New BC liquor laws to bump up prices

The government of British Columbia is to allow limited sales of liquor in provincial supermarkets next year but the average price of a bottle of wine seems set to rise as a result.

From 1 April 2015, a limited number of supermarkets will be granted a licence to sell wine and beer in a move meant to provide greater convenience for customers as well as designed to help small and medium craft brewers and wineries the chance to grow and expand.

A press release from the government said: “For small- and medium-sized businesses, today’s changes will remove barriers that have previously hindered and discouraged growth, both with regard to the breweries themselves and to their volume of beer production.

“By moving to gradual increases in mark-up rates, there will be no more financial cliff as soon as breweries grow into a new production category. Simply, it will mean no more artificial barriers to growth and it will mean more jobs for British Columbians.”

From 1 April, all liquor retailers, including BC Liquor Stores, will have to buy all alcoholic products through the BC Liquor Distribution Branch at a common, wholesale price.

However, according to lawyer Mark Hicken who advises and writes on liquor issues, the wholesale pricing model the government is adopting will lead to price increases for bottles of wine over C$20 in particular.

According to his pricing chart, bottles of wine up to $10 will not be overly affected by the model but a bottle of wine that is $15 now, will likely go up to $18 next spring and a $20 bottle will be $24.

As Hicken explained on his blog: “At the present time, private retailers pay different prices depending upon their licence type. Government stores don’t pay wholesale prices at all because their revenue is simply blended between their retail and wholesale divisions.

“Under the old model, the LDB applied a 117%/51% markup on wine [on the first $10.25] to generate a fixed retail price which was used as a reference point for all retail sales.

“Under the new system, the LDB will apply an 89%/67% [on the first $11.75] markup on wine to generate a wholesale price – retailers will then be free to set their own end retail prices once they add their own markups.”

As a result, he wrote: “While the new system provides margins equivalent to a 22% backwards discount on the lowest priced wine ($8 retail) the margins diminish quickly as prices rise.”