Is It Fixable?

July 16, 2016 § Leave a comment

This week saw a first from the BC Liquor Distribution Branch; an apology letter.

A letter was send to every wholesale customer of the LDB. Given that they have a monopoly on all imported product and spirits, this mean close to 12,000 businesses was saw this letter.

The letter starts with an apology for all the shorted orders and out of stocks that have recently plagued the LDB Wholesale Centre. Over the last 3 years fulfillment rates have dropped to 91% yet overall revenues have grown to over $3B. What this means is that $300M in demand has gone unfulfilled and lost to the province’s general revenue.

The letter goes on to name a few causes. Technical, which I totally understand given that they are using databases that were old in 2009 to run $2B worth of orders through, and capacity. The first of these is easily solved and they are in the process of doing so, however the second is a little harder to solve politically although dead easy operationally.

Operationally you would simply lease more warehouse space or trucks, so why is this not happening now? Who doesn’t want an extra $300M in the coffers each year?

The answer is that the government would have to take legislative action to allow non-LDB distributors to deliver directly. All of a sudden this isn’t a revenue issue, it is a political issue, specifically political capital issue, and that is why it hasn’t been solved.

It is sad and you can’t blame the people working at the Wholesale Centre, they are doing what they can. The blame rests on the shoulders of politicians who can’t seem to see the forest through the trees, no matter what side of the political fence they sit.

Solving this issue will take bi-partisan leadership which is something that BC has lived without for decades.

This is just my opinion so if you have other solutions then by all means post them here.

Cheers

Dork UnCorked

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BC Liquor Updates: Separation of BCLDB Retail from BCLDB Wholesale

December 1, 2014 § Leave a comment

Along with wholesale pricing (see: Wholesale Pricing, & Wholesale Pricing Premium Products) the government and the BCLDB announced the separation of BCLDB Retail from BCLDB Wholesale. For those not in the industry, this may not seem like a major step, for those in the industry, this has the potential of being a game changer.

I have been in this industry for over 20 years and there is only one thing true about changes to the industry, they are evolutionary rather than revolutionary. The separation of LDB retail from wholesale is a big step in the evolution of the industry. Afterall no one in their right mind would suggest that it is a level playing field if one player was not only in charge of pricing, selection and distribution, but was also competing as a retailer.

So what details were released about this separation? None, which gives me a blank canvas to list what it would mean to me, so I will start with how it works today and contrast that to how it should work if the playing field were to truly be level.

The Present

Selection

Right now every product, whether made in or imported to BC must first be registered and approved of by the BCLDB regardless of what the market plan for the product. What this means is that BC LDB has veto power over products that are not intended for their own stores, even if the product has been specifically purchased by a private retailer or restaurateur for their own operation only.

At present the only way a private retailer can prevent other retailers from getting a product is by buying it all, however BCLDB retail can apply a ‘cross-dock’ over any product which prevents anyone but the LDB from buying that product. This embargo can last months if the BCLDB decides so. The LDB does this every year with the Bordeaux and Whisky releases.

Distribution & Inventory

At present every BC Liquor Store in the province can see the inventory levels of every product in the province; how many cases are at the LDB Warehouse, how many cases are at the agent’s warehouse and how many cases are ‘on the water’. Private retailers don’t have access to this information.

Upon the release of a new, highly anticipated item(s) such as the new raft of coolers and ciders that come out every Spring, BC Liquor Stores orders get priority over private store orders. Private store orders will only get filled after all the BC Liquor Store orders get filled.

BC Liquor Stores use a different computer system. Theirs is tied into LDB Wholesale and thus they can effectively create back orders. Private stores can not do the same.

A caveat: Publically the LDB has always stated that Cross-Docks, Priority Shipping, and ‘Back Orders’ don’t exist, however in practice they do and the current system allows the possibility for them to happen.

Data

At present Portfolio Managers have access to sales data for every product in the province, including those that they don’t currently carry. This gives the LDB an unfair advantage and makes many a private retailer uneasy. It has happened all to often where the LDB suggests to an agent that they should drop a sku from BC Liquor Store shelves in favour of an item that is currently exclusive to the private sector. Can you imagine if Save-On Foods had access to all of their competitors sales and pricing data?

The Future

The hope is that with the separation of BCLDB Wholesale from Retail, that the goose and the gander will be treated the same way and have the same levels of controls and access to data. If this is to be the case then the only difference between the BC Liquor Stores and private stores would be their ability to meet and exceed their customer’s needs, full stop. That is something worth working toward.

Let me know your thoughts and may quality ever fill your glass.

The Dork Uncorked.

BC Liquor Updates: Wholesale Pricing & Premium Wine & Spirits

November 27, 2014 § 3 Comments

In a previous post I wrote about the change to wholesale pricing in BC as of April 1, 2015. At the time of writing that piece I was aware that the BCLDB were soon to release more details including the graduated mark-ups that will be applied to premium spirits and wine. Today they released those formulas and it seems that wines over $20 and spirits over $30 are set to jump significantly in price, whereas wines under $20 will stay roughly the same as what they are today.

To be clear I can only speculate on what the result of this pricing model will be,  however my 20+ years in the business leads me to believe that this will have the effect of penalizing mid-range and premium wines and spirits and favouring lower end items.

The fact is that consumers are value driven and understand that a tax increase does not equate an increase in value… no matter how good the retail store they are purchasing from is. I fear that the real effect will be to chase premium consumers out of premium price points, exchanging them for good values at lower prices. Note that the consumer is not likely to increase the quantity they purchase, they will simply spend less. On the supply side, small artisan producers can expect slower sales for their products making it harder to justify selling them in B.C. and will be forced to either seek other markets (Alberta, Asia, US, other Canadian Jurisdictions), business channels (divert volume from retail to restaurants or ‘cellar door’ sales), or simply close their doors.

There are those, however, that are very pleased with the new calculations. Retailers in Alberta and Washington State will be eagerly expecting windfall gains as more BC residents load up or make special trips to save hundreds of dollars on their purchases. I can tell you that this happens right now within the specialty spirits category. The most ardent Scotch collectors have long been making most of their purchase outside of BC.

Admittedly I am not privy to the discussions and calculations that saw the powers that be opt for this model vs a flat tax or less oppressive percentages. I can only speculate what their short and long term motivations are and what the results will actually be. However, although I remain hopeful that they will take another look at the numbers, I believe the smart move would be to find a model that reduces the potential of sending more money to Alberta and pushing artisan producers out of business.

Attached is the pdf as issued by the BCLDB regarding the new formulas.

Mark-Up Schedule Effective April 1 2015 (2)

As always let me know your thoughts and feedback.

May Quality Be Ever In Your Glass

The Dork Uncorked

The Liquor File – The Whole Pie

November 22, 2014 § Leave a comment

This weeks announced changes to the liquor industry in B.C. will go into effect on April 1, 2015, but already their impact is being felt.

Social & traditional media has been jammed with calculations, prophecies and conjecture and, full disclosure, I have been apart of it to. However, after a Facebook conversation this morning I took a step back to get a broader perspective.

We have to remember that none of these changes will change the size and value of the market. If anything all they will do is divide the ‘pie’ into more pieces and shift value around.

It is no secret that BC Liquor Stores have been losing share to private stores each year for the last 10 years. Creating a level pricing field is likely the only way that this trend could be reversed using legitimate means. I expect that BC Liquor Stores will start to act like a large grocery concern and leverage their position to either mitigate costs or corner the market on certain products. This could mean disaster for many of BC’s private liquor stores who rely on price and product agility combined with well oiled marketing machines, but it won’t mean any more money into government coffers.

The other big announcement leads to further splintering of the market. Allowing liquor in grocery stores, no matter how it is done, will not lead to any greater revenues for the province or any increased sales for suppliers. It just means that there are more places for consumers to buy booze.

I truly hope that the quality of liquor retailing in BC will improve and I hope that these changes will instill a spirit of continued improvement, however these changes will not change the fact that we pay the highest prices in the country, and it is certain, that they will only mean the pie is divided in more ways.

I would love to hear your comments and feedback so please engage.

I will also be writing a piece specific to Wholesale Pricing so look for that.

May Quality Be Ever In Your Glass

The DorkUncorked.

LRS Operators: Top 5 Ways to Increase Your Bottom Line

August 5, 2014 § Leave a comment

The following is not sexy or glamourous. It doesn’t involve fancy lunches, travel or even snazzy software. In fact you likely have all the ingredients currently at your fingertips.

#1 Weekly Shelf Adjustments to accommodate new products, seasonal transitions, and changing market conditions.
This is definitely not sexy, but has a ton of impact. Studies over the last 50 years have all concluded the same thing. Consistent adjustments can lead to 3-5% increase in your bottom line per year.

#2 Re-organize your data into categories that best reflect your brand and your customers.
Every LRS fills a unique market position and has a different consumer base. Why your customers shop with you should be reflected in the categories you analyze. Looking at your business in the same way as everyone else only tells your staff and your customers that you are no different. Creating clear points of distinction not only creates loyal customers but is also the best way to increase your profits.

#3 Establish timely and simple measurements to stay on top of changes in consumer preferences.
Customers tastes and demands can change on a dime, not responding to these changes means you can’t possibly have the right product, at the right time and at the right price. Establishing simple and timely measurements can point to budding trends and therefore new opportunities to profit.

#4 Re-establish win-win relationships with vendors by managing categories and not products.
New product introductions, promotions, and pricing actions will have impact over entire categories and not just on one product. By effectively managing categories you create situations where the vendor wins, your bottom line wins and, more importantly, your customer wins.

#5 Know which LTO’s to pass along and when.
This is remarkably simple to do and can save you a ton of wasted price reductions. It is amazing how much money is needlessly lost by pushing through price reductions without first understanding how much a product needs to increase its sales to breakeven.

If you would like more details on these just let me know via the comments or by contacting me at rodphillips@telus.net or calling me at 1-250-800-0072

Cheers

DorkUncorked

BC Liquor Review: Hoping

January 10, 2014 § Leave a comment

I’m hoping that the government, policy writers, stakeholders ask one question when it comes to the plethora of rules and regulations surrounding BC’s Liquor Industry: Why?

The fact is that although there are hundreds of pages of law and documentation, BC’s Liquor industry is enveloped in millions of pages of policy. Often this policy has the opposite effect of its intention or it is in direct conflict with another policy.

If the threshold is truly public safety and revenue, then every policy should be put to that test. Why do we have this policy? Is there data to suggest that it is effective in insuring public safety? Is there truly a threat? Does the policy restrict the government’s ability to generate revenue or increase it?

When I talk to people about the liquor industry their eyes glaze over. Why because to have some understanding of the issues one must mentally walk through a quagmire of policy directives that often defy rationality.

The liquor review provides an opportunity to fix this, so I’m hoping that someone in government simply asks the question Why?

The Dork Uncorked

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