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Privatizing B.C. government liquor distribution and liquor stores would provide huge benefits to consumers

Appeared in Business in Vancouver
Authors:
Release Date: August 14, 2012

If you’re a fan of lower prices, increased convenience, better product selection and improved customer service, you might want to keep the champagne on ice---at least when it comes to BC’s liquor industry. Despite all the recent talk of the BC government privatizing the Liquor Distribution Branch [LDB], it’s not happening. Not even close. And that is unfortunate for regular British Columbians who enjoy a cold beer, a glass of wine or a "sex on the beach" every now and then.

Back in February, the BC government announced its plan to "modernize B.C.’s liquor distribution system" by transferring the government’s two liquor distribution warehouses (in Vancouver and Kamloops) to the private sector by 2015.

But the government isn’t really privatizing, it’s simply contracting out the distribution monopoly to a private company through a 10-year contract. In all likelihood, as the evidence would suggest, a private company will be more efficient and deliver better service than a government monopoly. But it’s still a monopoly. Every liquor store in B.C. still has to buy from a single wholesaler. If others wanted to get into the warehousing game and offer even better service and efficiencies, tough luck.

In addition, the wholesaling of liquor is only a portion of what the B.C. Liquor Distribution Branch does. It also owns and operates nearly 200 government liquor stores. And these stores will remain firmly in the hands of the government.

Once upon a time (i.e. back in 2001), the B.C. Liberals actually supported competition in the retailing of liquor. The government briefly allowed some additional private liquor stores into the retail mix, but soon shut the application window, and it has since remained closed.

Now, even the private liquor store owners aren’t disciplined by the threat of increased competition. That might be convenient for existing liquor stores owners and for public sector union employees in the government stores but it’s a bad deal for consumers.

B.C. currently has 699 private stores and 197 government stores. If that sounds like a lot of stores, consider that 800,000 more people live in B.C. (4.6 million) when compared with Alberta (3.8 million), and B.C. has less than half the number of liquor stores that Alberta.

Greater convenience for customers through increased retail outlets is just one of the benefits of the Alberta’s privatization of liquor retailing back in 1993/94.

Consider a 2003 study by University of Alberta economist Douglas West published by the Fraser Institute which analysed the impact of privatization in Alberta. West found that after privatization:

  • convenience increased with significantly more stores;
  • liquor prices tended to fall, especially after the number of stores multiplied;
  • product selection increased substantially;
  • revenue for the Alberta government increased;
  • and there was no evidence of increases in crime or liquor-related offenses.

Despite the evidence, supporters of government run liquor stores cling to the myths about privatization: warning of dire consequences for consumers, harmful social costs and a loss of revenue for governments.

These enthusiastic supporters are not of course looking out for the interests of consumers. Rather they are typically those that benefit from the current system including unionized liquor store workers.

I suspect though, that British Columbians---many of whom buy beer, wine or spirits in Washington State, or have travelled to Europe where all of that is also available on the (private) grocery store shelf---well understand consumers have long been sacrificed in the narrow interests of a government union. That’s why it’s high time the government considered the complete privatization of liquor wholesaling and retailing.



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