End Moratorium on LRS Licenses to Stop Exodus From Rural Areas - Quick, Easy Fix

I don't know why it took so long for people to figure out the negative impact the elimination of the "no more than five kilometre" rule for the buying and relocating of private liquor store (LRS) licenses would have on rural areas in BC.

In Friday's Vancouver Sun, an article appeared with the headline "Liquor licenses being sold in anticipation of new rules" which has caused a bit of a stir in some rural communities and among those who are interested in the BC retail alcohol industry.

This is not really breaking news as this situation has been bubbling and boiling for months now, even before the change to the BC liquor laws concerning relocating LRS licenses was announced last March by Liquor Control and Licensing Branch (LCLB) General Manager, Douglas Scott.

The old policy (which is still in place until some time next year) states that a LRS license can be sold and relocated, but that the new location can be no more than five kilometres from the old location. This ensured rural areas would not be abandoned and that there would not be an over-concentration of LRS locations in urban areas. The new policy, which is set to come into effect sometime in 2015, states that LRS licenses can be purchased then moved anywhere in BC, as long as they are not moved to within one kilometre of an existing LRS, government liquor store (GLS) or rural agency store (RAS).

My immediate thought at that time of the announcement was that LRS owners in smaller, rural areas, where commercial property is much cheaper than in urban areas, must be ecstatic as the value of their businesses just skyrocketed. In fact, before the announcement was made, I know there were big city types sniffing around in my town of Powell River, attempting to buy existing LRS locations and I do not think they were planning on leaving the big city for the fresh air and ocean views of the Sunshine Coast.

Obviously they were in the know and had been tipped off that this change was coming and they were trying to get in before the LRS prices trended upwards in the hinterlands of BC.

I remember sitting in my local, The Red Lion Pub, one of the LRS locations mentioned in the Sun article, discussing this fact with friends over a beer just after I had heard the planned law changes. It was as plain as day to me that sharp business folks were going to shop about in cheaper rural areas to buy LRS licenses and then move them out of their communities to more lucrative urban markets. The big city purchasers of these licenses do not care that the locals in the small communities are getting screwed and will be highly inconvenienced by the moving of their local LRS.

It was also obvious to me that smart LRS owners were going to increase the price of their businesses, if they were looking at selling, or be tempted to sell as their business was suddenly much more valuable and desirable on the market. LRS licenses are already a much-coveted commodity due to the moratorium on granting new licenses in BC and with the new policy, a LRS in Smalltown, BC was closer in value to those in say Vancouver, due to the fact that there were far less restrictions on relocating them.

This inflated value of all LRS locations and the and exodus of same from rural communities can all be blamed on moratorium on granting new retail liquor licenses. I see the solution to this problem as being quite simple - if a LRS license is sold and relocated more than a kilometre away, allow for another LRS license to be approved for the location where the license was moved from to replace that service for local consumers. The policy could stipulate that the new license could not be tied to anyone who had a financial stake in the license which had been sold and relocated to stop people from just opening up LRS locations and flipping them to those who want to relocate that license. The government could even put a stipulation that the new LRS license could not be relocated for five years...Hell, make it 10 years!

The Union of BC Municipalities (UBCM) should have been yelling loudly at the government during their recently held convention but they were too distracted by the more pressing issues of saving rural, coastal communities by trying to right the BC Ferries shipwreck.

I think that allowing LRS licenses to be relocated anywhere in BC is not a bad decision, provided the government allow for the replacement of that service in the community the LRS is moved from.

As I have said in the past, BC liquor policy needs to make sense for all of British Columbians, not just those who live in urban areas.

Small BC communities are already struggling to attract and hang on to viable businesses and this stupid, short-sighted change to liquor policies is going to do just the opposite by encouraging small town business owners to flog their LRS's at falsely-inflated prices, to those who have no plan to keep that business in an area where it is much needed. Once again it is the consumers who are getting shafted by the BC Liberal liquor law reforms - specifically the consumers in rural areas. Like with the increase in the minimum drink price, which has impacted many rural areas negatively by driving the price of beer up, those who are drafting the new policies did not look at the impact this would have on British Columbian alcohol consumers outside urban areas.

Or if they did, the Liberals simply did not care that rural consumers, who already have limited choices, would be further limited and their communities without a successful business which provided  much-needed employment and services.

I cannot blame those who own LRS locations in small towns or those who wish to buy these licenses and move them. They are business people trying to maximize their assets. They are doing nothing shady or illegal. They are doing what is allowed under the law.

Those owners in small communities will have to deal with the fallout of selling what potentially could be the only LRS license in the area which would leave their neighbours and those they bump into on a daily basis without an outlet to buy booze outside of the local BC Liquor Store's restricted hours or the limited selection at the local rural liquor store (RAS) if there is one. But some cold stares and snide comments will be a little easier to take for these business folks due to the fact they probably were paid far more than they ever imagined they would get for their business.

Lift the moratorium and this all goes away. Those wishing to sell can still make a pretty penny for their businesses to be bought and relocated but at least there would be a mechanism in place for consumers in small towns to be somewhat protected.

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.