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Future Options for Liquor Retailing

There are five options proposed for selling alcohol in Saskatchewan.

In all of the options, the following principles apply:

  • Government will continue to regulate and enforce laws related to alcohol retailing
  • Government will continue to collect revenue from the provincial mark-up included in the wholesale price of alcohol products, and through the application of the Liquor Consumption Tax
  • Government will maintain exclusive authority for warehousing alcohol coming into the province from suppliers for distribution to private liquor retailers and commercial establishments.

While there are numerous variations possible both within and between these models, five different options are being considered:

  1. Status Quo
  2. Expanded Private Retail System
  3. Alberta-Style Fully Private Retail System
  4. Managed Transition to Fully Private Retail
  5. Expanded Government Retail System
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1. Status Quo

Maintaining the status quo would continue Saskatchewan's mixed system of public and private liquor retailing.

Under the status quo option, the private sector would continue to retail alcohol through a small number of private stores, off-sale outlets and franchises in smaller communities.

In urban areas, the majority of liquor stores would continue to be government and private stores would continue to meet demand for alcohol in a competitive marketplace. Government would continue to undertake operating and capital improvements in government stores, but any new stores required to meet increased consumer demand would be privately owned and operated.

What does it mean?

For Consumers
  • Consumers would continue to have access to government stores, with standardized prices across the province in both government and franchise stores on products carried by SLGA.
  • To the extent new private stores are opened to meet increased consumer demand, consumers would experience some benefit from increased product selection, price variability and convenience.
  • Consumers in larger centres would be the primary beneficiaries of increased choice in products, as new private stores would be opened only in urban areas.
For Government
  • Future expansion of liquor stores would be through privately owned and operated stores. This would allow government to invest in other priorities.
  • Government would continue to make investment to maintain existing liquor stores.
Other economic and employment impact
  • To the extent that new private liquor stores are opened, there would be some additional economic activity and growth in private sector employment.
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2. Expanded Private Retail System

Under this option, Saskatchewan would maintain a mixed public and private retailing system but would expand the number of private liquor stores by closing government stores that are less efficient or require new government investment.

New private stores would be allowed to open in larger communities to replace less efficient government stores. Conversion of government stores to franchises would be considered in smaller communities to replace less efficient government stores. Increased consumer demand would be met by opening new private stores, consistent with current government policy.

This option would also involve deferring all future government operating and capital investments in existing stores, other than to maintain health and safety standards.

What does it mean?

For Consumers
  • Consumers would experience greater product selection, price variability and convenience with the introduction of more private stores. As an example of product selection in private stores, the new private Co-op liquor store in Saskatoon added approximately 2,000 additional SKUs currently not carried in government stores. By comparison, the government system as a whole carries approximately 2,500 SKUs, with government stores carrying between 500 SKUs and 2,300 SKUs.
  • Consumers in larger communities and cities would be the primary beneficiaries of new private stores, as smaller communities would be served by franchises.
  • Consumers would experience some familiarity and predictability from standardized product prices across government stores and franchises in communities served by these outlets.
For Government
  • Converting or closing less efficient government stores would reduce provincial operating and capital costs.
  • There may be an increase in the costs associated with regulating an increased number of private retailers.
  • Some associated head office costs continue to be incurred even if less efficient stores are closed.
Other economic and employment impact
  • The construction and operation of new private stores would result in new investment and increased private sector employment. Closure or conversion of government stores would result in job loss for provincial employees.
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3. Alberta-Style Fully Private Retail System

Under this option, Saskatchewan would adopt a fully private system of liquor retailing, similar to the model Alberta implemented in 1993. This option would significantly differ from the status quo, in that it would:

  • Allow for an open and competitive fully private liquor retailing system, with limited barriers to entry for private retailers. Franchises and off-sale outlets would essentially operate as private liquor stores.
  • Shift responsibility for alcohol retailing to the private sector through the closure of government liquor stores and the sale of government assets.
  • Allow existing/new full-line private liquor stores to expand locations within the province on a commercially viable basis, with the private sector determining both product selection and price based on customer demand.

What does it mean?

For Consumers
  • The number of new private stores that opened would be greater than the number of government stores that closed, creating additional retail outlets for consumers.
  • Consumers would benefit from increased retail locations offering an expanded product inventory, resulting in consumers gaining greater selection and access to products available in Saskatchewan. For example, the new private Co-op liquor store in Saskatoon added approximately 2,000 additional SKUs currently not carried in government stores. By comparison, the government system as a whole carries approximately 2,500 SKUs, with government stores carrying between 500 SKUs and 2,300 SKUs.
  • Consumers may see lower or higher prices on liquor products compared to the status quo, depending on how private retailers price their products as a result of competition. This would be different than the consistent product pricing across government stores and franchises.
  • While an increase in the number of liquor stores would provide more convenience to consumers, some people may be concerned about the negative social impact of an increased number of liquor stores.
For Government
  • Government would save operating and capital costs associated with running government stores.
  • There would be some financial gain occurring from the sale of land/buildings associated with the existing government stores.
  • Government would incur costs related to the closing of public stores, including employee severance costs.
  • Government might experience additional expenses to expand regulation and enforcement of an expanded private sector.
  • Government would benefit from an on-going source of new tax revenue resulting from increased private sector participation in liquor retailing.
  • Providing a consistent discount or wholesale cost of alcohol to all private retailers similar to Alberta (including commercial permittees such as off-sale outlets which currently do not receive a discount from SLGA) could reduce provincial revenue without changes to the mark-up.
Other economic and employment impact
  • Potential increase in employment in the liquor retail sector. The extent of changes in employment and wages would depend on the private sector’s interest in expanding the provincial liquor retail system.
  • Closure of government stores would result in job loss for provincial employees. Based on the Alberta experience, some current employees would find employment in new private stores, while others could consider taking an ownership interest in a private store.
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4. Managed Transition to Fully Private Retail

Under this option, government would sell existing government liquor stores and/or the exclusive right to retail alcohol in a specific geographic radius to private retailers. This could be accomplished through an open tender/Request for Proposal (RFP) process to potential private sector retailers.

There are a number of ways an RFP process could be undertaken:

  • Individual stores could be sold through tender to individual private vendors
  • City or region specific bundling of stores could be sold through tender to a single private vendor, or
  • All government stores in the province could be sold through tender to a single private vendor.

This option would result in the sale of government stores to the private sector and consequently the private sector being responsible for all liquor retailing in the province. A key characteristic of this option is that an overall restriction would be applied on the number of full-line liquor stores operating in the province. Government could choose to limit the number of stores in operation to 75 (same as current government stores) or expand the number of private stores in operation up to a maximum number.

The purpose of adopting this model would be to:

  • Allow a managed transition to a fully private liquor retailing system with consumers benefiting from increased product selection and variable pricing;
  • Shift responsibility for alcohol retailing to the private sector, thereby eliminating any future operating or capital costs to government associated with being a retailer of alcohol;
  • Provide government with up-front revenue received from the private sector for the sale of assets and the right to retail liquor within a specified area of the province; and
  • Limit the total number of private liquor stores that could operate in any community, region or across the province as a whole.

What does it mean?

For Consumers
  • Consumers would see approximately an equal number of full-line retail outlets to purchase alcohol, with private stores replacing government stores. Consumers would have additional choices if government chose to expand the overall number of stores allowed to operate in the province.
  • Consumers would experience increased product selection through the private sector in response to consumer demand, although likely less than in an open and fully competitive marketplace.
  • Consumers would experience variability in alcohol prices depending on the level of competition in the marketplace. The price variability would be less than what consumers would experience under a fully open and competitive system depending on how stores were sold.
  • Consumers would not experience consistent product pricing across government stores and franchises.
  • Consumers in rural communities not served by a government store would see minimal benefits from increased private sector retailing in the province.
For Government
  • Government would see a one-time revenue gain from the sale of government stores and /or the exclusive right to retail in prescribed areas. However, this would be dependent on private sector interest in liquor retailing and the value of related assets, attractiveness of the associated competition zone and related conditions established under the RFP process and the size of the retailer discount.
  • Government would save operating and capital costs associated with running government stores.
  • Government would benefit from an on-going source of new tax revenue resulting from increased private sector participation in liquor retailing.
Other economic and employment impact
  • Limited new economic impact or job creation if the private sector is limited to the operation of existing government stores.
  • Government store employees would have the opportunity to acquire an ownership interest in an existing or new liquor store.
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5. Expanded Government Retail System

Under this option, Saskatchewan would maintain a blended public-private liquor retail system, but the role of government stores would be maximized in the system going forward.

Government stores rather than private liquor stores would be constructed to meet future consumer demand and government would actively look for opportunities to re-establish government liquor stores in communities currently served by a franchise. In addition, government could follow Manitoba’s lead by introducing government liquor kiosks in grocery stores.

What does it mean?

For Consumers
  • Continued predictability in products and prices across more government stores in the province.
  • A bigger role for government retailing would eliminate the benefits of competition for consumers, such as greater product selection and price variability.
For Government
  • Government would have a higher degree of control over the retailing system.
  • Government would be required to invest in new government stores to meet future demand, in addition to on-going cost of reinvestment in existing government stores. This would reduce government’s capacity to invest in other public priorities.

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