Saturday, March 2, 2013

More on Growlers & Mark-ups: Industry Confusion a Sign of LDB Dysfunction & Need for Review/Reform

It seems that the post I wrote regarding increases to the way growlers are marked up by the Liquor Distribution Branch needs some clarification.

There is confusion, most of which falls on the industry side of things and I find that disturbing as there seems to have been no consistent policy communicated or direction given to licensees on the sale of growlers by the people who are in charge of regulating sales and collecting dollars.

If I am to believe what brewery and brewpub representatives are telling me, and I have absolutely no reason not to, then different people are being advised different things at different times by the LDB.

When I was contacted about the potential increased mark-up, I took it upon myself to ask the LDB what the current mark-up policy was on growlers and if that policy was about to change resulting in an increase in cost to breweries. It took well over two weeks to get any responses to these simple queries and the LDB were being more mysterious and secretive than the Illuminati. No one seemed to have this information, or, if they did, they were unwilling to release it.

But eventually, after making further inquiries about growlers and another issue which I will be posting on the next few days, here is what I received:

  • Currently, the packaged mark-up rate is applied to the first Growler fill and the draught mark-up rate is applied to refills
  • The LDB recently reviewed the application of mark-up on Growlers.
  • It was determined that Growlers, both the first fill and all refills, should be subject to the packaged beer mark-up rate because they are packaged for customer consumption off-site.
  • The LDB previously applied a packaged beer mark-up rate on all Growler fills and will resume applying that rate in April.
  • The collection of a deposit is no longer necessary.

That is a direct communication from the LDB. Notice on the first bullet it says "currently" and goes on to outline the mark-up as I described it in my first post: first fill is packaged mark-up rate and mark-up on refills is charged at draught rate. It then says that the LDB "previously applied a packaged mark-up rate....and will resume applying that rate in April". 

Seems simple doesn't it?

I have received information from brewery representatives, either directly or forwarded, "clarifying" how the system works and, as I mentioned, all are not being told or doing the same thing and there is no universal, clear policy in place it seems in regards to growler sales and mark-ups. 

I had a few people tell me they were told, by telephone over the past month or so by the LDB, that all growler sales would be classified as refills and that refills would now be charged at the packaged rate but when that change was taking place was not made clear to some. 

I have other information that growlers have been considered "packaged" therefore the higher rate has always been applied and this has been happening for about a year or so. These breweries have been getting charged $.32 more per litre for growler refills compared to some other breweries for some reason and probably did not realize it as they were doing what they were told to do. 

What is clear to me is that this is clear as mud and maybe why the LDB did not want to answer my questions, because they had no clear answer. 

In short, I stand by what I wrote. 

What is also clear to me is that those who were not getting screwed $.32/litre on refills will soon be feeling the pinch of the LDB and will have to make the decision between eating some of their profit to not piss off customers or raise their prices. 

But again it is not even totally clear how much the mark-up will be as it seems there are new mark-up rates coming out in April, but this I have not confirmed. I was notified by one brewery owner who "stumbled" across a document, in the vendor area of the LDB website, outlining the "new" rates, which will be applied in April. No one else, including the LDB, mentioned these mark-up changes so I am not sure what is going on there. I might assume it has something to do with the change back to the PST/GST tax system from our current HST but who knows.

So, there you have it. I do not usually write posts like this defending what I write because I do my research and am careful about what information I put out there. But in this case, some were hinting I was talking out of my ass, but I can assure you, the reason I did not post three weeks ago when I was first contacted about this potential mark-up change was because I was waiting for some confirmation from the LDB. When I received it and the info I had was confirmed, I posted.

So the confusion does not lie with me, it lies firmly with the LDB who quite clearly have not had a handle on how breweries should report their growler sales or who had not clearly defined for breweries how to do so. It is the LDB that approve skus which have prices attached to them and it is the LDB who collect the $$$s so someone there should have known what was going on. How there can be some much confusion about how a product should be marked-up and how sales should be reported is beyond me. It appears the LDB have now come to realize there is disparity and are in the process of making some changes and the changes are not ones that are going to favour some breweries and some consumers.

It is a definite sign of how convoluted, complicated and dysfunctional the current system is. There is need for review and reform. I am not saying scrap the whole system, but there is a need to simplify and streamline and look at what works and what does not.

In regards to growlers, mark-ups and potential cost increases, I guess we will have to wait and see what the meantime, I am going to shift my focus on growlers from the bureaucracy side of things to what should be important - the wonderful craft beer that is inside.

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