E-Malt.com News article: Canada, BC: The cost of beer distribution may double

The cost of distribution, currently estimated at 78 cents per case of beer in B.C., could nearly double to C$1.53 per case, Times Colonist reported on May, 28.

That’s what craft brewers pay for distribution in Alberta’s private system and those increased costs will have to be passed on to consumers, said Jim Dodds, general manager of Vancouver Island Brewery.

“It affects everything, our entire business,” said Dodds. “If we go to a similar model as Alberta, we will be looking at double the cost and that has to be passed on.”

The province announced in February it wanted a more modern and cost-effective way to warehouse and distribute liquor.

A request for proposals, which has to be returned by the end of June, asks the private sector for a plan that involves warehousing of liquor products currently done by the LDB and the distribution of warehoused products to government liquor stores and wholesale customers.

The government said it would like to be in position to sell LDB assets, warehouses in Kamloops and Vancouver, by March 2013.

Dodds said the move is bewildering to the craft-brewing industry, which has not been consulted. “There’s no transparency here. They are trying to blast this through, and we can’t figure out why,” he said.

Tod Melnyk, chairman of the B.C. Craft Brewer’s Guild and owner of Tree Brewery in Kelowna, said the impact of such a move would be felt throughout the province, and not just on the price of suds.

“The private Alberta model is more expensive to distribute your beer, and if we were to privatize it here from what we know it would become more expensive, too,” Melnyk said, noting private companies have shareholders who need to see profit at the end of the day. “If we put that cost onto consumers we have to ask: Will they buy our product?”

Melnyk said if sales drop off, brewers may have to start looking at curtailing production. “As you look at the beer industry as a whole, it’s the craft industry that’s growing, and there are more than 50 of us in B.C. who provide meaningful jobs in each of the cities and towns we do business in. A decline in production has an impact on everybody,” Melnyk said.

In its quarterly review in December, the B.C. Liquor Distribution Branch showed larger brewers, defined as producing more than 150,000 hectolitres annually, saw a four per cent drop in sales last year, while smaller brewers’ sales increased by 19.3 per cent.

The larger breweries still accounted for the vast majority of beer sales — C$770 mln last year, according to the LDB. But the smaller brewers saw their sales grow to C$130 mln in 2011 from C$106 mln in 2010.

Melnyk said despite raising its concerns through the media, the brewers still haven’t heard from government on the issue.

And they may not.

Rich Coleman, minister of energy and mines and the man responsible for the Liquor Distribution Branch, doesn’t seem to think there’s a problem and dismissed concerns over increased costs. “If they read the RFP it says we won’t do it if it does drive up the cost, so it’s just one of those things people are afraid of changing,” he said.


29 May, 2012