Proposed Policy Changes in BC

The BC Government and the LCLB (Liquor Control and Licensing Board) have proposed some changes to the “Tied House” and “Trade Practices” policies that currently govern booze sales in BC. http://www.pssg.gov.bc.ca/legislation/docs/2011-lclb-tied-house-and-trade-practices.pdf

I’m not sure what most people will think of these proposed amendments. However, the status-quo seems not to be an option, and I’m very happy about this. I started RainCity Brands because I wanted to enter an industry I love, and ultimately earn the money to start a brewery (For those who might wonder about that: It’s WAY cheaper to start and agency than to start a brewery)

Essentially Tied House policies limit a bar/brewery/restaurant/agency owner from promoting their goods in another bar/brewery/restaurant/agency that they also have a financial interest in. This post prohibition holdover is intended to prevent giants such as Molson from buying bars and stocking only their beer. But it also prevents me from opening a restaurant that sells my own beer, and from opening my own brewery.

The “Trade Practices” policies essentially limit or prohibit breweries or agents from providing financial or other inducements to licensed establishments to promote their goods. For example, these prevent Labatt from buying taps and draft lines for a bar in order to get their products on tap. However, these prohibited actions occur all the time anyway.

The LCLB has issued a document (here) that outlines some options. They want our feedback. I am certain I don’t understand the issue as well as I could, but there are likely to be strong opinions on each side, and while most of my colleagues are likely for the changes, I’m not sure if we all agree on what options or what structure is best. In fact, I’m prone to believe that our respective self-interests will guide such decisions. But that’s the point, I suppose.

The tied house options are all feasible. I prefer Option 1 (hit the link above) which relaxes all restrictions on tied houses, basically fully allowing them in all cases. I feel this is in the best interests of consumers and business owners. While choices may be impacted as a result of corporate ‘muscle’ being flexed, the free market should indicate what if any ventures are successful. I would much rather not have the government telling me what businesses I can and cannot operate, and from my perspective as a consumer also, what I can and cannot drink. If Molson wants to open 100 restaurants or bars with cheap shitty beer on tap at a discount, please let them. My customers will not be affected, as they’ll never walk in the door. Conversely, such changes would allow me to open my dream bar, which would not offer shitty beer at a discount, but rather incredible beer at a premium, because that’s my prerogative and I believe there is a market for it. Neither is currently allowed, and I feel that’s a shame.

I certainly respect the opposing view, which is that such legislative change might cause large companies to dominate the market. However, this is already happening, and unless the laws are changed it is difficult for passionate small business owners like myself cannot step in and offer our alternatives. I suppose the point is this; if a large brewery or distributor can open a restaurant and sell their own beer so too can a small operator. It’s freer and it’s much fairer. If you can’t throw dollars around to compete, do something different and do something better.

I am an importer, so I’m lucky if I make a few dollars on each case of beer or wine I sell. I cannot go toe-to-toe with the marketing budgets of “the big guys” – their economies of scale are too great and they earned that advantage (I wish I sold billions a year). I cannot buy a bar new draft lines and I cannot offer a bar $10 for each case of my beer they sell. I don’t even make that much myself.

While I’m concerned that a limit on trade practices will initially cause licensees to ask me for more incentives, it won’t matter in the long run. I simply don’t have to compete in their game. Freeing the market and relaxing the rules opens up the field. I can blaze my own trail. I offer better products. I offer great wine and beer, and they offer mediocre wine and beer, sometimes down-right crappy wine and beer.

Such changes WILL make it harder to win in this business. But ‘harder’ encourages innovation. ‘Harder’ makes us better. If the big guys want to slug it out with marketing, the small guys can pick up the slack by making better product and exporting it to other areas too. There is always a way. I just hope that we pave a path that is mostly free of government-imposed obstacles. I can deal with the rest of it.

8 thoughts on “Proposed Policy Changes in BC

  1. Martin Williams

    Not sure I can agree on throwing open the doors. BCLDB sales figures, for the last two years have shown the dramatic increase in small (less than 150,000 hectolitre beer producers, compared to a steady decline for the factory producers.

    Yes, Labatts and Molsons employ some under the table tactics to reward some establishment owners and slow the loss. But imagine them without fetters and restraints?

    They’d be more than happy to offer stupid money for taps. Stupid money as in stupid to offer, more stupid to refuse… its a money game.

    Yes, there are some who are true to the spirit of a real beer experience and not a commercial one.

    More dialogue is required.

    And thanks for jumping into the ring.

    CAMRA-BC submission coming online tonight. (Yes, something was submitted before today’s deadline!)

    Reply
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  3. David O'Halloran

    So, as a strategist for M/C I am not interested in
    opening 3 new bar/restaurants in Vancouver to sell my own product. What would be the point? There are lots of places that sell my beer,and doing so will not change the market in my favour, it will just mean I am open to the risks of opening a new establishment.
    My advantage to being able to own a bar is that I can now buy the alibi room, st augustines, etc. and close them. This will limit that infectious disease, CRAFT BEER.

    Reply
  4. Rick Green

    Respectully, Adam, I couldn’t be in more disagreement with you. The fact that non-craft brewers currently have 86% of the BC market in terms of sales is not by accident or the workings of an invisible hand. It is because they have the money to completely dominate the market, putting their products front & centre.

    The reason why tied house regulations came into effect in the first place was because the Liquor Inquiry Commission of 1952 found market consolidation had eliminated competition and, thus, choice. Did that immediately open up the market? No. It took another 32 years before craft brewing in BC even began!

    Brewers don’t have to own an actual establishment. They merely need to offer a large enough inducement to lock out a competitor’s products, which makes an establishment a de facto tied house without the headaches of management. This is currently illegal, but both the feds and the Province are doing pretty much nothing to prevent this from happening. That is why we are presented with the same ten taps (if that) of crap (mostly lager) in most places. Deregulate, and what is there to hold an establishment back from demanding even more money because now it isn’t illegal? That makes it even harder for a startup to get in the door.

    Anyway, I went through the LCLB consultation paper in detail and posted an analysis on my blog, if you wish to read it, you’ll find it at: http://bcbrews.wordpress.com/2011/02/16/the-ties-that-bind-how-the-bc-liberals-want-to-limit-beer-choice/. Feel free to comment.

    Reply
  5. Adam Post author

    Thanks Rick.

    There are many reasons for non-craft market domination. And it’s certainly not just due to these two policies, that I’m sure we can agree on.

    But you can allow tied-houses without legitimizing all inducements. That to me is preferred. There is no reason to criminalize vertical integration in this industry. I feel very strongly about that.

    Reply
  6. Rick Green

    Yes, I agree, it isn’t just these two policies.

    dorkuncorked made some excellent comments on my post at http://bcbrews.wordpress.com/2011/02/16/the-ties-that-bind-how-the-bc-liberals-want-to-limit-beer-choice/.

    I just want to clarify, as Martin has pointed out, that the tied house issue we are focusing on is not wholesale to retail. It is wholesale to bar. In terms of the overall LDB system, it is most certainly rigged and needs to be dismantled.

    Reply

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