The Canadian Liquor boards are independent monopolies, controlled by their provincial governments. Each jurisdiction operates its own business, although they must follow federal rules for product and packaging standards. These Canadian standards relating to Food and Drug regulations, along with packaging requirements for labels and cartons, print and font size and package size etc., are published and available from any of the liquor board web sites (use the map for more information on each province or territory's liquor control board and to view links to each web sites). All brands must have UPC and SCC international product codes for distribution
Twice a year, the heads of each of Canada's liquor boards and commissions meet under the auspices of the Canadian Association of Liquor Jurisdictions (CALJ) to discuss topics ranging from operations and trade to alcohol policy and social responsibility. Created in 1942, CALJ's
mandate is to:
- Promote and encourage frank, open and ethical practices concerning the control, purchase and/or sale of alcoholic beverages;
- Co-operate with all provincial, territorial and federal agencies concerned with the control, sale and taxation of alcoholic beverages;
- Improve the provinces' and territories' systems of control and distribution of alcoholic beverages by co-operation and free flow of information among the members of the Association and by regular meetings or conferences of the members of the Association and comparable jurisdictions outside Canada.
Visit the CALJ website at: www.calj.org
Liquor Board policies and practices
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. Liquor boards work with international freight forwarders and arrange delivery from point of production or nearest port.
FOB or ex-works prices are subject to liquor board mark-ups that are added on top of freight and other costs. These mark-ups generally exceed 100 per cent of product cost and freight, depending on beverage type and country of origin.
Board distribution systems
Each liquor board has its own retail store and distribution system, staffed by union employees (the province of Alberta is privatized). Licensed bars, restaurants and hotels etc., must buy their products through the liquor board outlets, many of which have "licensee depots" to handle this channel. There is a slight discount in cost in most provinces, which is available to all outlets equally. It is illegal to offer on-premise accounts incentives or inducements to buy specific products. Licensees may however, use branded items such as glasses, POS material, and other items to promote specific brands.
Liquor board purchasing groups have strict sales quotas for all brands listed. Brands not achieving quota are discounted at the supplier's cost and the remaining inventory is sold through. Individual stores have the power to list or de-list brands, dependent on net sales 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.
Board advertising and merchandising programs
Suppliers are encouraged to participate in liquor board advertising and merchandising activities, as well as other promotional programs such as consumer advertising, in-store tastings and on-premise activities. These proposed brand investment costs are reviewed before brands are considered for listing. All actual promotion spend is continually reviewed by the category managers.
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.
Most liquor boards have two distinct departments: General List (products which must comply with Canadian standards and quotas); and Vintages or Specialty (international products, of unique types and price points, with minimal changes to packaging required to meet standards; these are usually reviewed, selected for listing, and purchased on a one-time basis).
Brand building activities must be done through "General List" where consistent inventories are maintained.
New products purchased by the liquor boards usually have 90-day payment terms. Once listed and carried on a regular basis, the government liquor boards pay suppliers in 30 days after receipt of goods. Note that the provinces of Alberta and British Columbia sell products on a consignment basis, therefore suppliers are not paid until the product is sold.
Canadian distribution outlets
There are approximately 4,200 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.