WATCH: Wine merchants say a new government policy will result in big price increases next spring. Elaine Yong tells us why.
VANCOUVER – Wine merchants in B.C. are raising concerns over a new wholesale pricing system. Starting this April, costs could jump for higher-end bottles by as much as $40.
Vancouver wine industry lawyer Mark Hicken says the new wholesale price models has serious flaws.
“What’s happened is, the government had an overall good objective of creating a uniform wholesale price for all retailers, both government and private stores, and to do that they came up with a new wholesale mark-up formula, which is essentially the liquor taxes that are put on to wine,” said Hicken. “The old formula was kind of a two-tiered formula, that was a 51 per cent tax level on a certain portion of value for wine.”
“The new formula that they’ve come up with places a 67 per cent tax level on pretty much that same portion of value, so it’s a jump in 16 percentage points in liquor taxes on wine for medium to high-priced wines.”
The system is based on a percentage and that is why higher-priced wines would be impacted more than lower-priced ones. Under the new system, a $20 bottle of wine could rise to about $22, while a $30 wine will go up to about $40.
“Below about $18 to $20 there wouldn’t be much effect on consumer prices, but on $18 to $20 upwards, you’re going to see jumps in prices,” said Hicken.
However, Attorney General and Minister of Justice Suzanne Anton, said it’s too early to start talking about what retailers may charge.
“The new wholesale pricing model is about enabling more competition in the marketplace – it’s not about changing prices for consumers,” she said. “Trying to guess what each individual retailer will charge per product at this point is complete speculation.”
“The model was designed to collect approximately the same amount of revenue for government from each product category as exists today,” continued Anton. “Within each category, some products go up in price and some go down. For the vast majority of products, the change is very minor in either direction.”
Hicken said he believes the overall objective to initiate a wholesale price is a good thing, but he thinks someone has made a mistake in this new mark-up formula.
“I think that that 67 per cent number needs to be reduced, in fact if you’re changing from a formula that generates retail prices to one that generates wholesale prices you need to have a lower percentage, so instead of 67 it needs to go way down,” said Hicken. “The previous one was 51. It needs to go way down to 40 per cent or something like that.”
WATCH: Wine merchants in BC are raising concerns about the new wholesale pricing system that kicks in starting April 1, 2015. Critics say prices will jump for higher end bottles by as much as 40 dollars. For more on this we chat with Vancouver wine industry lawyer Mark Hicken.
He said it would also help if the government had a cap on the amount of tax that they charge on wine.
“There’s already a perception in B.C. that wine pricing in B.C. is probably too high and we lose a lot of business to neighbouring jurisdictions like Alberta and Washington State, anybody whose been to Seattle or Calgary knows that prices are cheaper there,” said Hicken. “So I think the government needs to rethink that or they’re going to lose a lot of business going out of B.C.”
Anton said at the retail level it will be up to each liquor store to choose the price at which they sell their products.
“If some retailers choose to raise their prices, I would expect that others in the market would be happy to compete and in some cases offer lower prices to draw in consumers,” she said.
“To be clear, as the framework changes for how liquor stores purchase their products, overall, we do not anticipate consumers seeing much if any change at the register for their favourite products.”
Anton added this is all about levelling the playing field for consumers and retailers. “For example, for years, independent wine stores that have enjoyed a 30 per cent discount compared to 16 per cent for licensee retail stores,” she said. “While they will now have to start paying the same wholesale price, this does not mean prices for alcohol will go up across the board. It just means retailers must operate in a more competitive marketplace.”