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When do wine consumers get to benefit from the strong dollar?

By John Schreiner

November 10, 2007

Pity the people who run Chapters/Indigo, among other Canadian retailers.

Ever since the Canadian dollar began to soar, everyone has been beating on them to get their prices down on imported products.

Even federal Finance Minister Jim Flaherty beefed that he had paid more for a Harry Potter book in Ottawa than he would have in the United States. It turned out that he just had gone to the wrong bookstore, but his complaint incited other consumers, some of whom have been downright rude to retailers.

But tell me: did you hear Jim Flaherty, or anyone else, complaining that their favourite California wine is the same price today as it was a year ago, even though the Canadian dollar is 23% stronger?

You didn’t hear it. Our liquor stores have been hosing us for so long that we have become conditioned to paying what’s asked and shutting up.

Well, that shouldn’t be so. Consumers should raise hell if they don’t see some savings soon. Letters to the editor. Letters to the liquor board. Letters to anyone else you can think of.

To be fair to the British Columbia Liquor Distribution Branch, it is hard to say who is not passing the savings along – the agents who bring in the wines or the LDB which sells them.

Basically, the ball is in the court of the agents. They order the wines from their suppliers and then, based on the wholesale price, set the price at which the wines are sold to the LDB. The LDB then marks up that wholesale price by something like 120%.

If an agent decides to reduce the price of stock already in the LDB’s system, the board will go along – but charges the price cut back to the agent. The monopoly has no intention of eating agent-inspired discounts. The agents have to eat them. So there is no incentive for agents to pass price savings through quickly.

In recent years when the Canadian dollar was weak, California suppliers frequently gave special prices to their agents here just the retain market share. Now, some of those suppliers may be dragging their feet on cutting prices after years of internal subsidies just to stay in the Canadian market. If that’s the case, it is small comfort to consumers here.

I am prepared to give the system some slack since wines are ordered and paid for months before they show up at retail. But with the turnover on popular brands, one should have started to see some price declines by now. My source at the LDB says there have been a few nibbles but “nobody is willing to blink.”

Consider California wine examples taken from LDB product guides. I have starred a few price declines and noted some that raised prices. The selection is entirely random but it makes the point. I found myself getting hot under the collar just by assembling this list.

The pattern? There dollar’s surge has yet to be noticeable in our liquor stores.

Now, the LDB might not be totally happy to see prices forced down by the strong dollar because that would hit the LDB’s gross revenues.

In the 12 months to the end of September, the LDB’s sales of American wines totaled $82 million. If those wines begin reflecting the impact of a dollar that is up by nearly a quarter, that could mean few dollars flowing through the LDB, especially on California wines.

On the other hand, if prices come down, sales volume should rise and neither the agents or the LDB should not worse off.

However, if consumers don’t speak up, nothing much will happen. How the Chapters clerks who have been getting abuse from book buyers must envy the clerks in the LDB.

 

John Schreiner is author of British Columbia Wine Country

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