Electoral Rhetoric on Beer Prices
I’ve recently heard people claim that the NDP, if elected, will raise taxes on beer (something that the Liberals already did to all liquor on April 1). This is false. The NDP have said they would reduce the discount to private liquor stores from 16% to 10%.
In response to this and the NDP’s vow to raise the minimum wage to $10, the Alliance of Beverage Licensees of B.C. (ABLE), a provincial advocate group for approximately 1,000 private liquor stores and pub owners, claims this will force them to raise prices by 25% or more, translating into an additional $3.00 on a $12.00 six-pack. However, ABLE Executive Director, Kim Haakstad, said that the $3 figure came from discussions among group members, not from any economic study to determine a more precise impact.
Taking their cue, Liberal leader Gordon Campbell said on May 4, “I can tell you this. I am not drinking beer. But if they put a $3 cost on a six-pack of Diet Coke, I’d be mighty upset.”
Again, the NDP are not saying they will do this. They claim that their policy will level the playing field between government and private stores, raising $155 million in government revenue over the next three years. This will have no affect on the price of liquor in government stores, but it may certainly be aimed at protecting the BCGEU’s union jobs.
Recall that Campbell increased the discount to private stores in 2007 from 13% to 16%. Al Arbuthnot of the ABL said at the time, “We presently sell more than 50% of the beer in the province and it will allow the operators to be a little more competitive with the government stores. I think you will see prices come closer in line with the government stores.”
I don’t know about you, but I never saw that happen in the private stores I go to. So if prices were already 10-20% higher in private stores before the increase, where did the savings from the additional 3% discount go? Doubtful the staff got a raise as ABLE is against raising the minimum wage.
ABLE also does not support private rural agency stores getting more of a discount than their current 10%. According to the Kamloops Daily News, ABLE’s Haakstad argued that there’s no business case for giving rural stores the same discount as other private stores. “Rural agency stores are set up to service the community,” she said.
In an interview with The Province, Haakstad also argued that “rural-agency stores are established businesses with other income from groceries and gasoline and marina operations. Our independent stores don’t sell much else besides beer, wine and spirits — except maybe some beef jerky.”
Ultimately, what matters is that a business can achieve enough of a profit for the business owner to make a decent living by providing goods or services that are attractive to consumers. I doubt the intention of rural stores is to run as a non-profit society. Otherwise, they would be constituted as such. And selling more products does not ensure one makes a higher profit/better living. These arguments strike me as being self-serving. Rural agency store owners would probably agree.
So has privatization benefited consumers in B.C. so far? The Consumers’ Association of Canada found that the BC government’s privatization of liquor sales has forced consumers to pay millions of dollars more for beer, wine, and spirits while there is less product selection at individual private stores.
So from a consumer and taxpayer point of view, one could say people are generally worse off than before. Why don’t we hear about it? Why don’t more people buy their beer from a government store than private? Probably because they don’t care enough to be bothered to do anything about it. They are willing to pay a premium for mass-market beer that is readily available in a government store at 10-20% less cost because it is chilled and convenient for them in terms of store hours and/or location.
So be it if one can run a profitable business from this, but I’m not for taxpayers subsidizing mediocrity, whether it’s private or public. Ultimately, I’m for whatever system offers the opportunity for getting the best value and selection. According to Ted Hlokoff, who operates a rural agency store in Anahim Lake, private liquor stores have an average markup of 20-25%. With the 16% discount off the LDB price, this adds up to a margin of as much as 40%. [Note: average figures are not necessarily reflective of a particular business’s circumstances.] By contrast, for government stores, Hlokoff says the margin is 27%. Also, rural stores cannot mark up their products more than 5% above the LDB retail price, but ABLE’s stores can mark up product as much as they want.
So when it comes to beer in BC, I see problems with public, private, and rural stores. People have argued for a fully-privatized system like Alberta, but I’m not sure they have it much better than we do. I’m looking into it…