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P>All the liquor and spirits industry wants is a fair shake in B.C.

Two representatives from Spirits Canada, the Association of Canadian Distillers, dropped by the Pique office Tuesday morning to talk about the problems facing of the industry in B.C.

The first problem, they said, is one of perception. The second is a question of equal treatment. The third is matter of taxation. The fourth is a matter of history.

They said they were touring the province to make their case, and that Whistler was the first stop on their tour.

Then, presumably, they went skiing.

The representatives were Jan H. Westcott, the president and CEO of Spirits Canada, and C.J. Helie, the executive vice president – hardly what you would call lightweights. The companies they represent – such as Bacardi Canada, Joseph E. Seagram & Sons, Hiram Walker & Sons – sell 13.5 million nine-litre cases of distilled spirits in Canada each year, although more than 85 per cent of their products are exported around the world. That’s more than $11 billion worth of spirits in Canada, more than 80 per cent of which goes to federal and provincial taxes.

Important men… so what the hell are they doing going door to door, from media outlet to media outlet, to talk about the issues facing the spirits industry in the province? Obviously because they feel the issues are that important.

"We decided to make a point of coming to B.C. and chatting up the media a little," says Westcott. "There are a number of political changes in B.C. we’re trying to understand, to get a better sense of what it means to our industry.

"We started in Whistler because this is a particular part of B.C. where there’s a transient population, good sales, good competition between retailers, and an international clientele."

According to Westcott, the Gordon Campbell government has talked about the importance of attracting investment to B.C. and making things easier for B.C. businesses, and one business that he would like to see benefit from these changes is the spirits industry.

"More than any other business, we rely on government to operate," says Helie. "We’re heavily taxed, heavily regulated, heavily controlled. We have to work with government if we want to improve our economic prospects in B.C."

Spirits Canada believes that their brands are under performing in B.C. in comparison to the rest of Canada, and they attribute the decline to outdated government and Liquor Distribution Board policies and the resulting perception that spirits are somehow more dangerous than beer and wine.

"B.C. used to be the best performing market in Canada in terms of spirits, but over the last five years this was dropping. Now it’s fifth or sixth in Canada," says Westcott.

Between 1996 and 2000 per capita alcohol consumption in B.C. dropped 9.3 per cent. Spirits consumption dropped about 6.9 per cent in that period – less than beer, but significantly more than wine and coolers. Despite the fact that the population of B.C. is 35 per cent larger than Alberta, Alberta has a larger market share.

To make things right, one of the first changes Spirits Canada would like to see implemented by the government is to allow the sale of spirits by independent retailers, the almost 300 licensee retail stores (LRS) across the province.

"They should do it out of self-interest. It’s better for consumers, it’s better for LRS stores, and that’s better for the province because at the end of the day they’re still getting the tax revenues," says Westcott. "They’ve already allowed LRS stores Sunday openings. A few years ago they decided people were responsible enough to buy alcohol using a credit card. What more does it take to make spirits available is LRS stores? It’s the next logical step."

According to studies, people don’t drink one thing any more, but match their purchases to the occasion – a beer to watch the hockey game, wine for dinner with the girlfriend, spirits at a party. By keeping spirits out of cold beer and wine stores, the Liquor Distribution Branch gives the customer fewer options.

It’s also unfair in the sense that it directs business away from spirit retailers to beer and wine retailers, giving beer and wine companies a competitive advantage. As well, there’s an unspoken message that spirits are somehow more dangerous than beer and wine.

At the same time, anti drinking and driving campaigns are pointing out that it really doesn’t make that much difference. "A beer, a glass of wine and a drink mixed with spirits all have the same amount of alcohol. At the end of the day, a drink is a drink is a drink," says Westcott.

Historically, he says the spirits industry in B.C. has had a harder time than beer or wine and the bureaucracy that hampers the sale and distribution of spirits are 50 years old. It’s a perception that was born in prohibition, in the days of Al Capone, and that has somehow survived until today.

"The population has changed. People don’t drink and drive anymore. People are better educated, more sophisticated, more intuitive – they get it," Westcott says.

Competition between provincially run liquor stores and LRS stores has been a good thing for beer and wine sales, and it will be good for spirit sales as well, he believes. Besides, LRS stores are Liquor Distribution Customers, too, and unlike provincial stores, they don’t require any taxpayer investment.

In addition to the problem of perception and bureaucracy there’s the problem of taxation.

The spirits industry, although it represents less than 10 per cent of all alcohol purchases in the province, is taxed higher than any other market segment. As a result it accounts for 40 per cent of the provinces tax revenues from alcohol sales.

The price of a bottle of beer is about 50 per cent tax. For a bottle of wine, it’s about 65 per cent. But when you buy a bottle of spirits, a whopping 84 per cent of the purchase price is tax. About 20 per cent of that goes to the federal government, while the remaining 64 per cent goes to the province.

Not only does Spirits Canada see this skew in taxes as unfair, they believe it furthers the perception that spirits are bad – if taxes on alcohol are "sin" taxes, then spirits must be a bigger sin than beer and wine.

It also inflates prices, both at the liquor store and in bars. "If you go out and order a rum and Coke, you’re paying a lot more than you are for a beer, and they have the same amount of alcohol. It’s tough," says Westcott.

The brewing lobby has a lot of power in Canada, and the tax structure is not likely to change any time soon. Meanwhile, the brewers have bigger profit margins than the spirits industry, which means more money to advertise and market their products, and more money to lobby government on matters of sales and distribution.

Between the provinces there is also a tax discrepancy that doesn’t favour the recovery of the spirits industry in B.C. In B.C., alcohol taxes are tied to the retail price of the alcohol, while in Alberta, taxes are tied to volume. It doesn’t make much difference for low-end products, but for premium products the difference is big enough that many B.C.’ers who live near the border choose to buy their alcohol in Alberta. That in turn deprives B.C. of tax revenues.

Although the B.C. government has looked into privatizing Crown corporations like ICBC and the liquor distribution branch, Spirits Canada believes that the owner of an industry is less important than the way it’s run.

"We sell our products around the world, and there are always issues," says Helie. "Everyone has a different system, different taxes, a different bureaucracy. Sometimes the private systems are better, and sometimes the public systems do a great job."

Competition with the LRS stores is already forcing the LDB to do a better job reaching customers and providing customer service. That means better stores, better promotions, and a better selection.

Helie and Westcott believe that they can work within the system provided that the people in it are motivated to run the industry for the benefit of the customer.

"Our industry is offering a broader array of products, and has invested huge money to advertise brands and to the make the public excited about them. We want to be sure when they go to the store to buy these products, it’s not a bad experience," Westcott says.

If the B.C. government helps Spirits Canada to level the playing field, Spirits Canada says it will increase its investment in the province by putting more sales people on the road, increasing advertising and promotion budgets, and supporting events wherever possible.

"We haven’t been able to do that in the past making 16 cents on every dollar," Westcott says.

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