Tuesday, March 5, 2013

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

Despite the fact that many small, BC craft breweries often struggle to get their beers listed to be sold in the government run BC Liquor Stores, the Liquor Distribution Branch (LDB) is sending one of their own to the Craft Brewers Conference & BeerExpo 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,"  and that 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 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 Washington, DC by a government bureaucrat to try to lure US craft breweries to sell in BC government run liquor stores is a direct slap in the face to the local craft breweries who employ local people, support other local businesses and industries, pay local and provincial taxes, spur on local economy, draw people to the province via tourism and who struggle to get their beers sold via the LDB outlets and who, for the most part, feel the LDB but little to promote and market them in LDB stores the same way they do the BC wine industry. It is especially sensitive with some local brewery owners I have spoken to in the face of the fact that recently the Provincial Gov't announced  "a 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, 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 beers "listed" with the LDB and are often turned down for various reasons. The application process is complicated with many specifications that must be met in regards to the beer's production, packaging, etc before an actual listing is approved and the beer can be sold in the LDB stores. 

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

Competition for shelf space in LDB stores is getting fierce and there are more local breweries set to open over he 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 breweries who are already established, up and running and, as I stated, who are already finding it difficult to sell via the government outlets themselves. 

And it appears, if Giesbrecht's talk is successful, they will have to compete with more US craft breweries for space as well.

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. 

In their email communication, the LDB 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 that are available in a packaged form. For that matter, I cannot even find all the beers made within 5 kilometres of the Drive, beers that are selling like crazy in the LRS outlets.

The LDB communication 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 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 all the way up to 160,000 HL annually, so you can include many breweries that the craft beer drinker would never consider to craft breweries. In fact, with the recent tied house law changes, medium-sized breweries are considered those that have an annual production of over 15,000 HL up to 300,000 HL which is a massive amount of beer and so far removed from the craft scene that it is laughable! 

I am not sure what standard the LDB is using but if it is up to 160,000 you can include Okanagan Spring (10 listings) and Granville Island (15 listings) and if it is up to 300,000 HL, you can include Pacific Western Brewing (16 listings) as well. 

So you really have to take that stat of 160 listings with a grain of salt.

And if you consider that Labbat & 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 and want to offer the best products available to their consumers and, "a complete portfolio of beers," they could cut back on these 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 and 6-pack tins 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 hectolitres are up 24.81% for draft and a whopping 53.36% for packaged product over the same quarter last year and this is despite the fact 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) which seems contrary to the intro to Giesbrecht's talk where it was written, "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 email 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," and I'll have to give them that one. 

But the email went on to state, "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.

And 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 posts about LDB's focus on marketing here and here you will get the picture.  

This craft beer boom in BC has everything to do with the breweries producing great beer, which is garnering consumer support, which in turn is causing more and more licensees to realize that BC craft beers are quality and profitable products to sell and has little to do with the LDB supporting the industry that continues to put more and more $$$s in their coffers. 

It would make far more sense to me if the BC Government was hosting buyers and distributors from Washington State and Oregon, trying to entice them to buy BC craft beer and distribute it is their markets. 

This I would see as supportive. 

Or just allow BC breweries to list their beers so they can at least sell in their local LDB Liquor Stores.

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