing is a challenge the government can help sell your wines for you.

But 350 or so wineries are too many. No more than a handful export their products. The B.C. market alone cannot support that much domestic supply. Compared to the rest of the world, B.C.’s is still a nascent industry. Elevated price points of too many B.C. wines do not always reflect the reality of what’s in the bottle.

Exports? Most wine that leaves the province is sugary juice in packaging labelled "icewine," destined for Asian markets. It’s a good niche. Table wine is where the competition is. But better wines are made everywhere. How to compete with Australia, for instance, which exports 58 per cent of its production? Spending real money to develop offshore markets is not what vanity wineries have in mind. The novelty wears off, business wears thin, and at any given time a dozen or more wineries are listed for sale.

The B.C. Wine Institute has 167 members, just three of whom are classified as large producers: Jackson-Triggs, owned by the international conglomerate Constellation Brands; Calona Vineyards, owned by the Ontario company Andrew Peller Limited; and Mission Hill/Cedar Creek, the only B.C.-based player. Constellation Brands has made major inroads, buying up good producers and entering into joint ventures with growers.

The B.C. Wine Institute was originally created by an Act of the Legislature, but today is a trade association which warmly embraces the body that feeds its membership. Provincial records show that the institute has donated $46,500 to the Liberal party since 2012. Donations to the NDP during the same period? Zero.

Since 2013, Constellation Brands (“Our Vision is to Elevate Life with Every Glass Raised”) has given $64,700 to the Liberals, and nothing to the NDP. Constellation’s operation in Canada formerly was known as Vincor, which prior to 2013 donated more than $60,000 to the Liberals, and nothing to the NDP.

Since 2012, Andrew Peller and its entities have donated more than $53,000 to the Liberals, and nothing to the NDP.

In the records of Elections BC, there is in fact an absence of donations to the NDP from any element of the wine and spirts industry. Exceptions are a handful of outliers — licensed resellers of wine and spirits unaffiliated with the dominant, corporate players like the Jim Pattison Group’s Everything Wine and the Alberta-controlled Liquor Depot and Liquor Barn. All give to the Liberals. (Pattison has always been a major Liberal donor — $200,000 in 2010 alone.)

As a politician, the attorney general cannot be unaware of where the sentiments of the domestic industry lie, and the reasons for that. And surely he smarts in the knowledge that the privileged players, corporate and independent, are situated mostly within seven provincial constituencies — Shuswap, Vernon, the three Kelowna ridings, Penticton and Boundary-Similkameen — all of which voted overwhelmingly Liberal in the May 2017 election

But that is not to suggest political considerations may be an element of Mr. Hicken’s undertaking. That is not why he has been retained and would be improper in the context. (Records show that a person with the name Mark Hicken made small donations to the Liberals up until 2014.) Indeed, should political considerations enter into decision-making by the NDP government, they need not be punitive towards anyone.

In correcting imbalances within the liquor industry, if that is Mr. Eby’s goal, he need only to ensure that the government act fairly and responsibly towards sectors where governments have been remiss in the past in recognizing the industry’s true economic backbone: the hospitality sector, the retail sector, and the multitude of suppliers word-wide who, together with their B.C. importers and representatives, provide the industry and the community as a whole with a diversity of product.

And, Mr. Eby, don’t forget the consumer. Therein lies the ultimate political contribution: the ballot.  [Tyee]

Read more: Food, BC Politics

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