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Canada: Liquor Privatization Pros and Cons

U.S. Surpasses France To Lead The World In Wine ConsumptionThe topic of the privatization of the Newfoundland Labrador Liquor Corp. has been discussed briefly in recent media. It is a topic that comes up for debate every so often, but hasn’t seemed to spark a great deal of interest in the public.

 

Setting aside the labour issues – and ideological positions on either side of the free enterprise argument – it might be interesting to consider the potential impact of privatization on (wine) consumers. We have at least one example of privatization in Alberta to show us the possible outcomes to expect here if such a course of action were to be taken.

 

So what exactly did Alberta do? Liquor boards need to charge enough markup to cover the costs of the product, shipping, warehousing, and retailing and have enough left over to make the profits required by their respective governments.

 

The most costly part of a liquor board’s operation is the retail effort – owning or renting premises, distributing product, stocking shelves, and operating the cashier positions. There are also marketing costs associated with identifying and listing brands, and wholesale costs associated with warehousing.

 

Alberta turned over shipping, warehousing, and retailing to the private sector, thus eliminating the more expensive components of its costs. It then shifted to a much smaller, flat markup according to product.

 

Alberta was able to protect its revenues (and even increase them) using a much simpler and lower rate markup scheme. It was left to the private sector to figure out how to make the rest of it work.

 

So, in Alberta, government revenues were maintained and even increased, and the number of stores selling liquor products and the variety of products and labels available increased substantially.

 

This all seems positive so far.

 

Consumers, particularly wine consumers, have not necessarily seen much benefit from the changes. There may be a lot more stores, carrying an overall wider range of products, but at the individual store level the product range is much more variable. Some stores will have a lot of labels, and others a much more limited selection.

 

There hasn’t been much of a change in the end price to the consumer, either. The prices for the same wines between here and Alberta are not much different.

 

Wine knowledge from store to store is also much more variable, which is in stark contrast to the investments the NLC has made in its staff in this area.

 

Privatization could mean a reduction in the variety of products and help services available in the smaller market areas of our province. Limited competition in those same areas might lead to higher prices. Any policy shift of this nature will require some scrutiny by wine consumers.

 

This past week, some local wine lovers were able to enjoy tasting wines with Master of Wine Jane Masters. Jane, who is the wine selector for the Opimian Society, was in St. John’s for the better part of a week taking part in the Society’s AGM and associated meetings, and was the guest speaker at a dinner event for members.

 

Everyone was enthralled by the seeming ease with which she was able to brilliantly describe the aroma, taste and texture of the wines, and completely capture the important essence of each one in just a few words.

 

Next week, I will get back to more reviews of wines – with aspirations of describing them one-tenth as well as Jane Masters!

 

Source: The Telegram

http://www.thetelegram.com/Living/2014-06-13/article-3760676/Liquor-privatization-pros-and-cons/1