A Very Brief Glimpse into BC’s Weird and Wonderful Liquor Industry

Mike Brown

Village Liquor Store

Tuesday, May 16 2017

The history of the sale of liquor in British Columbia is a long and very windy road, with the consistent pattern of government hanging on to control. Today, even though private stores run the highest investment risk and typically carry a better product, government maintains barriers which seem to make no sense.

Up until 1900, BC saloons stayed open 24 hours a day, seven days a week. Vancouver was built around a saloon (Gassy Jack’s 1867 “hotel” saloon for his lumber workers).

In the early 1900s the temperance movement started and groups began to lobby for temperance or even prohibition.

1916: the BC government introduced a bill that set the stage for a referendum on prohibition.

Although prohibition was voted in, it wasn’t very popular and it created a huge black market.

BC was the first Canadian province to make drinking alcohol illegal but it was also the first province to realize that prohibition wasn’t working and changed the laws.

One loophole found in the prohibition legislation was that liquor could be purchased for medicinal reasons (hmm, sort of like medical marijuana?). 

1919: over 180,000 prescriptions were written by the province’s doctors for $2 each. 

The government sold over $1,500,000 of liquor in 1919 through this method. (Equivalent to $20,728,723.40 if adjusted for inflation to 2017 by Bank of Canada.)

1920: A new referendum was ordered to try and create an alternative to prohibition. The referendum basically asked, do you want to keep prohibition or create a new system of government control?

1921: the government introduced legislation giving themselves control over liquor sales. The government liquor store was born, and with it came rules.

1. You had to purchase a $5 license to drink legally (about a days’ wages at the time)

2. You could only legally purchase liquor from a government liquor store that sold alcohol in sealed packages

3. Once in the store (that looked like a bank with no alcohol on display) you had to go through three lines. The first to get your permit checked, the second to write down your orders and pay, and the third to collect your liquor in brown paper bags and then get out. Employees weren’t even allowed to talk about the products.

4. You could only drink the liquor at home but you couldn’t get drunk …that was illegal.

The government stated that control in their hands was about the safety of citizens - but in 1922 liquor revenue provided the government with about 14 per cent of its general revenue. By the end of that decade it would rise to almost 23 per cent.

1925: the government began licensing hotel beer parlours where people drank for the next 50 years. Along with licensing came more rules. Here are some of my favourites:

1. No entertainment (music, cards, checkers - all banned)

2. One had to sit to drink (standing was illegal) and be served by men

3. No women allowed

4. No food, soft drinks or cigarettes were allowed (can’t have food ruining ones’ buzz)

5. Only one type of beer could be served in a parlour and the staff couldn’t tell the patron what it was (this one is my personal favourite rule)

Rules were tinkered with over the years but strict regulation was adhered to under the guise of public safety (not huge government profitability) 

1985: the first BC private stores were allowed but could only sell beer and wine and had to sell at close to government store price (they had to buy it at government store price as well … wouldn’t want anyone else to make a profit)

It wasn’t until 1986 that you could drink on Sundays. Until then, you could sometimes get a drink with dinner in a restaurant, but pubs, hotel bars and cabarets weren’t even allowed to open.

2004: the government started issuing liquor retail store (LRS) licenses enabling private retailers to open liquor stores. LRSs were given a 12 per cent discount on government retail store prices ensuring that they could not profitably compete with government stores on price so a convenience store model was adopted by the LRSs with cold product, longer hours and holiday openings. 

Between 2013 and 2016 there was a massive liquor reform policy project done by the government. 

It was touted as one of the Liberal governments most successful public engagements.

They had input from less than one per cent of the BC population - but who’s to say what is and isn’t successful...

The changes brought in with the reform were supposed to balance the retail playing field between public and private stores - but private liquor stores still can’t sell to restaurants and pubs (over $250 million a year in lost business); or sell to holders of special occasion licenses (weddings, private parties, community events) even if the license holder wants to purchase directly from a private store.

Restaurants, pubs, night clubs and hotels all purchase their liquor through government liquor stores at full retail price (no discounts at all). This is why drinks (especially wine) are so expensive.

The most economical way to enjoy wine in a restaurant is always to bring your own and pay a corkage fee. If you’re not sure what you will be eating. bring several different types; you will only be charged for the ones that you open. 

Can’t drink the whole bottle? That’s okay because the restaurant can reseal it and you can take it home.

Here’s the rub

BC’s private liquor industry creates jobs and helps grow BC’s economy

BC’s private liquor industry generates billions of dollars of economic activity throughout every community in BC 

Every year, BC’s pubs, private liquor stores and hotels purchase more than $1.6 billion of liquor and employ nearly 100,000 British Columbians

BC’s liquor industry contributes more than $1 billion of direct profit to the BC government, making the liquor industry one of the top sources of provincial revenue.

Over 56 per cent of all government liquor revenue comes from the private sector (that is over $560 million a year)

Here is how we, the consumer, contribute over a billion dollars a year to the BC government through the liquor industry:

In BC, the government taxes spirits at 124 per cent on the first $21 of cost per litre, then 93 per cent on the next $8.20 cost per litre, then 62 per cent on the next $8.20 cost per litre and finally 43 per cent on everything over $37.40 cost per litre.

In BC the government taxes refreshment beverages (ciders, coolers etc.) at a flat rate of 73 per cent.

In BC the government taxes wine at 89 per cent on the first $11.75 cost per litre, then 27 per cent on anything above that.

This after-tax price is the price used as the wholesale price that both government and private liquor stores purchase product at (the government has already made a vast sum of money at this point).

Next, both government stores and private stores add a mark-up to their products to cover their hard costs (lights, staffing, insurance, bank fees, telephone, hydro, license fees, et cetera) and anything left over is profit. 

So far so good, but…

If an individual private store loses money after these expenses it comes out of the operator’s pocket. 

If an individual government liquor store loses money it comes out of the general tax revenue.  This means that if a government store isn’t profitable every dollar a customer spends in that store actually takes money away from the revenue that funds such things as education, health care and infrastructure (as well as politician’s salaries and pensions, but I’ll leave that one alone).

To be continued at a later date…