Single Malt Scotch Drought Hits B.C.

Over the last number of months I have fielded more than a few hundred calls, e-mails and tweets regarding the dwindling availability of some your favourite single malts here in BC.

Here are the primary reasons why items like Laphroaig 10 or 15 year are not available in BC.

#1 Demand- for brand name Single Malts in emerging economies like India, China and Russia has grown 100 fold over the last 5 years. Clearly it is much easier for the distilleries to sell large quantities to a few markets than small quantities to many markets.

#2 Prices - paid by consumers in B.C. for single malts are some the highest in the world, while the prices paid to the distillery by importers in BC are the lowest in the world. Crazy hey! In B.C. we have what is called an Ad Volerum tax system which means that the tax is a percentage of the base value of the product. For spirits the lowest tax assessed is 203% of the base value. For single malts it can climb to 248% of the base value. Here is the math for a simple bottle of Smirnoff Vodka. Base = $7.80/bottle, Retail Price = $23.95, which means taxes of $16.15 or 207% of the base price. We will come back to this in a moment.

The base prices paid by importers in China, India and Russia are roughly 3x those paid by importers here, yet the retail price is roughly 70% of the retail price here in BC. It is far more profitable for distilleries to offer these markets a far greater volume and range of products than to BC.

#3 Supply- 10 or 15 years ago it was impossible to predict that China would be the global economic force that it is today. At the same time distilleries such as Laphroaig, Ardbeg, Oban, Highland Park and Macallan, only use selected malts, selected water and peat sources. Each year sees different quantities available of each of these core items, thus limiting the amount of the resulting whisky.

Also limiting supply is what is called Angel's Share. This is the amount of whisky that evaporates over time. The longer the whisky is aged the more of the whisky that is lost to the 'Angel's Share' leaving fewer litres for bottling.

At the end of it all the distillery manager is faced the fact that he or she has a limited supply of 10 yr, 15 yr, 25 yr and 30 yr, while demand in new markets is growing exponentially along with the prices paid, while the tax system in B.C. insures that the consumer pays the highest prices, yet the distillery receives the lowest amount of revenue per unit sold. This combination means that BC will see allocations of the most well known brands dwindle unless the taxation system changes.

All is not lost however. Re-Bottlers such as Douglas Laing are happy to supply BC with whiskys from the best known distillery's although under their own label.

Re-bottlers purchase immature whiskys from distillerys and take on the cost of ageing and bottling when they decide the flavours are correct. Often these are at slightly inflated prices or non-traditional years.

Most single malt producers offer 10 year, 15 year, 25 year and 30 year for sale. As these will be offered at lower prices than what re-bottlers can offer, thus re-bottlers often offer off years for sale at slightly higher prices. These include 12, 16, 18 and 40 year.

In the fall you will be able to find Laphroaig 10 year and Blair Athol 8 year for sale under the label Provinance. the distillery and year are clearly stated on the label.

At present you can still find some bottles of Laphroaig 12, 16, & 18 year available in privately held stores in BC.

Another benefit to re-bottlers is the fact that they are often the only source of whiskys from distilleries long closed and thus the whiskys have become collectors items as well as 'rare drams'.

I hope that this sheds some light on the single malt situation here in B.C. If you have any further questions, please send me a note are rphillips@liquorplus.ca or via twitter at www.twitter.com/Rod_Phillips.

To keep up to date on the world of Whisky, I highly recommend the WhiskyCast which you can find on iTunes or on the web at www.whiskycast.com. There are also RSS feeds and you can follow Mark Gillespie, the host on twitter @whiskycast.

If You Love Wine in BC Then...

It has come to my attention that the BCGEU will be launching their 'Shop Public' campaign on radio stations and in newspapers around the province. It is costing approximately $200K to get you to shop at BC Liquor Stores.

Regardless of the dollars and cents or social responsibility issues, neither shopping public nor private will encourage the best selection, the best service, the best pricing and the best product knowledge. The only thing that will do this is a truly competitive market.

Let's face it. The public sector employee's fear mongering, and the private sector's insistence that the province has increased financial benefits from privatizing seem to forget the main component in any market- the consumer.

The market in BC should be re-tooled to best serve a number of interests, the first of which is the consumer.

I have been around long enough to know that consumers want the same thing from liquor stores that they want from all other stores they choose to visit. They want the best selection of their favourite products for the best price possible. In addition they want the staff at each of these stores to be courteous, knowledgeable and helpful. I know, this is a blinding glimpse of the obvious.

The second interest that needs to be served comes under the umbrella of social responsibility. Nobody in the industry wants to see anyone, directly or indirectly, harmed by the consumption of alcohol, so lets agree that irresponsible use of this product can have serious negative effects on people and our community in general. Lets also agree that current efforts to curb selling to minors, bootleggers, and those that have had a few too many already are insufficient and need to be improved.

Does the system need to have anything else? Oh yeah...the provincial government relies heavily on the income raised through liquor taxes to pay for all manner of things as tax income goes into general revenue. If there is anything that the BC government has been consistent about, it's that any changes to this system need to be revenue neutral. So the new system would have to protect government revenues.

Well, from my view, not a lot has to be changed. In fact the BCGEU will retain their membership, government can maintain revenue neutrality, social programs can receive greater funding and best of all, the consumer gets better choices, better prices, better service, and more selection than at anytime in the past. All that needs to happen is the following:

1) Government and Private stores pay the same wholesale price. At present, the government pays cost and consigns the product to their stores, whereas private stores pay an average of 60% more for the same product.

2) 2% of all revenues goes to addiction counselling, beds, and those organizations that offer services for people dealing with the effects of Fetal Alcohol Syndrome. At present these programs and charities receive funds totalling less than 1/10 of 1% of total revenues.

3) Government stores and private stores that breach the rules of serving are made equally accountable for their actions. At present Private Stores receive fines, and in some cases have been closed, whereas government stores, although having a lower compliance record, have never been fined, reprimanded or closed.

There are plenty of liquor stores in the province of BC, so opening or closing some should be the function of consumer demand and not that of the BCGEU.

Sincerely

Rod Phillips