- Written by Mark Hicken Mark Hicken
- Category: Latest News Latest News
- Published: 20 November 2015 20 November 2015
The Saskatchewan Government has announced some major changes to its retail system for liquor, contingent upon the Brad Wall government being re-elected in April 2016. Details on the changes can be found here: SLGA - Future of Liquor Retailing and in this PDF: Future of Liquor Retailing Backgrounder. If implemented, there will be some very significant changes to to the liquor retail system in Saskatchewan that can be contrasted with the changes being made here in British Columbia:
Expansion of Private Retail. Saskatchewan plans to convert 40 of its existing 75 government liquor stores to private retailers. In addition, it will issue licenses for 12 new private retail stores in communities that have been designated as underserved. The end result of this expansion will be that the government retailer will only operate 35 stores. Saskatchewan currently also has 4 private liquor retailers, 190 rural liquor stores, and 450 "off-sales" locations. Saskatchewan is not introducing liquor sales in grocery stores. By contrast, BC's changes have included an expansion of government liquor retailing through extended hours as well as the introduction of wine sales in a limited number of supermarkets. There has been no increase in the number of freestanding private liquor retailers in BC.
Level Playing Field. Saskatchewan is planning to introduce a new wholesale pricing system for liquor such that all retailers (both government and private) pay the same price for all products. British Columbia has also done this to some extent, with the one exception that BC's new supermarket wine vendors, as well as its existing VQA stores, currently pay significantly less at wholesale than everyone else. In addition, Saskatchewan will permit restaurants/bars/hotels to buy liquor from any retail source that they choose. By contrast, BC still requires that these customers purchase only from government channels. Saskatchewan will also create consistent business operation rules (e.g. hours of operation, pricing, discounts) for all retailers.
Discounts on Wholesale Pricing. Saskatchewan will allow individual retailers or retail chains to negotiate lower wholesale pricing from suppliers through incentives (see below). Presumably, this could be based on volume or other factors. It will also allow suppliers to set "system-wide" discounts at the wholesale level. In contrast, British Columbia only allows "system-wide" discounts.
Inducement and Trade Practice Rules. Saskatchewan will eliminate its prohibitions on inducements (financial incentives provided to retailers from suppliers such as co-op advertising that are common in other retail sectors). The only restriction in SK will be that incentive/inducement arrangements cannot exclude competitive products. In contrast, British Columbia has not reformed its inducement and trade practices rules (a 2010 industry consultation appeared to indicate that it would do so but that did not happen).
Changes to Liquor Board Markups. Saskatchewan has introduced a new system of liquor markup at the wholesale level which will generate the "wholesale prices". Retailers will then set their own retail level prices themselves with varying retail level profit margins. This system is basically the same as BC's new system. However, the new markups for wine in SK are dependent upon alcohol level and are higher. For wine that has 14.5% alcohol or less, the markup will be 94% on the first $12.50 per litre of supplier cost and then 53% markup on the remaining value. Wine that has an alcohol level higher than 14.5% is treated the same as spirits with a markup of 125% on the first $25 per litre of supplier cost, 83% on the next $12.50 per litre of value and then 56% on the remainder. These markup levels are considerably higher than the levels imposed in British Columbia (89% on the first $11.75 per litre of value, 27% on the remainder for all wines). For wines that are over 14.5% alcohol (which would include many New World wines as well as pretty much all fortified wines such as sherry and port), the resulting consumer prices in SK will be extremely high (certainly higher than in BC and significantly higher than in AB).
None of the above changes will actually be made unless the current SK provincial government is re-elected in April 2016.