Liquor Retailing in Sask: the Gov’t wants to hear from YOU

(First of all – where have I been? Let’s say I was on a mind-bending 6-month craft beer journey of discovery.*)

It’s the moment you’ve been waiting for, Saskies… the government wants to know what reforms our liquor retailing system needs.

I’ve mentioned my opinion on this subject before (even more often on Twitter).

They’ve provided a couple of excellent background documents covering the history of liquor retailing in Saskatchewan; the public debate over liquor retailing in Canada; and the options under consideration:

  1. Status Quo
  2. Expanded Private Retail System
  3. Alberta-Style Fully Private Retail System (as Murray Mandryk notes, this is a bit of a red herring if the warehousing & mark-up model remain the same – which the government says they will)
  4. Managed Transition to Fully Private Retail (selling existing public stores to private sector liquor operators. Differs from option 3, which would see existing stores simply closed & sold – not necessarily remaining liquor stores)
  5. Expanded Government Retail System (this is really a non-starter, as the government has already committed to not building another public liquor store)

The government has framed the discussion as one of “liquor retailing,” and isn’t opening the door (at the moment) to reviewing warehousing, distribution, tax policy, mark-up policy, etc. I’d be happy to see vastly expanded private liquor retailing, but without further reforms, it’s just tinkering around the edges (important tinkering, but tinkering nonetheless). True reform also requires a review of the government’s involvement in ALL aspects of Saskatchewan’s liquor regime.

Warehousing & Distribution

If private stores are still required to source through SLGA’s antiquated warehousing, special order & distribution system, it’s not much better than status quo.

warehouseSLGA’s inventory system is antiquated. It simply can’t handle the number of unique products that a modern liquor system must carry. To their credit, in many cases they’ve clearly attempted back-end work-arounds… but the fact is that each new product essentially means de-listing another product, or finding a work-around. This is a clear disincentive to carrying new products, engaging local producers, or simply keeping up.

Yes, the SLGA has selected a new inventory management platform, and are building a new warehouse, but both of these illustrate the problem with the current environment… SLGA… moves…. at… a… snail’s…………..pace. These should have been in place years ago – in anticipation of a changing retail environment (the changes haven’t exactly snuck up on us over the past year or two). From what I hear, the inventory system is significantly behind schedule – so I wouldn’t bet on improvements any time soon.

Put Local Producers First

SaskIf our producers are still required to supply the private stores using SLGA’s Regina warehouse – rather than direct selling to retailers (as they currently can to bars, restaurants & pubs) – then the Saskatchewan craft spirits, brewing & wine industry will remain short of its potential due to nothing more than bureaucracy. For example, Paddock Wood can sell a keg directly to Congress Beer House in Saskatoon, but if they want to supply a Saskatoon liquor store (public or private), they have to send the product to SLGA’s Regina warehouse… SLGA then sends it back to Saskatoon. #FacePalm

A Local First policy is also critical if SLGA is to remain relevant in the retail landscape. Use the public system for the primary reason it was created: achieving public policy goals (the other key goal is obviously revenue). A stated public policy goal of this government is encouraging investment & economic growth. Entrepreneurs are key drivers of this growth. Let’s use SLGA stores a vehicle to showcase our local craft breweries, distilleries & wineries & encourage more entrepreneurs to enter the market. BC, Ontario & Quebec all use their public liquor stores to showcase local products. Rather than giving local SLGA managers the option, mandate that any public store a Saskatchewan producer wishes to be carried in, must accommodate the local product (ahead of other products).

Fox Guarding the Henhouse

foxIf we expect private retailers to come to this province, we need to correct a glaring conflict of interest.

I don’t mind the provincial government continuing to operate a system of public liquor stores – but the field must be level. At present, the SLGA is in a clear conflict-of-interest: they are both the regulator of all liquor retailers (public & private) in Saskatchewan, AND a direct competitor to the private retailers.

Imagine if Coca-Cola regulated Pepsi. Or Apple regulated Google. It’s nonsense. Even looking at other public bodies – SaskTel doesn’t regulate Bell, Telus or Rogers’ Saskatchewan operations… If public stores are to remain alongside private stores, the Government of Saskatchewan must separate SLGA’s retail/warehousing/distribution & Regulatory functions.

The most logical model is a Crown Corporation (let’s call it SaskLiquor). Specifically, the structure should ensure that SaskLiquor has no direct or indirect reporting relationship with the liquor regulators at SLGA.

Why is this split necessary? Simple: transparency & fairness. When Willow Park was granted a liquor franchise, there were conditions applied to their license. One of these conditions was that they must order all product through SLGA. OK, sure… seems somewhat reasonable. Another condition was that they couldn’t carry any products that SLGA carried. The intent was for Willow Park to delivery niche products…so this requirement made some sense. An interesting thing happened, though. The products that were selling well at Willow Park started getting listed & carried by the SLGA (pure coincidence, I’m sure – SLGA didn’t cherry-pick using insider business knowledge). Great for consumers, not so great for Willow Park, as SLGA’s move forced them to stop carrying their best-selling products.

Under the new licences, private stores can carry any products they wish – even if SLGA carries them – so the specific scenario above is now moot, but the principle remains: private retailers are at a severe disadvantage if their largest competitor also has the authority to dictate the rules of the game, or use insider information to gain a competitive advantage… this is the current situation in Saskatchewan.

If Premier Wall truly wishes to develop a competitive environment for liquor retailing in Saskatchewan, the private stores must have confidence that they will be able to compete fairly with the public system.

UnknownEnsure Your Voice is Heard

These are just my thoughts – be sure to let the government know what you think. The survey has a comment box at the end, but they are also welcoming feedback by email: liquorretail@gov.sk.ca

 

 

* because this sounds better than saying that “life” and “my day job” took priority for a few months.

One thought on “Liquor Retailing in Sask: the Gov’t wants to hear from YOU

  1. I wish I had read this before filling out the survey, but I did talk about the ‘treating the product with respect’ angle and the single source distribution. Ontario isn’t even a great example either, they’ve been under some scrutiny in the past while about about their Big Boy(ABInbev/Miller/MolsonCoors) ties. What SK needs to do is look at all the other systems and work out the best way to incorporate the best features of each while not succumbing to the same problems. Be it a private or government system. So long as the selection is there and the prices aren’t highway robbery, I’ll buy from anywhere.

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