Improving BC’s Import System

By: Danielle Leroux

Agents navigate shipping logistics, international laws, and an antiquated distribution system to import liquor to British Columbia.

Imported wine, beer, and spirits account for over $860 million—approximately 30%—of the BC Liquor Distribution Branch’s (LDB) annual liquor sales.

Industry has long been pushing for logical changes that would improve the import system and bring it up to par with widely accepted global standards—changes that would foster innovation, growth, and competition.

How Imports Work

The LDB has a monopoly over wholesale liquor distribution operations within the province.

As aptly explained in Mark Hicken’s 2018 Business Technical Advisory Panel Report, the system started as entirely government operated but over the years has been modified. While the overall administration of the system remains under control of the LDB, certain aspects are now provided by the private sector.

Essentially, BC has three distribution systems for liquor: one for local producers who are allowed to self-distribute their products (direct distribution), one for beer (brewers distribution), and one for imported products (the LDB distribution system).

The LDB distribution system is unusual in Canada, and many would argue unnecessarily complicated, in that products enter the province through the private warehouse system but are then sent to (and for higher volume products, stocked at) a government LDB warehouse. These warehouses act as a ‘middleman’ between the private warehouses and the licensee.

If a product is stocked at an LDB warehouse, the licensee can order and get it delivered from the warehouse as part of their regular deliveries. But a significant number of lower-volume products are not stocked at the LDB warehouse.

These Non-Stocked Wholesale Products (NSWP) are stored in private warehouses until ordered by a licensee. Once ordered, NSWP must be shipped from the private warehouse, delivered to and unloaded at the LDB warehouse, and then repackaged and delivered to the licensee.

Issues with Non-Stocked Wholesale Products

Unsurprisingly, industry has long raised concerns about the inefficiency of the LDB distribution system. Many report that it is difficult to obtain NSWP in less than two weeks, an unreasonably long timeframe in today’s world of next-day delivery. Licensees have also reported receiving orders that are either incomplete or not filled at all.

“It is difficult to obtain NSWP in less than two weeks.”

Further complicating matters, orders for NSWP are subject to rules that restrict product selection. For example, the products can only be ordered in full cases and no mixed cases are permitted.

“Unequivocally, most restaurants are saying they don’t want to do unlisted products. It is too hard for them to manage,” Ian Tostenson, President and CEO of the BC Restaurant & Foodservices Association says. “Labour shortages are leaving the hospitality industry scrambled, combined with all the other issues they have to manage. They’re not going to spend a few hours hunting down the Chardonnay they ordered from France that didn’t arrive last week.”

Importance of Import Products

NSWP comprise an essential part of hospitality businesses, particularly smaller pubs, bars, and retailers. These businesses rely on NSWPs as they’re typically focused on offering unique or premium liquor products that are unavailable as LDB Stocked Products (which are generally less expensive, high-volume products).

Licensees can order anything else and get it delivered within hours or days at most. It is a different story when it comes to liquor. “Anything you can buy in the hospitality sector that is not alcohol, you can innovate,” Tostenson adds. “You can bring in whatever you want. But somehow when it comes to alcohol it becomes a big problem.”

Now a widely repeated anecdote that was first shared in the BTAP report, one restaurant operator said: “I can order fish from Japan on a Saturday and receive it on Tuesday. I am unable to get a case of wine delivered from Richmond to downtown Vancouver in two weeks.”

This also negatively impacts agents. “There is so much time, effort, and cost to manage this process,” Tostenson describes. “Agents start to market to licensees but licensees give up because they don’t want to put money up front and sit around not knowing when their product is going to arrive. It could be 4-8 weeks, or maybe even never.”

Recommended Changes

Unfortunately, not much has changed on this issue since the 2018 BTAP report, and BC’s liquor industry associations continue to push for the same recommendation: allow NSWP orders to be delivered directly from one of the private storage warehouses to licensees.

ABLE BC’s Executive Director, Jeff Guignard, has discussed this issue at length with Minister Mike Farnworth, Solicitor General and Minister Responsible for the LDB. “We’ve been clear with Minister Farnworth that this is one of the few areas where there’s broad industry agreement. It would save so much time and money if private warehouses could deliver directly to licensees. It just makes sense.”

“Until they make these changes, it will never be a level playing field,” says Ted Latimer, Executive Director of the Import Vintners and Spirits Association (IVSA).

There is the perception that the tables are tilted in favour of products listed with BC Liquor Stores. “Just because I don’t have a listing with the LDB doesn’t mean my product should take longer to get to the customer,” Latimer adds.

“Having one central point of distribution is not a best practice.”

“Plus, as we have noticed with floods, stop strikes, and the pandemic, having one central point of distribution is not a best practice. If the LDB goes down, it all goes down,” Latimer explains.

It is not entirely clear why the LDB hasn’t made headway on these changes; some suspect it may have to do with the BC General Employees Union (BCGEU) and impacting jobs.

But as BTAP stated in its report, since the overall volume of these orders is less than 10% of the distribution warehouse volume, there should be minimal negative effect on the operation of the distribution warehouses. Arguably, this change would allow the warehouses to concentrate on providing more efficient service for LDB Stocked Products which constitute the vast majority of system orders.

Besides improving efficiency, reducing environmental impacts, and supporting businesses, distribution changes could also encourage innovation.

“Restaurants like any business try to differentiate themselves and find certain gems. Someone might go to a restaurant for a really cool wine that they can’t get anywhere else,” Tostenson says. “By making these changes, we could create innovation and growth and help some of the small and bigger players.”