Montreal Gazette: Montreal bars should fight outdated regulations, not possible competitors

Peter Sergakis doesn’t think Starbucks should have the right to sell alcohol. As the president of the Union of Bar Owners of Quebec, he saysthat “we have enough bars like that in Quebec.” It’s a convenient argument given that he owns much of that market himself, about 40 drinking establishments on the island of Montreal.

Starbucks started selling beer and wine in select American locations, and they now want to bring the pilot project to Canada. According to their spokeswoman, Montreal is a prime target.

The Union of Bar Owners of Quebec wants to contest that plan. Rather than let consumers decide what should succeed and fail, Sergakis is pushing a vision that would never have allowed him to become an oligarch of Montreal’s nightlife to start.

The problems Sergakis is worried about are quite real. Running a bar costs much more than people might imagine and the margins of profit are generally low. Add an overbearing amount of government regulation, and it’s understandable why another large player is worrisome for many in the industry.

However, the solution does not lie in limiting the market. The solution is to make the industry more competitive — and that starts with demanding that government cut costs and remove red tape.

The astronomical markups imposed by the Société des alcools du Québec are an affront to Quebec consumers and producers. One bottle of premium vodka bought by the state for $11 is resold in-store for $42.50 — including to Sergakis’ establishments.

This explains why consumers get gouged when it comes time to pay their overinflated tabs, at no fault to the bars themselves. While the SAQ collects average profit margins of over 48 per cent, successful bars make only 4 per cent. It’s a tough business.

To alleviate this problem, the government should let restaurants and bars buy their liquor at discounted rates — as middlemen typically do in the private sector. This happens in other provinces like Nova Scotia, where bars pay 10 per cent less.

Certainly changing that would mean less money in the state’s coffers, but it’s a fair price to right the SAQ’s abusive wrong. According to a government report, a 10-per-cent cut would save Quebec’s restaurateurs $50 million every year.

The stamp system — an archaic measure to prevent bars and restaurants from serving illegal alcohol — also needs severe reform. Quebec is one of the only places in North America that still issues stamps, affixed to every bottle by SAQ employees for a wasteful $6 million a year. Bars can be charged thousands if bottles have missing or ineligible stamps.

This happens more often than it should according to Sandy White, president of the Quebec Nightlife Association. Many of these fines are contested in court, with astronomical legal fees for both sides. “The cheap stamps aren’t always glued on properly, so they fall off when alcohol drips on them and when the bottles get cleaned,” White explained. “The ink also smears over time. Yet if anything happens to the stamps, we get fined. It’s outrageous.”

Simplifying the stamp system would go a long ways toward helping bars and restaurants avoid unnecessary costs and would cut down on government waste. Alberta and Manitoba issue scannable bar codes to keep track of supply, while other provinces only require that the establishment’s permit number appear on their invoices.

Fair pricing and reforming the stamp system are only two examples out of numerous issues that need to be addressed, but they are very important steps. Reducing the burden put on owners would reduce the costs on consumers and increase industry confidence. Sergakis and others would do well to put their efforts toward fighting outdated regulations, not attacking other businesses.

Tom Kott is a consultant at HATLEY Strategy Advisors, a Montreal-based public affairs firm.

Source: Montreal Gazette


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