| The price of booze is going up February 25, and it isn’t the usual government increase on sin taxes. Connect Logistics, the privately owned liquor warehousing contractor for the Alberta Government, is raising warehousing rates – in some cases more than 250 per cent. These costs will be passed on to the consumer.
Alberta’s distribution system supplied the cheapest liquor in all of Canada until last April when the system imploded. A booming economy exacerbated various problems including month-long delays, rolling shortages, the unavailability of products and a barrage of class-action suits by retailers. To deal with rising labour costs, increased warehousing requirements, growing diversity of products and other issues that it says have squeezed its margins, Connect is raising its rates. Liquor industry professionals have expressed unhappiness with the timing of these rate increases to the Alberta Gaming and Liquor Commission (AGLC). Despite these objections, some increases are going ahead. Further rate reviews will occur in March.
The core cost components that Connect Logistics charges are increasing significantly. For example, storage fees (charged per case, per month) are rising from $0.20 to $0.53, receiving fees are dependent on the type of shipping container (e.g. pallets, loose cases, mixed loads), but the mixed load fee will increase by over 200 per cent in 2006. The cost of assembling an order at the warehouse has doubled ($0.92 per case versus $0.46 per case in 2006). A planned increase of its new product listing fee from $65 to $200 and a proposed 100 per cent increase in its insurance rate, however, have been disallowed for now. Such dramatic price increases hurt Alberta’s micro breweries and the importation of specialty alcohol products. An apparent attempt to simplify the liquor warehousing system may squash the little guy and affect Alberta’s selection of spirits.
Connect Logistics states that part of its rate hikes will pay for additional staff to handle backlog issues at its St. Albert warehouse. It now promises delivery to retail outlets within two days of orders being made. Connect blames some of its problems last year on a 17 per cent increase in sales, however, many in the liquor industry believe Connect is rewarding itself for its incredibly poor 2006 performance.
Connect’s cost increases aren’t the only component of higher alcohol prices. Rising fuel surcharges and higher trucking rates add to the cost of shipping and storage. It is expected this cost element will boost the price of beer by 30 per cent in 2007. Consumers will pay up to $2 more for a dozen beer.
Importers also pay daily demurrage fees. Last year, due to Connect’s slow warehousing process, importers paid exorbitant fees as their product sat in shipping containers. Though Connect Logistics is beefing up warehouse staff and space, it isn’t known how much this will improve matters.
Connect Logistics agreed to postpone the full impact of its rate increases and to defer additional rate increases until after the coming AGLC review. |
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