Ten days before the Northwest Territories Liquor and Cannabis Commission (NTLCC) ended its contract with the liquor warehouse on April 1, it warned businesses in the city there would be a “modest price increase” as a result.
But in early April, Bob Stewart, owner of the Kilt and Castle Pub, had already seen an 18.3 per cent increase in the cost of domestic beer and a six per cent increase in wine.
“I’m starting to think it’s a bad April Fool’s joke,” Stewart said at the time. “I never would have believed it would be so astronomical.”
The city’s two liquor stores are now selling alcohol directly to bars and restaurants as well as the general public after the territorial government decided to close its liquor distribution warehouse.
To mitigate increased costs as a result of that decision, the NTLCC created a discount program which will be applied to liquor licence holders across the territory, and the finance minister has instructed the NTLCC to “undertake a complete review of its current pricing formula given the unintended consequences that led to the price changes” a news release from the department states.
But Kam Lake MLA Kieron Testart says the move was a poor policy decision that caught the minister by surprise, prompting the review.
“Ultimately, this is a band-aid solution that’s directly cleaning up a mess that was started when the warehouse was closed and the prices went up,” said Testart.
The MLA said he continues to hear concerns about the liquor regime, strict regulations and most recently, the decision to close the warehouse.
That decision was “very poorly communicated and has resulted in a massive price increase” for licensees in Yellowknife, said Testart, with some reporting a nearly 20 per cent increase for draft beer, a 15 per cent increase on bottled beer and an 18 per cent increase for wine.
“No one is going to go out to a bar or a restaurant and pay $15 for a pint of beer,” said Testart. “That’s a toxic pricing condition for the hospitality business.”
Licensees were told there would be a slight price increase due to changes in the federal excise tax and changes in transportation costs, but if the culprit of the price jump was the federal excise tax, that change would be felt in every province and territory.
Licensees Testart spoke with contacted breweries in Alberta who hadn’t changed their prices at all, he said.
“I’m afraid I don’t buy the rationale that’s been provided by the finance department,” said Testart. “I think this is entirely due to the circumstances of closing the Yellowknife warehouse.”
When the warehouse was in operation, commissions were paid to the warehouse for liquor sales he explained.
“Now that the liquor commission has lost revenues from those commissions that now have been rendered obsolete without the warehouse, they have passed on the cost that they’re incurring from the loss of commissions onto licensees,” he said.
While the NTLCC has announced the rebate program, Testart said he hasn’t seen any details about how it will actually work, and none of the bar or restaurant owners he’s spoken to have either.
He’s also been waiting weeks for information on the exact price increases from the Department of Finance.
“Everyone’s kind of holding their breath to see exactly what this looks like,” said Testart.
It doesn’t make sense to create a liquor rebate program for the entire Northwest Territories when the problem only exists in Yellowknife he added.
“The liquor commission needs to step up its game and we need to fix this problem now,” said Testart.
“We need to take the opportunity to look at the other problems with our liquor system, with government monopolies of controlled substances. When it comes to liquor, we definitely have a problem with a very large government wholesaling operation that seems to be out of touch with the market conditions.”
Department of Finance responds
The rebate program gives all license holders in the NWT a 10 per cent discount on liquor purchases and will remain in place until after the pricing review is complete, stated Beau Stobbs, a communications officer with the finance department in an email.
“This rebate program was implemented across the NWT to ensure that all NWT licence holders are treated equally and that there is no preferential treatment in any one location,” stated Stobbs.
“The Yellowknife Liquor Warehouse’s operating costs were originally included in the liquor store prices,” he continued.
“As of April 1, this cost was removed resulting in lower consumer prices.”
This changeover highlighted issues with the pricing formula, which the minister of finance then directed the liquor commission to review, he explained.
At this point, the scope of the work for the review has not been finalized, but the department says industry will be consulted.