Considering the price of wine

As Cornucopia approaches, wine lovers should consider the cost of the wines they taste and about which they are educated.

This year, Whistler addressed what have been described as archaic and stifling liquor laws with a focus on licensing. The argument is made that many of these laws are inhibiting events that promote tourism.

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But there is another issue of equal import that has not been addressed: liquor pricing. The provincial government took the step of permitting restaurants to allow patrons to bring their own wine and charge corkage. This may have reduced the cost of dining out, but it did so on the backs of restaurants, presumably reducing their profitability. It did nothing to change the retail price of wine.

A couple years ago, I purchased a nice bottle of 2005 Bordeaux while in Seattle. The price was $12. Last weekend, I saw the same bottle for sale in Vancouver (2009 vintage). It was $37. The vintages were both exceptional and the chateau remains at its lesser known, but respected, stature. The main factors that account for this difference are, no doubt, taxes and duties that we must pay to ship wine to B.C.

Our Liquor Distribution Branch (LDB) has exclusive control of setting wholesale liquor prices. It also controls all shipments of alcohol into the province. As such, all private distributors and retailers must ship their products through the LDB before selling to customers.

During the shipping process, duties are applied such that each bottle of liquor has a minimum wholesale cost before it is sold through the LDB's government liquor stores, or through a private retailer, like a cold beer and wine store. Then, depending on which licence the retailer has, there is a fixed wholesale price, which is different for each class of retailers. For example, one class of wine retailer receives its product from the LDB at a 30 per cent discount off the LDB retail price, while another gets their product at 16 per cent off. One can see the various challenges for the private retailer, most notably that their main competition is the same body that sets all of the base prices.

To arrive at wholesale prices, the mark-up on an imported bottle of wine is 123 per cent; and for liquor 170 per cent. Applied to that total are the LDB fees, the HST, and the federal customs fees, to arrive at the LDB retail price (i.e. in the government liquor store). To illustrate, a bottle of Washington merlot purchased by the LDB for $10 will retail in the LDB Liquor Store for $25.69. It should be the same if you bring that bottle home with you and it is not duty free.

The rationale for marking up wine and liquor prices includes: revenue for government and controlling consumption. At a recent law conference I attended, a speaker estimated that the B.C. government earns about $900 million annually from alcohol sales, despite the (high) mark-ups. This is obviously good for government coffers, but many argue that the private system would do better than that, looking at Alberta as an example, where mark-ups are considerably lower.

If we consider the health aspect of higher pricing, I would argue that the goal of moderating consumption can be equally well achieved by simply keeping the minimum price for any liquor high, while reducing the rate of mark-up as the shipped cost rises.

For example, keep the current formula for wine bought by the LDB for less than $10 per bottle, but have a diminishing rate of mark-up after that. I doubt that a $75 bottle of Burgundy is the drink of choice for youth, college students, and desperate alcoholics. So why not let it sell for $30?

I expect the LDB would sell just as much wine and liquor, in terms of gross dollars, if they offered high-quality products at lower prices, because the volume of sales would increase accordingly.

The same would apply to restaurants. Would that translate into undesirable rates of consumption? I argue that it would not, because people who do not need to buy liquor tend to buy according to their budget. That is, they will tend to spend an amount with which they are comfortable. They will simply obtain a better quality product. The one exception may be that collectors will buy a greater volume of wine, but this type of purchase should not translate into equivalent consumption.

We hear that drinking red wine in moderation every day has positive health effects, and better quality wine should only improve upon that. Given this, why not let us drink better quality products and have a greater variety of choice. It will make for happier local consumers, less motivation to smuggle, and tourists will be less alienated (i.e. will not be put off by what many see as gouging).

It should be very beneficial to the province, generally, and specifically to Whistler.

Greg Diamond is a lawyer at Double Diamond Law in Whistler, whose practice includes personal injury claims and criminal defence. When not raising money for charity through his passion for wine, he can be reached at 604-938-0890 or gdiamond@ doublediamondlaw.com

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