Wholesale liquor pricing could help restaurant industry survive pandemic

It’s no secret that restaurant and bar owners are struggling due to the indoor and outdoor dining restrictions, but many believe a wholesale discount at the LCBO might help. Hospitality owners holding a liquor licence can currently pay more than retail buyers at the LCBO.

In-restaurant dining markups on alcohol are one way that restaurant owners offset this cost, but that becomes impossible during a pandemic when many restaurants have to close their dining rooms, lower prices and consistently offer meal deals for takeout.

The issue of LCBO pricing is not a new problem but it’s one that may sink the pandemic-stricken industry if left unchanged.

“This is something we’ve lived with for way too long. This particular issue is very, very, crucial to the survival of restaurants, our volumes are down drastically, in most cases, next to zero,” says John Sinopoli, co-founder of the group Save Hospitality (www.savehospitality.ca) and partner and chef of the Ascari Restaurant Group.

Sinopoli says wholesale pricing will help with sales margins during the pandemic and even then it will take months for bars and restaurants to recover.

“We will be down as we move forward even with the recovery and opening of the economy a little bit, we’re not going to go back to 80 per cent or 100 per cent volumes for a long time,” he says. “Who knows, it could be many, many months if not a year or more.”

Advocacy groups have raised the issue numerous times before the COVID-19 pandemic in the annual Raise the Bar guide (published by ‘Restaurants Canada’) and in a recent letter to the minister of finance from Ontario special advisor for the Beverage Alcohol Review, Ken Hughes.

This past June, British Columbia allowed restaurants to register for wholesale prices through the B.C. Liquor Distribution Branch (LDB) effective until March 2021. This small change has allowed B.C. restaurant owners to offer clients alcohol at a much lower price resulting in larger sales.

Quebec, New Brunswick, and Nova Scotia have also created discount or wholesale pricing on some or all alcohol sales. Several provinces have also offered discounts on licences easing some of the costs that come with serving alcohol.

An attempted partnership between the LCBO and delivery company SkipTheDishes added more fuel to the fire this past December. Due to the backlash, the attempted partnership announcement was paused but didn’t escape scrutiny from restaurant owners struggling to make ends meet.

“The timing was completely tone-deaf,” Sinopoli says, “If that’s something they want to do in the future, it doesn’t bother me as long as we get wholesale pricing and make a bit of a margin.”

But the playing field would be uneven otherwise.

“If they go into alcohol delivery where they don’t have to sell food when we have to sell food, and then we have to pay their retail prices. There’s no way we can compete. Zero way we can compete,” he says.

So why does the LCBO charge hospitality owners a markup?

“Retail markup is supposedly the cost to put it on the shelf, to process it through their warehouse, deliver it to the stores, and pay the people to sell it to you,” Sinopoli says. “Except that we don’t buy our alcohol off the shelf from the LCBO store, we buy it directly from our suppliers. We’re not getting anything for that retail markup.”

Sinopoli also adds that the LCBO’s retail cost applies even if a restaurant or bar buys wine directly from a winery.

Save Hospitality (a group founded to help restaurant and bar owners survive the pandemic and bring light to current problems) is in talks with the Ministry of Finance in an effort to work towards wholesale pricing for the hospitality industry.

“We’re excited to continue to work with the Ministry of Finance on this topic. We want to create a win for them and the public,” he says. “They campaigned on this platform, and the pandemic has created a horrible situation for restaurants but a great opportunity to rethink the restaurant bar model, normalize it, and create an environment that helps bars and restaurants to be much more sustainable.”

Save Hospitality’s proposal includes 12-month wholesale licensee pricing on alcohol while simultaneously working towards a better plan.

“What we’re proposing is that the government give 12-month licensee pricing on wholesale alcohol, and during those 12 months, we can be at the table to discuss a new structure that allows small businesses to purchase alcohol from the LCBO without the markups,” he says.

Many restaurants and bars in the GTA closed last year, mostly due to pandemic restrictions (10,000 Canada-wide).

“The whole system is archaic,” Sinopoli says. “It just doesn’t make any sense.”

Article exclusive to TRNTO