The Canadian Liquor Boards are independent monopolies, controlled by their provincial governments and operate either as full monopoly or monopoly/private systems.
Each Liquor Board has reference or floor pricing standards, which set the minimum retail price points for each product category. All boards encourage premium pricing to enhance profit.
All products are subject to excise tax, environmental taxes or levies, plus federal and provincial taxes.
For Eastern Canada, in most cases Liquor Boards work with international freight forwarders and arrange delivery from point of production or nearest port. In Western Canada, agents have the option of purchasing the alcohol in bond, and then sell to their respective Liquor Boards.
FOB or ex-cellar prices are subject to Liquor Boards markups that are added on top of freight and other costs. These markups, depending on the market and origin of the product, can well exceed 100% of product and freight cost.
A full marketing plan must be submitted as part of the initial application process, which must be made through a licensed agent, working in the province and representing the producer. Many liquor boards offer "calls" for various product groups, and review products, packaging, promotional spend, and actual sales in other regions in their review of potential products for their boards. Liquor boards will not review unsolicited products which are not represented by a qualified agent. It can take up to one year to launch a new product into the retail system.
A range of payment options exist depending on the Liquor Board. Monopolies in the East hold the receivable and are the importer of record. Aggressive terms are strongly encouraged and range from a minimum of 30 days to 150 days depending on the type of product and quantity purchased. In Western Canada, the agents negotiate and have the option of purchasing alcohol directly from suppliers. Payment terms are typically 90 days to 120 days. Terms can vary from “Bill of Lading” to “Receipt of Goods” depending on the market. In some jurisdictions it is possible to supply product on a consignment basis, this is however voluntary and should only be used if significant gains can be secured. Receivables held by a provincial monopoly do not need to be insured.
All Markets adhere to federal packaging standards that cover both label and carton specifications. Included are mandatory EAN/UPC and SCC codes.
Each jurisdiction is controlled to some degree by a Liquor Board. It ranges from the most liberal, Alberta, which controls only warehousing and local transport to a range of provinces in which the entire distribution channel, including retail and on-trade supply is handled by the monopoly.
Liquor board purchasing groups have strict sales quotas for all brands listed. Brands not achieving quota are discounted at the supplier's cost and sold out. Individual stores have the power to list or de-list brands, dependent on volume, compared to other brands in a given category.
If products are performing well and growing in sales volume, they will be retained. New brands are provided with initial distribution into approximately 20 per cent of the retail stores, usually the largest in the province, but there is no guarantee that they will remain in these stores after six months of sales. It is up to the agent's sales force to grow distribution and to establish shelf space in other retail outlets on a store-by-store basis.
Largely, listings are divided into two areas: The first is the higher volume/lower price "General Category" which requires strategic price pointing, precise quotes and significant marketing expenditures. The second is the premium focused "Specialty Category" which offers opportunities for more interesting, select products and rare wines and spirits. Though these purchases are generally more limited, they can often reach a supplier's maximum market allocation.
With the exception of Alberta, all products must be reviewed and accepted by the Liquor Board prior to being ordered. The competition for “Listings” or “Slots” is very high and it is essential to offer not only high quality/value product and interesting packaging but have strong local representation as well.
As with all large clients, it is important to strictly adhere to their policies and terms. Failure to do so can result in significant costs being billed back to the supplier or even return of goods.
In today’s competitive environment monopolies can be an interesting, loyal and rewarding client if the supplier and its local representative offer the highest level of product and service.
Canadian distribution outlets
There are approximately 3,200 retail outlets in Canada, more than 30,000 on-premise accounts, and 35 Duty Free outlets at border cities and airports. Liquor boards are targeting $8 billion in retail sales and will turn over more than $2.5 billion in profits to their provincial governments.