The Yukon Liquor Corporation has changed the way it calculates the price of draft beer and cider in the territory, which should lead to savings for local bars and restaurants.
But there’s no guarantee that thirsty customers will find themselves paying any less for a pint.
On average, the price of a keg has decreased thanks to the changes. For instance, a keg of Molson Canadian now costs $180, down from about $207.
The adjustments are part of a larger overhaul of the liquor corporation’s pricing structure. It plans to roll out similar changes to all types of alcohol by the end of the year.
“We’re in the earliest stages of a process in which we’re going to be transitioning ourselves to a pricing structure that’s much more in line with the neighbouring provinces,” said Jeff Erasmus, director of purchasing and distribution with the liquor corporation.
Erasmus said the way the corporation has been calculating liquor prices to date is a “logistical nightmare.”
“On the Yukon Liquor (Corporation’s) end, it leads to a large number of people experiencing a high degree of confusion,” he said.
The liquor corporation applies a markup to all the alcohol it orders. Previously, that markup was calculated using a complicated formula based on the price of getting a product to the Yukon warehouse, called the landed cost.
But that’s problematic, Erasmus explained, because many smaller breweries use smaller kegs than their larger competitors. Despite the difference in volume, their landed costs might be the same, because smaller breweries have higher expenses.
And because the markup was based on the landed cost, not the volume of the keg, the two kegs might end up with the same markup from the liquor corporation. That means beer from smaller breweries would end up being even more expensive.
Now, that’s changed. The liquor corporation will calculate its markups based on the volume of each keg, which should help level the playing field. The new structure has also been designed to bring down prices overall.
“The priority at this point is ensuring that local businesses are given the chance to be as successful as possible,” Erasmus said.
These changes have come not a moment too soon, said Christine Kent, who owns the Miner’s Daughter and the Dirty Northern Public House with Katja Schmidt.
“Everything’s moving in the right direction, but it’s been very, very frustrating,” she said.
She and Schmidt brought their concerns about the pricing structure to the liquor corporation last year, and she believes this change wouldn’t have happened without their complaints. She thinks the problem isn’t just that the old structure was complicated – it’s that it wasn’t being followed at all.
“The price structure was convoluted and didn’t make sense. And then their Excel spreadsheets were wrong,” she said. “For years, nobody asked any questions. Nobody really knew there were problems.”
James Maltby, co-owner of the Woodcutter’s Blanket, said he thinks the growing demand for a variety of craft beer prompted local bar owners to question the pricing.
“It was so convoluted that nobody could figure out how the hell this stuff was priced,” he said.
Both he and Kent credit recent management changes at the liquor corporation with these pricing adjustments. In April, Matt King took over as president of the corporation, replacing Pamela Hine.
“He’s come into an absolute joke of a Crown corporation, and he’s doing absolutely everything he can,” Kent said.
While the new system is more transparent, Kent and Maltby both said it doesn’t translate to large savings. Kent said she might save 14 to 17 cents on each pint under the new pricing structure.
And that means customers likely won’t see any changes to the prices they’re paying.
“Your profit margin is so ridiculously small,” Kent said. “Am I passing the 14 cents on? Probably not.”
Erasmus said the corporation plans to roll out similar pricing structures for all other types of alcohol, including wine and spirits, by the end of the year.
But prices at the government liquor stores likely won’t drop, he said, because that would create too much competition with off-sales.
Erasmus said the pricing changes will result in a “reduction in cash flow” but wouldn’t say how the liquor corporation would make up the shortfall.
The announcement this week did seem to catch some people off-guard. Bob Baxter, co-owner of Yukon Brewing, said he didn’t realize the changes were coming so quickly.
Baxter was initially concerned by how the adjustment would affect Yukon Brewing as a supplier. While the price of a keg of Molson Canadian has dropped by $27, for instance, a keg of Yukon Gold has come down by just one dollar, according to the new price list.
But he said the liquor corporation has agreed to make some more adjustments to narrow the gap. Now, he said, he won’t have to lower his own prices to compete. “We’re happy.”
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