B.C. Beer Blog

The who, what, where, when, why, and how of B.C. craft beer

Local Breweries Feel Slighted by LDB’s Plan to Lure US Craft Sales to Gov’t Liquor Stores

with 9 comments

by WanderingPaddy

Despite the fact that many small BC craft breweries often struggle to get their beers listed for sale in government BC Liquor Stores, the Liquor Distribution Branch (LDB) is sending one of their own to the Craft Brewers Conference & BrewExpo America (CBC) to give a talk about “market opportunities” in BC for US craft breweries.

LDB Portfolio Manager, Kimberly Giesbrecht, is set to give a one-hour talk entitled, Canada Market – British Columbia, during a day of talks dedicated to “Export Development” at the CBC.  According to the LDB, Giesbrecht was invited to speak at the CBC by the U.S. National Craft Beer Association (USNCBA) “because BC is recognized as very supportive of the craft beer industry.” Giesbrecht “will be sharing her insight into the BC market with their members,” addressing “craft brewers from around the world including many from BC.”

I hope BC craft brewers do not have to travel all the way to Washington, DC, where the conference is being held, to benefit from Giesbrecht’s insights about the BC craft beer market.

The description of the talk to be given on March 27 states:

“U.S. craft beers have seen solid growth in British Columbia through the government-run liquor stores and private retail. British Columbia Liquor Distribution Branch category manager Kim Giesbrecht will speak about the performance of American craft beers in the province and market opportunities.”

Why is this worthy of mentioning, you ask? Well, for one, this foray to the US capital by a provincial government bureaucrat to try to lure American craft breweries to sell in BC government-run liquor stores is a direct slap in the face to our local craft breweries. They employ local people, support other local businesses, pay local and provincial taxes, spur the local economy, and draw tourists to the province. Yet, they struggle to get their beers sold via the LDB outlets and, for the most part, feel the LDB does little to promote them the same way they market BC wines.

It is unclear at this time if the USNCBA or the BC taxpayer is paying for the trip, as the LDB has yet to respond to my inquiry. But it is clear to me that the local brewery owners whom I have spoken to about this talk are pissed off, especially in light of the recent provincial government announcement that an “honorary B.C. wine envoy will be named with a mandate to work to complement existing efforts to open up domestic markets for B.C. wines.”

Many may not know this, but having a brewery in BC and making great beer does not automatically give you access to selling your locally-brewed beers  in BC Liquor Stores. Breweries have to apply to get their products “listed” with the LDB and are often turned down for various reasons. The application process is complicated, with many specifications that must be met with respect to the beer’s production, packaging, etc.. Only after all requirements are met is an actual listing approved and the beer can be sold in LDB stores.

Many craft breweries have to settle for getting the majority of their beers “registered.” This means they can sell on behalf of the LDB directly to consumers from their own storefront, if they happen to have one, or sell to private liquor retail stores (LRS) which are more open to trying new, unique, small-batch, specialty items. But having your product registered without a listing for the government store prohibits that product from being sold through LDB outlets.

Competition for shelf space in LDB stores is getting fierce. There are more local breweries set to open over the next few years, so the situation is not going to get better. Not all will want to sell via the LDB, but those that do will have to compete with established breweries who have already found it difficult to sell via the government outlets. And if Giesbrecht’s talk is successful, they will also have to compete with more US craft breweries for space.

So why is the LDB actively seeking out to import US craft beers to sell in their stores that could potentially make it more difficult for local breweries to get their beers to market? Why is it so difficult for BC craft breweries to get all their beers into the LDB stores? I posed these questions to the LDB and Kim Giesbrecht, and I received a reply from the LDB’s Communication Department that stated, “British Columbia’s craft beer customers demand access to a wide range of domestic and import beer. In response to this demand, the LDB provides its customers with access to a complete portfolio of beers which includes import.”

I agree strongly with consumers having as many choices as possible. But in my opinion, should BC consumers not have access to all their favourite BC craft beers? It really irks me that when I walk down to my local government-run store on Commercial Drive, I can’t find many of the great beers that are brewed in the Greater Vancouver area and available packaged. For that matter, I cannot even find all the beers made within five kilometres of The Drive, beers that are selling like crazy in the LRS outlets.

The LDB response also pointed out, “currently, the LDB has listings for 160 beers produced by small and medium-sized BC breweries. In comparison, there are 30 listings for small to medium US craft breweries.” These numbers seem to support the assertion that the LDB is giving local craft breweries a fair shake. But consider that in the eyes of the LDB, a medium-sized brewery can produce up to 160,000 HL annually. That can include many breweries a craft beer drinker would never consider to be a craft brewery. In fact, with the recent tied house law changes, medium-sized breweries are deemed those that have an annual production of more than 15,000 HL and up to 300,000 HL. That is a massive amount of beer! It is so far removed from the craft scene that it is laughable! I am not sure what measurement the LDB is using, but if it is up to 160,000 HL, you can include Okanagan Spring (10 listings) and Granville Island (15 listings). If it is up to 300,000 HL, you can include Pacific Western Brewing (16 listings).

So you really have to take that stat of 160 listings with a grain of salt. And if you consider that Labatt & Molson have over 60 listings just for their beers, 95% of which are impossible to differentiate taste-wise from one another, the 160 listings for all BC “small-to-medium-sized” breweries looks a little lame. If BC Liquor Stores are feeling the pinch for shelf space, want to offer the best products available to their consumers and “a complete portfolio of beers,” they could cut back on this massive number of listings for large breweries. I see no need for Molson Canadian to be available in 18-pack, 15-pack, 12-pack bottles and 30-pack, 24-pack, 15-pack, 12-pack, 8-pack, 6-pack cans on BC Liquor Store shelves.

As you know, this is exciting times for the BC craft beer industry which is experiencing unprecedented growth and success. In their December 2012 Quarterly Market Review (QMR), LDB stats show domestic beer sales for breweries under 15,000 HL are up 24.81% for draft and a whopping 53.36% for packaged product over the same quarter last year. This is despite the fact that domestic beers sales are dropping consistently here in BC. In fact, US beer sales are dropping as well (15.31% by volume, 10.84% in dollars). This seems contrary to the introduction to Giesbrecht’s talk where it states, “U.S. craft beers have seen solid growth in British Columbia…” and the LDB’s report of only having 30 US listings for small- to medium-sized breweries.

I also posed the question, “Is the LDB looking to support BC breweries at a critical time of growth for this local, home-grown industry which is providing key employment opportunities in BC during hard economic times and if so, how?”

The LDB stated to me that they do, in fact, support the BC craft beer industry. In their e-mail they stated, “the Province provides preferential rates of mark-up for small breweries. This policy has had a significant impact on the growth and stability of the craft brewery sector in British Columbia which is one of the most vibrant in the country.” I’ll have to give them that one.

But the e-mail went on to say, “In addition, the Province offers craft brewers a very affordable distribution rate if they choose to have the LDB distribute their product. Also, craft brewers are offered excellent display opportunities in BC Liquor Stores throughout the province that raise the profile of their products.” Low cost LDB distribution is brilliant if you brew close to a LDB warehouse where you have to deliver your beer in order for them to distribute it! It is of little use to breweries who are located nowhere near the two distribution warehouses located in East Vancouver and Kamloops.

As for “excellent display opportunities in BC Liquor Stores…”, I don’t even know where to start with that one. If you want to see how serious the BC Liquor Stores take promoting BC craft beer, check out Barley Mowat’s series of posts about the LDB’s focus on marketing here and here. You will get the picture.

The craft beer boom in BC has everything to do with our breweries producing great beer. This is garnering consumer support which, in turn, is causing more and more licensees to realize that quality BC craft beers are profitable products to sell. It has little to do with the LDB supporting an industry that continues to put more and more $$$ into their coffers. It would make far more sense to me if the BC government was hosting buyers from Washington and Oregon, trying to entice them to buy BC craft beer to distribute in their markets. This I would see as supportive. Or, just allow BC breweries to list their beers for sale in their local LDB Liquor Stores.

~ originally published on the VanEast Beer Blog on March 5, 2013.

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9 Responses

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  1. I haven’t set foot in a LDB store in almost a year. Selection stinks. Why are they looking for great beers elsewhere? We got it all right here in Canada.

    Ian Lloyd (@left4beer)

    March 5, 2013 at 11:31 pm

    • It’s because the established American craft brewers have more money for marketing, which means they have a better chance of meeting the LDB’s minimum annual sales threshold. This sales floor is actually higher than what many BC beers have achieved. So the only reason the BCLS’ selection isn’t even more lame than it already is, is because they give the local craft brewers a bit of a break, albeit at their discretion.

      BCbrews

      March 6, 2013 at 12:10 am

      • The system of getting listings needs to change to reflect today’s growing BC craft beer industry. If the government truly wants to support the industry, they need to overhaul their criteria for listings in LDB stores so that smaller BC breweries can be listed, not go to the US to bring in competition. There are enough importers bringing in many fabulous US beers, you just have to go to the LRS locations to see that. LDB just needs to tap into those beers that are already here if they want to round out their portfolio for US craft beers.
        Why can’t a local brewery who do not want to grow bigger than a certain size that may exclude them from meeting the minimum annual sales threshold, be able to sell in LDB stores in their own market. Think small, isolated areas like Powell River, Price Rupert for example? We need to be slightly protectionist, without banning imports, to really grow the industry from the ground up and to encourage more small breweries to open.
        Local jobs, locally produced products, smaller carbon footprint…

        paddy Treavor

        March 6, 2013 at 2:18 pm

  2. Actually, it is still cost-effective for BC craft breweries outside of the Lower Mainland to distribute through the LDB. Despite the various other headaches, the ability for the likes of Nelson, Mt. Begbie, and Fernie to get their beer in stores throughout the province is a benefit they acknowledge.

    BCbrews

    March 6, 2013 at 12:02 am

  3. I’m all for more selection at the LDB, the mark-ups at the LRS vary substantially more for the same product. Why is that? At some stores (Broadway Liquor I’m looking at you) Fat Tug is on a 25% markup from the LDB.

    I completely agree but we can only dream of getting all the “mountain water” drivel beer with all their packaging variations and drinking vessels of the out of the LDB.

    Joel

    March 8, 2013 at 10:37 am

  4. Really great to hear the statistics proving the market gains in craft beer! There are some amazing breweries providing a great product, and they deserve to grow & flourish.

    The more noise we make as consumers, the more chance of change!

    alepinions

    April 11, 2013 at 4:11 pm

  5. Do what I do and shop at the breweries themselves. Bypass the gov’t all together. Same price but the brewery makes more money when you buy direct from them.

    Murphy

    April 29, 2013 at 6:30 am

    • Actually, often the beer is more expensive at the brewery when you buy direct, at least when you do so legally, because the brewery does not get the discount that the LRS or GLS outlets get. As well, the brewery makes exactly the same amunt of money as they are selling as an agent of the government. The $$$s they collect from you at the cash register at the brewery goes straight to the LDB who then process the sale, take their cut and send back the brewery’s cut. It is a strange and inefficient system…

      vaneastbeerblog

      June 2, 2013 at 10:14 am

  6. The blog is a collection of submissions from various bloggers. My submissions usually are posted on my VanEast Beer Blog first and then reposted here.

    vaneastbeerblog

    June 2, 2013 at 10:15 am


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