Private Liquor Stores vs Public Liquor Stores in BC: Operational Differences

July 19, 2012 § 11 Comments

It seems that the underlying assumption about liquor retailing and distribution in BC is that it is a level playing field. I have to make this assumption for two reasons. 1) the level of debate by our political leaders never discusses the structural differences between operating a public and private liquor store, and 2) whenever I point out the differences people are incredulous and respond with ‘no way… That’s not possible!”

Disclaimer: the following is not controversial, full of sound bytes or going to impact your day one way or the other tomorrow. It will simply outline the operational (read: dull) differences between operating a private liquor store and a public liquor store in BC.

The first issue for a private liquor store operator is always cost and primarily cost of goods. For public liquor operators the first question is always about public safety and here is why.

In BC, public liquor stores, also known as BC Liquor Stores or BCLDB, are never charged for the goods they sell. On the other hand private retailer is charged the BC Liquor Store retail price less 16%. In addition private stores must pay in full 2 days in advance of the order being compiled. No terms are available. The base gross margins BC Liquor Stores start at is estimated at 80% whereas as private liquor stores start at 16%.

When the BCGEU and the BCNDP suggest it isn’t fair that private stores get a discount when BC Liquor Stores don’t get the same discount, keep in mind that there isn’t a private liquor store operator in the province that wouldn’t rather have the same deal BC Liquor Stores have when it comes to cost of goods.

In BC all spirits and imported product must be distributed by the BCLDB. That’s right the same organization that supplies and operates BC Liquor Stores, the direct competitor for private liquor store operators. As a result the LDB can block orders from private stores and redirect that stock to their own BC Liquor Stores without notice to the private retailer or importing agent. The only way for a private liquor store operator to block LDB stores from access to an imported product is to buy all the stock available in BC. If a product is yet to arrive in BC, the BCLDB can block the sale to private stores even if the private store has paid the supplier and the freight forwarder for the product.

In BC, BCLDB buyers must approve all purchase orders requested by agents. Thus they have the power to refuse the order for a private store or have advance knowledge of the orders existence and arbitrarily decide to take the order for themselves.

In BC, BCLDB buyers have access to purchasing data of every private liquor store in the province. Private Liquor Stores only have access to their own data and not the data of their private or BCLDB competitors.

In BC the BCLDB can decide to open a store wherever it wants and is not subject to municipal zoning by-laws or community consultation. A private liquor store is subject to municipal zoning by-laws and must go through a re-zoning application process and community consultation if the property has not been zoned for a private liquor in the past. Furthermore, the LCLB, through the BC LDB forbids an LRS license (full service private liquor store) for being situated within 1000m of another LRS. Strangely an LRS can open directly beside a BC Liquor Store, Private Wine Shop (ie. Everything Wine) or a Duty Free store if the municipality approves of it.

The one thing that BC Liquor Stores are not supposed to do is to have available products that are called specs. These are products that have been deemed by BCLDB buyers as not for retail sales in BC Liquor Stores. However when a BC Liquor Store does make it available for sale in their stores, even when notified of the infraction stores, are not held accountable to remove the product from their shelves.

If your are a supplier to the BCLDB and you want a display of your products in BC Liquor Stores it is strongly suggested by BCLDB buyers that you buy advertising in Taste magazine which is published by the BC LDB. Thus the BCLDB is demanding a financial inducement to promote specific products. It is illegal (BC Liquor Act) for private liquor stores to have any financial relationship for any reason with suppliers. A private store having a financial relationship could face a stiff fine at best and at worst complete closure of their business.

Hours of Operation. Private Stores can be open from 9 am through 11pm 7 days per week 52 weeks a year. BC Liquor Stores can not open before 9:30 and most are not open past 9pm or on Sundays. That means, notwithstanding BCLDB Signature stores, private stores can be open 32 hours per week more than public stores. In the case of BC Signature Stores, private stores can be open 21 hours more than BC Signature Stores.

As a matter of policy BC Liquor Stores have not offered cold product or chilling facilities, whereas all private stores offer refrigerated product.

As a matter of policy BC Liquor Stores have restricted their advertising to Taste Magazine, BCLiquorStores.com and their mobile app, yet they are allowed to charge suppliers for advertising their products. Private stores can advertise on any medium but can not ask for, or receive payment, whole or in part, from suppliers for advertising their product.

As a matter of policy all promotions developed and executed by private liquor stores are supposed to be approved by BC LDB promotions first. Promotions planned by BC Liquor Stores do not need approval of private liquor stores before being executed.

Okay here is the one you have all been waiting for… Public Safety. We could also call this social accountability.

Underage drinking and bootlegging is a problem in private and public liquor stores, however public liquor stores are not held to the same level of accountability for these infractions. Private liquor stores could suffer fines or closure for any number of infractions as determined by the LCLB, whereas public stores will not be closed for such infractions. Furthermore fining a public store means money going from the government to the government and thus is not a real punishment. Only recently have LCLB inspectors been allowed to enter BC Liquor Stores as per BCGEU guidelines.

At the end of the day there are two indisputable facts about liquor distribution and retailing in BC.

1) the BC Government, whether NDP, Liberal, Social Credit, Green or Conservative Party, would collect taxes from the sale of liquor in BC whether or or not distribution and retailing are operated by the government through the BCLDB.

2) It is not a level playing field between public and private liquor retail in BC.

I don’t believe in ideological or broadcast solutions. I believe that retailing is about meeting the needs of your customers and community. If BC Liquor Stores can cover their costs by doing so then they should stay open. If they can not I fail to see why they should remain open. Nevertheless the playing field should be equal and let the best and most responsible operator win.

The thoughts and conclusions expressed above are my own and should be attributed otherwise.

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§ 11 Responses to Private Liquor Stores vs Public Liquor Stores in BC: Operational Differences

  • Lee says:

    Few other differences you missed:

    1. Private stores can pay employee min wage.
    2. Private stores can sell a wide variety of other items, including food, such a cheese, etc.
    3. Private stores can sell hard to find items at whatever rate they want.
    4. Private stores are not obliged to bring in for a customer any item listed in the system to anywhere in the province at the same price across the province.

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    • dorkuncorked says:

      Lee;
      1) True and I can only speak of behalf my own stores when I say that we require our staff to have more skills than the ability to simply do manual labour. These are skills are deserve to be paid for and celebrated. So we don’t pay minimum wage because our employees are worth more than that. Secondly it is not possible to find minimum wage employees even if we wanted them. Lastly the wages are a function of gross margin in any industry. The gross margin is the difference between revenue and costs. The gross margin for the LDB is about 80% because the stores do not pay for the product they sell. On the other hand our base margin starts at 16% out of which we need to pay a premium for competent and skilled staff, any theft, taxes and hope that there is a return that is enough to keep us going and everyone employed for years to come.
      2) As a matter of policy LDB stores choose not to carry confectionary items. Private stores are limited and only able to carry chips, pop, nuts, and chocolate bars and are not allowed to carry anything considered grocery which includes cheese.
      3) I don’t you know much about the supply chain in BC (it is dull and very convoluted so those not putting on the table from it don’t). I can only buy from the LDB (my competitor) which means they get first crack at anything I want. They choose to carry some items and not others. They are not forbidden from carrying anything and they can block me from getting inventory at anytime they like without notice. The rare and hard to find items that we carry are not a function of them being prevented from carrying them, but a function of me doing the work to find them, get them imported, and finding the money to pay for them.
      4) We are ‘obliged’ to meet our customers needs no differently than the LDB. When a customer requests something at a certain price we get it and provide for them at that price.

      Let me finish by saying that any retail organization that does not welcome customer requests and want to meet and exceed the customers needs should not be in business. If the LDB feels obliged to do so they should not be in the business.

      Let’s keep chatting

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  • Vancouver says:

    Very good article. Liquor retailing is very unfair in BC and Canada. Now is a good time for the BC government to get out of the liquor business. BC could save $300 million by closing or selling their gov’t stores. BC government should only collect taxes and regulate the industry.

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    • I am planning to open a specialty liquor store in BC. Let’s hope the margins are worth it….on that note: Could anyone specify their average margins??? The minimum is 16% but it seems everyone makes more than that given the discrepancy in bc liquor store versus private liquor store prices.

      Cheers!

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      • Diggler says:

        Back when there was just a few private ‘Cold Beer & Wine’ stores around their price point was definitely higher. Now that there are more private outlets, some are advertising ‘everything at liquor store prices’. They must be going for sheer volume sales.?! How can you survive on 16%.?

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      • dorkuncorked says:

        You bring up the question that all of us have been facing. The fact is that it is not impossible to operate at 16%, it’s just almost impossible to get the scale necessary to make 16% work.
        Until we can buy on a level playing field it will never be a vibrant industry.
        Quibbling about margins is a symptom of the illness and not the illness itself.

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  • Michele says:

    I work for the LDB.
    In my area,private stores lobbied against our hours of operation and refrigeration.
    These are truths not lies like your article states.
    Face the fact the BC Government will never give up the profits they generate from alcohol sales. Bottom line.
    No British Columbian wants to pay your prices or lack of customer service and selection.

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    • dorkuncorked says:

      Michele;
      Thanks for your comment, but I have to say that it is a little mis-guided. I will be the first to say that not all private stores are created equal. Unfortunately there are many that offer poor service for ridiculous prices. These I call the 7-11’s of the liquor industry and clearly they have a role to play as they still do a healthy business.
      Our stores offer competitive pricing, in some cases below yours, a clean environment and personal and professional service. That is why we continue to grow when the LDB stores in our market continue to decline.
      I know there are many in the private sector that fear competition and seek to curtail it, and the LDB does not want to see the playing field levelled in the ways I have described.
      Personally I don’t care if you are open on Sundays and offer cold product as long as I can buy at the same price you do, have the same control over distribution you do, have the same municipal zoning requirements that you do, have the same regulatory and public safety thresholds as you do. If these things can be achieved them let the games begin, but a present the industry is a patchwork of regulations, distribution, zoning and pricing.
      Here is something that you probably don’t know. The starting gross profit at the LDB is 117% and you do not have any receivables, yet the operating gross is around 60%. That means your operations effectively lose 57% of their gross profit. If the BCLDB were an actual business and this was the performance, it would only take about 1 year before radical changes took place.
      As a taxpayer, I want the BCLDB to operate effectively as this acts as a loss.
      This year the BCLDB’s revenue to government from retail operations declined again, yet total revenues to the government from liquor sales increased, all due to the private sector.

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  • […] stores have to buy their product through the BC liquor store, the same way you or I do, but at a minor 16% discount. So, it stands to reason that if private stores sold their product for the same price as the […]

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  • Andrew says:

    Any word on the market value of a retail liquor store license these days if one were to purchase (transfer) it from another operator? One would imagine this is probably a significant up-front expense that has to be amortized into the business and would further defray margins relative to a public store (which, of course, has no license cost).

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    • dorkuncorked says:

      Depends on the area of the store. The numbers range from $300K to $500K but that is not where the problem lies. If someone is looking to sell their license it is only for two reasons. 1) They are retiring, 2) their business is failing. Most often it is number 2.
      80% of a retail stores business is due to convenience and this is all about location. If a business is failing it is likely because it is in a crappy location in relation to someone else.
      Current rules make it almost impossible to move a license into a better location. The only way is to have a new development that is not within 1Km of another LRS, and the municipality is open to zoning for liquor. This combination is rare and it means that selling or buying a license are equally as tough.

      Like

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