LEGISLATIVE ASSEMBLY OF MANITOBA
THE STANDING COMMITTEE ON CROWN CORPORATIONS
Wednesday,
December 5, 2007
LOCATION – Winnipeg, Manitoba
CHAIRPERSON – Mr. Daryl Reid (Transcona)
VICE-CHAIRPERSON – Ms. Flor Marcelino (Wellington)
ATTENDANCE – 11 QUORUM – 6
Members of the Committee present:
Hon. Mr. Selinger
Mr. Borotsik, Ms. Brick, Messrs. Dewar, Graydon, Mses. Howard, Marcelino, Messrs. Maguire, Reid, Saran, Mrs. Taillieu
APPEARING:
Mr. Leonard Derkach, MLA for Russell
Hon. Jon Gerrard, MLA for River Heights
Mr. Don Lussier, President and Chief Executive Officer, Manitoba Liquor Control Commission
Ms. Carmen Neufeld, Chair, Board of Commissioners, Manitoba Liquor Control Commission
MATTERS UNDER CONSIDERATION:
The Annual Report of the Manitoba Liquor Control Commission for the year ended March 31, 2004
The Annual Report of the Manitoba Liquor Control Commission for the year ended March 31, 2005
The Annual Report of the Manitoba Liquor Control Commission for the year ended March 31, 2006
The Annual Report of the Manitoba Liquor Control Commission for the year ended March 31, 2007
* * *
Mr. Chairperson: Good evening, everyone. Will the Standing Committee on Crown Corporations please come to order.
Our first item of business this evening is the election of a Vice-Chairperson. Are there any nominations?
Mr. Gregory Dewar (Selkirk): I nominate Ms. Marcelino.
Mr. Chairperson: Are there any other nominations?
Ms. Marcelino, then, has been chosen as our Vice-Chairperson for this committee.
This meeting has been called to consider the following reports: the Annual Report of the Manitoba Liquor Control Commission for the year ended March 31, 2004; the Annual Report of the Manitoba Liquor Control Commission for the year ended March 31, 2005; the Annual Report of the Manitoba Liquor Control Commission for the year ended March 31, 2006; and the Annual Report of the Manitoba Liquor Control Commission for the year ended March 31, 2007.
Before we get started, are there any suggestions from the committee on how long we wish to sit this evening?
Mr. Dewar: I suggest we sit until 8 o'clock and re‑evaluate it at that time.
Mr. Chairperson: It has been proposed that this committee sit until 8 p.m. and then review the sitting at that time. Is that the will of the committee?
Mr. Leonard Derkach (Russell): Well, Mr. Chair, I sense by the apparatus here that there's going to be a presentation, and I would suggest that the time that is allotted to the presentation be taken away from the actual committee time and the time allowed for questions for reports.
Mr. Chairperson: I think in fairness to the committee, it's been suggested that we sit until 8, then review it at that time, and if there are other questions, then, of course, the committee would give consideration at that time to extending the sitting time.
Mr. Cliff Graydon (Emerson): Just a question on how long would that presentation be. Do you have some idea? I think we'd like to limit that presentation, if it's at all possible, and carry on.
Hon. Greg Selinger (Minister charged with the administration of The Liquor Control Act): I think we on this side of the table would be quite willing to take extra time if there's interest to pursue it, as I did last time, I think. The critic will know that where there was a desire to carry on for an extra hour, we were willing to do that. But I think the presentation provides a lot of information that people would find worthwhile and sets a good context for the questions that will come after that.
Mr. Derkach: Mr. Chair, this is a departure from committee process that we've seen before. I appreciate the fact that the Manitoba Liquor Control Commission may have a story to tell, and I'd certainly be interested in it, but I don't know that this is the venue or, I guess, the opportunity for that.
We haven't had a committee meeting of this nature for some time and if we look at the reports, they date back to 2004. We're going to be allowing ourselves till 8 o'clock. We don't know whether we're going to sit later than that, and we're going to take up three-quarters of an hour of that time on a presentation.
I think this is valuable time for committee work. I'm not so sure that–their presentation may be fine, but I think it should be considered in the context of extending the time for questions by that length of time.
Mr. Selinger: As I said, we're willing to be flexible on our side of the House, as we demonstrated in the last meeting where we gave ample more time for people to answer all their questions. With Lotteries we had a presentation; with Hydro we had a presentation, and so far, members have found it informative. I'm hoping that they'll find it informative again.
We'll be flexible. We're not going to cut you off if you have important questions to ask.
Mr. Rick Borotsik (Brandon West): Mr. Chairman, perhaps if we could see the presentation. Arguing now isn't going to get the presentation started. So, if we could see the presentation and perhaps, for those areas that are already identified in the report, which we've seen some of them, maybe the presenters could just skip through those a little faster than what they would normally do and go through all of the mission statements and all of the members of the board and all of that stuff. So, if we could just sort of consolidate it a little bit from the 45 minutes, perhaps then we could deal with it. Okay.
Mr. Chairperson: There seems to be agreement amongst committee members to have the PowerPoint presentation then and to do it in an expedited fashion where possible. Is that agreed? [Agreed]
For the benefit of the Chair, I'd appreciate your indulgence and for the benefit of our Hansard recording folks behind me here, if members of the committee would bring their microphones close to them and also wait until they're recognized by the Chair before starting their comments or asking their questions, please. The Chair would appreciate that.
We'll now proceed. Oh, pardon me. Are there any suggestions as to the order of the reports that you wish to consider here this evening, or do you wish to do it in a general fashion?
Mr. Graydon: I would suggest that we consider the reports in a global fashion, Mr. Chairman.
Mr. Chairperson: It's been suggested that the reports be considered globally. Is that agreed? [Agreed]
Mr. Selinger: Yes, it's agreed. Do you have any intention to pass one of them at least tonight?
Mr. Graydon: We'll make that decision as–I would suggest that we have an intention to pass one, depending on the outcome of the–yes.
Mr. Chairperson: Does the honourable minister wish to make an opening statement and would you also please introduce your officials that are here with us at the table this evening?
Mr. Selinger: I'll dispense with the opening statement, but I would like to introduce the members of the commission. First of all, I'd like to introduce Carmen Neufeld, who is the Chairperson of the Board, sitting to my immediate left; Don Lussier, who's sitting beside her, who's the President and CEO. Ingrid Loewen is the Chief Financial Officer. Roman Zubach, and Roman over there is the Vice‑President of Human Resources and Administration; Maureen Spier, Director, Licensing and Inspection; Winston Yee, who's the Manager of Inspection Services. These are the senior officers of the corporation.
Mr. Chairperson: We thank the honourable minister.
Does the critic for the official opposition have an opening statement?
Mr. Graydon: We'd like to thank the minister for the introduction of his staff. We'd like to thank the executive and the staff of the Manitoba Liquor Control Commission for joining us tonight. We know that it's an inconvenience to leave a nice warm home, get in that cold car and come down not knowing when you're going to get back home. So we really appreciate that.
I'd also like to thank my colleagues for joining me at the table. None of them had to be pressured to do this, except that I had to buy them supper.
I'm still relatively new at this, so I'd ask you to bear with me as we go through it. There are going to be times, Mr. Chairman, you're not going to be fast enough to recognize me before I speak, and I hope you can adapt to that.
We just have a few questions we'd like to ask, and hopefully we can get through some of these reports and clear them off on a backlog. It seems to be a trend of this government to only examine the reports of the Crown corporations every couple of years, and we hope that this trend will change. I think we've expressed that in our last committee with the Lotteries and, hopefully, we can meet at least more than once every two years or every three years. I hope that we can leave here with that type of an agreement.
In saying that, Mr. Chairman, I'd like to turn this back over to you, and we can open up the committee.
Mr. Chairperson: We thank the critic for the official opposition for the opening statement. I understand that the representatives from the Manitoba Liquor Control Commission wish to include a PowerPoint presentation as a part of their statement to the committee this evening.
Is there leave of the committee to allow the PowerPoint presentation? Agreed? [Agreed]
Thank you to members of the committee.
Does the committee also wish to have this PowerPoint presentation included as part of the Hansard recording? Agreed? [Agreed]
Mr. Chairperson: The presentation will be included.
Mr. Derkach: Mr. Chair, I don't know the protocols here, but we have never had–
An Honourable Member: Move your mike up.
* (18:10)
Mr. Derkach: I'm sorry. Mr. Chair, I don't know the protocol for meetings like this. This is a step in a new direction, but I'd certainly be hesitant in terms of having a presentation included in Hansard. To me, what is important in Hansard is the dialogue that goes on between members of this committee and the corporation. A presentation should not be included as part of the Hansard, in my opinion, but you know, nevertheless, I'll go with the will of the committee, but we have never had this kind of a precedent set before and I'm hesitant in moving in that direction now.
Mr. Chairperson: Well, it was a question that the Chair posed to the committee. We don't have to include the PowerPoint presentation as a part of Hansard, although my understanding is that there may be hard copies available after the presentation is complete, if that's the will of the committee.
Some Honourable Members: Agreed.
An Honourable Member: Agreed, hard copies.
Mr. Chairperson: Agreed then. Thank you to members of the committee.
We'll ask Mr. Felder or Mr. Lussier to please proceed with the PowerPoint presentation then.
Mr. Don Lussier (President and Chief Executive Officer, Manitoba Liquor Control Commission): Okay. Not surprisingly we start with our mission statement. Our mission is to regulate, distribute and sell beverage alcohol thereby generating revenue for Manitobans within a framework of social responsibility, customer service excellence, business effectiveness and workplace quality.
Corporate values. This really tells you how we accomplish the mission, what our beliefs are. So we want to promote responsible sale and consumption of beverage alcohol and you'll see how we do that coming up. We foster importance of people. We foster a positive work force by working together as a team toward common goals.
Integrity and fairness. We develop respectful and ethical relationships where we are fully accountable for our actions, decisions and behaviours, and we believe in service excellence providing superior service to customers, partners and co-workers. And finally, we embrace change and encourage our employees to be innovative and creative.
These ones you'll see in more detail coming up so I'll go through them quickly. Financially, these are strategic goals which have been put into very plain English so that our staff can glom onto them rather than the usual highfalutin language in some of the reports.
Our financial goals. Our profits help improve the life of Manitobans. We are socially responsible in everything we do. To our customers, our employees are the MLCC.
Business. We are a business which operates efficiently, and our work-place, our work environ-ment, is safe, challenging, diverse and inclusive.
Okay, I thought I'd give you kind of an overview of the MLCC at a glance just to give you a feel for what we do and our size in the world of beverage alcohol. Surprising to a lot of people, we are the fifth largest buyer of alcohol in Canada. The LCBO likes to tell us on a repeated basis that they are the largest in the world. We are a little smaller than that but still fifth largest in Canada and also middle of the country. Our gross sales last year were over $500 million. We purchase product from about a thousand suppliers in 50 countries from around the world.
From our distribution centre in Fort Garry, we supply 1,700 customers, wholesale customers this should be, throughout the province. We inject about a million dollars into the transportation system, delivering that product to customers, and we have good relationships with suppliers. We regard suppliers as partners in our business.
Our operating costs currently are at 10 percent of sales which are the lowest operating costs in the country of any liquor board. From a retail point of view, we're a mix of public and private enterprise. We have 47 of our own Liquor Marts currently, soon to be 48. There are 284 private beer vendors throughout the province which sell beer from 9 in the morning until 2:30 in the morning, six days a week, a little shorter hours on Sunday.
We have 176 privately owned liquor vendors and duty-free stores and eight private wine stores. In terms of retail, our own retail, we have 25 stores in the city of Winnipeg and 22 in rural Manitoba. I think this is interesting: we interact with 7.6 million customers a year. On average, we see customers every two to three weeks. Some customers, not people in this room, we see more frequently than that.
On a wholesale side, we distribute all non-beer products through our distribution centre. Beer, like the mainline beers, Molson's and so on, are distributed by an organization called Brewers Distributor privately. That's about 98 percent of the beer's done that way. We carry in our distribution centre 3,300 SKUs of coolers, spirits and wine. A SKU is a stock keeping unit and why it's put that way is we have more than one SKU of a brand; so many sizes in a brand–that's a SKU.
Business-to-business. We have a business‑to-business system, a computer-based system that is available 24/7. It allows our wholesale customers to tap into our system on a 24-hour basis and automatically gives them 30-day terms. We deliver generally within 36 hours in most places in the province. We put through almost 4 million cases a year in the distribution centre.
Okay, getting to the strategic plan. What I'd like to do–I've taken the approach of, here's our major goals, our major pillars, and I've tried to highlight some of the things that are in our annual reports from fiscal '04 to fiscal '07 on the basis of these categories.
So, starting at fiscal '07, we returned almost $208 million to the Province. I guess to put that in perspective, that would fund about three to four community hospitals. Or, if it didn't exist, you would need a 10 percent increase in income tax to account for that lost revenue.
This is a graphic picture of our sales, gross profit, net profit and general administrative expenses. Depreciation is so small you hardly can see it. It's that little tiny, tiny bar at the bottom. Sales over this period have gone up, from 2003 to 2007, 20 percent. Our profits in that period have gone up 25 percent. Our operating costs, as I said earlier, are about 10 percent of our sales number. This is just another look at it and from a percentage point of view what this tells you is that for every dollar of sales, so every dollar of our $500 million in sales, 50 cents is returned to us as gross profit and 40 cents is turned over to the Province as our net profit.
In terms of financial pricing comparison to other provinces we try to be midway in the country; not the highest, not the lowest but in the middle. We pay particular attention to Ontario and Saskatchewan. This gives you a picture of how we compare with those two provinces. Across the board our prices are lower than Saskatchewan's. Our prices, with the exception of beer, are higher than Ontario's. Now, to put that in perspective, Ontario buys for 13 million people, we buy for 1.2 million people. So there's a little difference there. On the wine side particularly, Ontario gives price advantages to their wine industry and you see that in their pricing.
In terms of social responsibility, we try to ensure responsible consumption in everything that we do, from checking IDs on to regulations in licensed premises, such as shooter trays. We try to balance education and enforcement and ensure compliance with The Liquor Control Act. So our process there is really education first and enforcement second. In terms of social responsibility, we've had a long-standing program called Show Your Age in which we check anyone who looks under the age of 25. Last year, to give you a feel for that, we checked 177,000 people for proof of age and 9,000 were refused.
Another social responsibility program, and the first one that we entered into in a major way with a television and poster campaign is With Child Without Alcohol. This is the second phase of With Child Without Alcohol, which we spend about $200,000 a year on. The whole thrust of it is pretty obvious. We're trying to educate people so that they don't drink when they're pregnant. I think the interesting part of this program, you don't see it in the posters but we've been successful in getting the program into all the high schools in the province. So the Department of Education has worked with–we worked with the Department of Education on a facilitators' kit for teachers. It's available in all the high schools in the province currently.
* (18:20)
Another program we run is called Be UNdrunk. This is targeted at high-risk, binge drinkers generally in the age of 18 to 24. We started this as an Internet-based program, where that age group tends to get their information, and built the program from the input that we received on the Internet.
We received 2,000 ideas for stories on how to encourage people not to binge drink. The general theme of the story suggestions were twofold. From men, it was, if I drink too much, if I binge-drink, I get into fights. From women, it was, if I have too many drinks, I attract unwanted sexual activity. So our ad campaign–and I trust some of you have seen it–is targeted at that group. The latest edition of this looks like an Internet–this is the television part of it, and posters, but it's a pretty powerful message. In fact, it just won three awards in health advertising.
The other one, a recent change in legislation last year, was in response to concerns about doctoring drinks with date-rape drugs. The legislation was changed to allow people to carry their drinks with them at all times, including into washrooms. Once the legislation came into play, we came up with this campaign, and these posters were made available to all licensed establishments throughout the province.
Finally, this program just launched, it's unique in Canada. It's called Be the Influence. I think–it shocked me anyway, that based on research across the country, the age of the first drink for a child, when they either mix their own drink or have a bottle of beer, is 11 years old. So this program is designed to encourage parents to talk to their children about alcohol. It's based on modelling behaviour and the whole television campaign is targeted at that as well.
In terms of community participation, these are just some of the groups that we're involved in and with. I note two at the bottom, Winnipeg Downtown BIZ patrol. We contribute in a sponsorship form to the Red Nose program about $25,000 a year. Laterally, Thompson, also, we've worked with city council in Thompson more recently where there are concerns about bootlegging and safety in the downtown area. We've been heavily involved with them in limiting the sale of mickeys, is probably a classic one. So we won't allow anyone to buy more than four mickeys. We've also increased security and we're contributing to a similar Red Nose program in Thompson.
Just to remind you of some of the regulatory changes over the periods covered in the annual reports, in fiscal '06, recorking of wine purchased with a meal was allowed from a social responsibility point of view so that you don't have to finish the bottle of wine in a licensed premise. You can have it recorked and take it home with you.
Longer clearing times. This was in response to concerns particularly in big licensed premises of a thousand or more when everybody has to get out of there within half an hour. It was resulting in problems, too many people trying to get too few cabs as an example, violence breaking out. So that was changed to allow for an hour clearing time.
Mandatory security training under It's Good Business. This just came in. We're the first province in Canada to mandate a security training program under It's Good Business. No other province does this at this point.
Date rape prevention. You saw the campaign that I mentioned earlier.
Okay, licensing and inspection. As I mentioned earlier, a balance between education and enforcement. We have 1,600 licensed premises in the province and we have 16 liquor inspectors. So they can't be everywhere all the time. By the way, that is the highest ratio of liquor inspectors to licensed premises in the country.
So we use a risk-based approach and what that means is if you're a liquor primary operation, you're a cabaret, you're a beverage room, you're going to see a lot more of our inspectors than if you're a ma‑and-pa restaurant selling pizza. So, in the case of high liquor primary, you're probably going to see inspectors twice a month. In other cases, you may see them every two months.
We use a progressive discipline approach, which means we start with a warning. Then we go to written warning, then we go to a fireside chat with Maureen, the director of licensing. Laterally, if that doesn't all work, then they go to the licensing board for disciplinary action.
We do approximately 25,000 inspections annually and we also conduct educational seminars, 219 of them last year.
Okay, customer service. Just to remind you of the split between the outlets, this gives you a graphic demonstration of that. Our operating philosophy is to be friendly; to provide friendly, knowledgeable service in safe, convenient and modern stores. So we spend, to maintain modernness, about $1.5 million to $1.6 million a year in upgrading our stores. They're on a rotating basis, usually as the leases come up we either move or renovate. We also spend, and this is part of the knowledgeable service, approximately $600 per year, per employee, in ensuring that their service knowledge and product knowledge is up to snuff.
I'll go through this quickly, but this gives you a picture for what's in the annual reports, the renovations that we've done over this period: Brandon Shoppers Mall, Portage la Prairie, Beausejour, Pine Falls, Gimli. I think it's interesting to note that, strange as it may seem, when we do a renovation we always see an increase in sales. Anywhere from 10 percent to 30 percent.
Also, we opened a new store in fiscal '04, Kenaston Crossing, at McGillivray and Kenaston, and we've renovated Portage and Burnell, or renovated, opened a new location at Portage and Burnell which had a 50 percent increase in sales.
In '05, renovations at these stores, and a new store at River and Osborne which you see pictured up there. In '06, Southglen. South St. Vital is growing rapidly so we added another store on St. Anne's Road and we relocated Northgate to Garden City Square, and in Brandon we moved across the street to a premise that was built for us. A much larger operation which has done very, very well. In '07, we renovated our Southdale store, renovated and enlarged it, and we relocated in Selkirk and City Place.
In terms of this, customer surveys, we believe that what gets measured gets done. So we measure it on a regular basis through professional shops and through surveys. In the last survey, Liquor Mart satisfaction ratings were 98 percent. They rate us high on friendliness of staff, knowledge of products and prompt assistance in comparison to other shopping environments such as Safeway, SuperValu or Shoppers. Professional shops, as I mentioned, we shop our Liquor Marts at least four times a year and we also shop liquor vendors. Not all of them, not all 175, but the larger ones on a regular basis.
We believe well-trained employees are the key, so it's mandatory once you've attained a certain number of hours with us that you take and pass the basic wine and spirits course, which is a three-day course. We have over 200 employees that have completed the next level of that course which is the equivalent of a half-course at university training. We annually train all our store staff in some form in terms of product knowledge and trends, and product training is also provided to liquor vendors as is social responsibility training.
I'm going to run through this quickly. Most people find this fairly interesting because it's something everybody knows about. We sell, this is in millions of litres, so, by far, beer is the most consumed beverage in the province. The variation between, say, 2003 and 2007, where it went from 70 million litres to 78 million litres, is largely weather and that's the variation up and down in those ones. As you get a good summer or a bad summer, we sell more beer or less beer. Spirits is very stable over that time. Wine is growing very nicely and no end in sight, it appears. Coolers and ciders are more in the beer market type.
This shows the product sales dollars. The thing I'd like to point out here is the difference in spirits. Where the volumes aren't going up, the price is and that's a move to premiumization. For instance, a product like Grey Goose Vodka, I would never have believed people would pay 40 bucks for a bottle of vodka, but it's the second-highest in its size in the country. Wine is just goin'.
* (18:30)
Trends in terms of the whole market. Premiumization is the big thing. The market is moving towards premium product. On the spirits side, 40 percent of our sales used to be premium; it's now 60 percent of our sales are premium. So 60 percent would be in Crown-Royal-type of products.
The critter invasion, this is the Australian phenomena where Yellow Tail entered the market and just moved everybody into that. So that's moving very, very well. And innovative packaging which you'll see on the right, canned wine, is doing very well, particularly in licensed premises that don't like to recork wine.
Wine sales are just jumping. This shows that from 1996 to 2006, a 10-year period, doubling in the sales and continuing up.
Business effectiveness. We want to move to industry best practices, and we continually scan the marketplace for those best practices. As an example of that, we now night-stock. This month is the busiest month of the year for us. We sell double what we sell in any other month in the month of December. So we would move to best practices like night stocking in order to keep up with that.
We annually review our internal service measures, which I'll show you some of coming up.
In-stock service levels at liquor marts is on an annual basis 97 percent. So 97 percent of the time you can go in and find the product that you want. Our productivity is measured in terms of units per labour hour, and you see the numbers up there. Inventory turns, as well, a good business practice.
Shrinkage. Most retailers would die for this shrinkage, 0.12 percent of sales. General retail is more like one to two, and our cases per labour hour is 28 cases in the distribution centre.
In terms of sustainable development, we initiated an action plan in 2004. Initiatives over this time period include reduction in paper, lighting upgrades to energy efficiencies, ethanol fuel in all of our fleet, reduction in cleaning chemicals and sustainable development clauses in our tenders. We are also about to get out of plastic bags. We use plastic bags for our customers. We're going to get out of that. All of our paper bags come from Manitoba, are produced in Manitoba by a Manitoba company, and we'll move to that coming up.
Business effectiveness. Again. Workplace health and safety policy was developed during this period. We are completing job hazard analysis in a distribution centre and in our stores currently. Risk- management strategy has been very popular. I think some of it was generated by the catastrophes in the country. One example of our risk-management strategy is the insulation of a generator at our head office in order to keep power going to us. When we saw what happened in Québec during the ice storm, if that had happened to us in January, of some form like that, and we were out of power for two days, we would lose all of our stock in the distribution centre. So we spent about $250,000 for a generator.
Contingency planning also is a big thing. We have an off-site computer site in case we had a fire or some catastrophe at our office, and we also have an off-site control centre where we can get backup or operational within five days.
Community support. We support over 100 organizations in the communities that we operate in, and last year these programs generated $300,000 for Manitoba charities. Here are some of the examples of community support. I won't go into them in any detail.
Workplace quality. Again, these are all mentioned in the annual report. We took out 20 computer systems that were stand-alone systems and replaced them with one enterprise system. We also included in that a Kronos timekeeping system so that all of our store staff can tap into the computer and do timekeeping much more efficiently.
Realizing that our executive group, half of our executive group can retire within five years, we're big into succession planning. In fiscal '05 we started taking the strategic plan on the road. I personally went out to most operations and talked about our strategic plan. We did our first-ever employee job satisfaction survey, and we developed a workplace diversity strategy and an employee wellness program.
In '06 we did another satisfaction survey and followed up with focus groups. We developed a performance management system on-line. We did a policy document review and we developed an Aboriginal employment strategy.
In '07, we got direct employee input in the strategic plan through their management group. We updated our store managers development program which–our store managers development program involves a university certificate program. All of our store managers now have a certificate of management.
Our wellness program. We developed flex benefits into it.
Information technology. We're in the process of developing a new-point-of-sale cash register system. We also expanded our distribution centre from 110,000 square feet to 143,000 square feet.
Finally–whew, a world speed record–the last two years, this year and last year, we were named a Top 100 Employers in Canada. There were 2,500 organizations that applied for that. We ended up in the top 100. We're in the top 10 and top 15 in Manitoba.
Do I get a gold star?
Mr. Chairperson: Thank you, Mr. Lussier, for the PowerPoint presentation here this evening.
Mr. Selinger: First of all, I'd just like to thank Don and the board and the staff for putting the presentation together. I think you should be commended, in particular for your social marketing program and the awards you've gotten for that, and for being one of the top employers in the country. I just found it an excellent presentation.
Mr. Chairperson: The floor is now open for questions.
Mr. Graydon: Thank you, Mr. Chairman, and Don, thank you for the presentation and doing it in record time. We appreciate that from this side.
I'd like to start out with some questions. We have eight privately owned wine boutiques in the city of Winnipeg. There's been some talk that the MLCC wants to open up a couple of wine boutiques. Can you give us a status on that?
Mr. Lussier: Yes, we've started to take the approach that we'll open stores that have an emphasis on wine. So some of these stores are smaller than our full‑listing stores but have an emphasis on wine. For instance, the Tuxedo store is in that kind of mould, about two-thirds the size of a major-sized Liquor Mart, but the emphasis is on wine. We display it differently than we do in other liquor stores.
Mr. Graydon: I wonder what the eight private stores that are there now, would it make sense–or why would you not put these new initiatives up for tender and let them be privately owned as well?
Mr. Selinger: It's our government policy not to have more private wine stores at this time.
Mr. Graydon: Could you explain the reason for that policy, Mr. Minister?
Mr. Selinger: Well, first of all, we think that the Crown corporation does an excellent job in providing the services it does. All the profits stay in the public sector for the benefit of all Manitobans through the investments we make, not only directly through the corporation, but as the revenues go into the Consolidated Fund, they're allocated through the budget process to the priorities of Manitobans. That includes everything that we've talked about in the budget, whether it's health or education or infrastructure, roads, et cetera. We think that's a good story for Manitobans.
We also think that the Manitoba Liquor Control Commission does a first-rate job on the social responsibility part of its mandate. By having the stores under their control, they can ensure that that happens.
Mr. Graydon: Well, according to that definition, and I can't argue with you that they have a lot of social benefits; certainly, there's no question about that. However, then I would have to question probably why there are so many private liquor stores outside of the city of Winnipeg. Why wouldn't you want to be in charge of them all and have them all contribute?
* (18:40)
Mr. Selinger: I'm going to ask the CEO to discuss the distribution of the private-versus-public outlets and how that has evolved over time.
Mr. Lussier: Yes, in 1994, the then-government wanted to open a number of stores, and so they went out for requests to proposal. There were, I believe, four stores selected at that time. Again, later in, I think it was '98 or '99, there was a second group let out, and there were another four stores added to it at that time.
We were kind of hoping that there would be some from other areas other than Winnipeg at that time, but there was only one application from Brandon and the person wasn't resident in Brandon, they were from Gimli. That the proposal wasn't good enough is basically what it came down to.
Mr. Selinger: I think the member was also asking more broadly about the liquor stores, the private liquor stores, beer stores versus public provision of service outside of Winnipeg, why is it more private outside of Winnipeg as opposed to inside?
Mr. Lussier: Okay. It's largely act-related, and I think the drafters of the act, back in the '50s, were very, very forward-looking. What they did was try to make it as economical as possible to supply service to smaller areas in the province. It's very economical to run our own stores in the city of Winnipeg, but, when we start getting into very small operations, it's not as efficient.
So what they did was put in the act that, where it is not economically viable for us to operate a liquor store, it would go to an agency. It would go to a liquor vendor. So that judgment is made based on the economics of the situation. So we've been in a situation, over the years, where we have in fact closed liquor stores and converted them to agencies, to liquor vendors because it is more cost-efficient.
Mr. Graydon: Could you give me an example of where you've done that?
Mr. Lussier: Yes. Fisher Branch, Souris, Morris. There are a couple others, I just can't remember them. But it's at least four or five.
Mr. Graydon: Have there been any situations where you have closed independent ones? As the city grows, as we know that it does, and so it grows to the south and to the east, west, wherever, have there been any situations where you've closed a private store to install a government store?
Mr. Lussier: No. There has not.
Mr. Graydon: There hasn't been. Excuse me, Mr. Chairperson. You're going to have to be faster.
Mr. Chairperson: Thank you. I'm trying my best.
Mr. Graydon: So, then, are there any private stores that operate within the city limits today?
Mr. Lussier: There are not.
Mr. Graydon: So, with the expansion of the city, say, into the St. Norbert area and whatever, there has not been any expansion of your stores into that area.
Mr. Lussier: No.
Mr. Graydon: Maybe going to the country stores, are they supplied at the same rate or cost rate as the public-owned stores in the city?
Mr. Lussier: No, they are supplied at a discount from the retail. So, overall, it averages about a 12 percent discount. They get a flat rate per year of $3,000, and they get a 10.5 percent discount on everything except beer, on which they get a 14 percent discount. So they're below what we supply it at to our stores.
Mr. Graydon: Could you explain, then, for me to better understand the process of, say, a case of whiskey in a public store versus a private store in Fisher Branch?
Mr. Lussier: Yes. According to the liquor act, let's start from there, the price that is sold in Fisher Branch or in Churchill or in Winnipeg of a product is the same, by legislation. So there's no movement there. So, if a bottle of whiskey is $20 in our stores, then it would be supplied to the agency store at a 10.5-percent discount. It would be delivered free of charge to the agency store as well, anywhere in the province, one free delivery a week. We would also give that store 30-day terms to pay us.
Mr. Graydon: I just need to better understand this. Then there is a 10 percent, basically that's what the retailer in the country, that's his mark-up or that's his profit, is 10.5 percent? Do I understand that right?
Mr. Lussier: Yes, but overall, you have to consider the other factors and the other factors are there is a higher discount rate on beer and there is a flat-rate discount given to all of them of $3,000. So, on average, if you look at the total commission or total discount paid to agencies, the liquor vendors, last year it amounts to 12.03 percent discount.
Mr. Graydon: Do all the rural stores handle beer?
Mr. Lussier: Rural stores or agency stores?
Mr. Graydon: The privately owned agencies or privately owned stores in the country, liquor stores.
Mr. Lussier: Yes, they do. They don't handle domestic beer. The hotels handle domestic beer, but they do handle, they can handle imported beer that is supplied from our distribution centre and we give them a 14 percent discount on that. If there is no hotel within the trade area then we will give them a limited agreement to sell domestic beer as well. Then they must start operating or providing the same services that a hotel provides, which is cold beer, and they must take back empties.
Mr. Graydon: Do you find that there are many of these stores that do that type of business?
Mr. Lussier: Yes. I'm assuming that you mean sell domestic beer. I believe there are approximately 40 out of the 170 that we have an agreement with to do that. If a hotel opens in the town, again, then that agreement terminates. That's part of the agreement.
Mr. Graydon: On another avenue, for the rural, privately owned establishments, if there is an add-on, perhaps you can explain to my committee what an add-on is.
Mr. Lussier: An add-on could be anything from a free miniature of a product on a bottle to playing cards, to utility tools, key chains. It's a value-add basically, something that says, okay, you get extra value if you buy this product in order to switch from the product you were going to buy.
Mr. Graydon: Where is this add-on done? Is that done in your wholesale or is that done by the company that's supplying the product, or where does that add-on take place?
Mr. Lussier: It can be either. We don't do it in our own distribution centre. It is normally done at the supplier location. So it is done in Montréal or wherever the supply is coming from. It comes in the case already. In some cases, agents will go around and apply value-adds at the retail level but that's not as normal as it coming directly from a supplier.
Mr. Graydon: When these add-ons become available, and I suggest that they'll probably be sporadic add-ons probably, at this type of a season that we're entering today, how are they distributed throughout the province or throughout your number of stores?
Mr. Lussier: In some cases, in our larger stores, we would pre-order them so we would have a standing order to get some of them. In the cases of smaller stores, agency stores, it would just be open season, whatever. If the order comes in and the value-adds are available then they'll be shipped wherever they go. That results in some of our stores not getting them, some of the agencies getting them or some not getting them. It's a mixed bag, but the agency stores also have the ability to go into our stores and purchase product from any of our stores at their discount. So they can go to the nearest store and get that product if they so desire.
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Mr. Graydon: So I understand they don't have to purchase from your distribution centre at all. They could go to your nearest store and buy?
Mr. Lussier: Yes, that's correct.
Mr. Graydon: Is that for any of their product or just the add-on products?
Mr. Lussier: That's for any of their product. Now, they would be foolhardy in most cases to do that because we're providing 30-day terms–well, we provide them 30-day terms regardless out of the stores as well, but they are getting free delivery from us. So, in most cases, they would order directly from our distribution centre.
Mr. Graydon: Is there a limit to the size that they have to order to qualify for these?
Mr. Lussier: No, not in terms of–well, they'd have to order a case; I mean we don't repack. We have a list of products that we don't take out of the cases and sell on an individual bottle basis. Most of the products that are value-added are high-volume products, so they would be minimum-case order; so a 12-bottle order.
Mr. Graydon: I need to understand–if I understood you right before, you said that you could pre-order these add-ons. So do I understand that you know ahead of time that these are going to be made available to your distribution centre?
Mr. Lussier: Yes, you do. They're normally in limited quantities so the whole order may not be value-adds. It's an expensive proposition for suppliers; they pay for it all. So there may be limits on the quantities of those products available.
Mr. Graydon: So then you make that available or you make that notice available to your rural or to your privately owned facilities? You let them know ahead of time as well?
Mr. Lussier: Yes.
Mr. Graydon: Then obviously, if I understood your presentation properly, you can order on-line 24/7. You must have a date then when these are going to be available. I would suggest that morning that everybody has an order in.
Mr. Lussier: Yes, that can be correct, and so some get and some don't.
Mr. Graydon: Does that cause any problems with some of the people that have put in orders or it doesn't really make a lot of difference?
Mr. Lussier: Normally, it doesn't make a lot of difference. If they're really keen on getting it, they go to another store and get it.
Mr. Graydon: On the privately owned stores, is there any restriction on floor space that they need to provide for the product?
Mr. Lussier: Yes, there is. As part of our agreements, we stipulate, based on their sales, how many products they must carry and their in-stock levels; that's part of their franchise agreement.
Mr. Graydon: Are there different levels of stores in this system?
Mr. Lussier: Yes, there are four different levels of stores in this system: A through A, B, C, D. So the smallest stores would have the smallest variety and the smallest requirements in terms of inventory. The largest stores would have a substantial stock offer.
Mr. Graydon: I'm just trying to dwell a little bit on the rural area, I think, because I have some experience of being in those establishments. But, before you get the wrong idea, I don't drink but I buy it to watch other people make fools of themselves. I have no problem with that at all. I'm sure you wouldn't either with me buying, same as I buy supper sometimes.
However, in a lot of these establishments, they are in combination with a–we'll say a grocery store, a flower shop or some other establishment. It's not the main business; it's an auxiliary business. The staff that is there in rural Manitoba–you had talked about a training program–are they also in that same type of training program?
Mr. Lussier: Yes, they are, but it's on a voluntary basis. They do not have to do it as part of their agreement. So some take advantage of it and some don't. Certainly, the better operators, quite obviously, take advantage of the product training. So we on a regular basis have our product experts go out and do two- or three-hour training courses for them if they so desire, try to bring them as a group and train them.
Similarly, on social responsibility, that is done by the sales manager when they first are licensed.
Mr. Graydon: Many of these, because they are in conjunction with a grocery store or whatever, they hire staff, part-time staff, students, that type of thing in the community because that's sometimes the only source of employment for some of the students in the area. Is there an age limit for those that can sell the alcohol?
Mr. Lussier: Yes, they must be 18. They must be of legal drinking age to sell it.
Mr. Graydon: Can you tell me how you police that?
Mr. Lussier: Yes, we police it through our sales managers that go around. We have very good relations with the RCMP and with the town councils or with the R.M.s. So we maintain that contact on a regular basis. Normally, if something like that happens, we hear about it very, very quickly.
Mr. Graydon: So, if there's a restriction for someone under 18 to handle that bottle–however, if I pick that bottle up and set on a counter, she can still, or he, whoever it happens to be, can still punch it into the till and they don't touch the bottle.
Mr. Lussier: No, they cannot. They must be 18.
Mr. Graydon: There's been some restrictions put on the amount of liquor that can be bought in the city of Thompson, for example, and you referred to mickeys. What is a mickey?
Mr. Lussier: A mickey is a half-bottle, 375 millilitres.
Mr. Graydon: And there's a restriction to buy four of those and yet I could buy 12 750-millilitre bottles. Am I correct?
Mr. Lussier: Yes, that's correct. Now, that was developed in conjunction with the town council and the RCMP because the bootlegging was usually associated with mickeys. They're lighter. They're usually in plastic and they can be sold more easily. So we put in that restriction.
To give you a feeling of what happened in terms of our sales, in the first three months that we put that restriction in, sales dropped $180,000, and it didn't transfer into the larger sizes. We put restrictions on the larger sizes as well, but they're at a case level, and it hasn't transferred over. So it seems to have helped, at least at first blush.
Mr. Graydon: That's certainly an impressive amount of money. I don't know exactly what that would transfer into mickeys, but it sounds like it would be a considerable amount of mickeys. Being a businessman, if I couldn't get the product locally, why wouldn't I import the product that I needed as a bootlegger? Has that been happening in Thompson?
Mr. Lussier: Not to our knowledge, no. I think it's a function of remoteness. So it hasn't happened because we have, as well, been monitoring the vendors, but you're talking fairly substantial distances. So, so far it seems that it's doing what it's supposed to do.
Mr. Graydon: Well, Mr. Lussier, if it's doing what it's supposed do, I certainly applaud you because it lowers the consumption and probably cuts down on a lot of social problems that are there. So I certainly applaud the move. If, in fact, it's working, perhaps you could even limit the sale of alcohol in places like Brandon. I'm being facetious, mind you.
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An Honourable Member: I'm sure the member from Brandon would support that.
Mr. Graydon: I'm sure he will.
Perhaps we'll just switch horses here for just a little bit and then I'll turn it over to my member of Brandon so that he can defend himself without cutting into the Chair and myself.
The topic of violence in licensed establishments has been front and centre recently in the province. I'm not sure if you want to answer this, Mr. Lussier, or if the minister wants to, but there seems to have been, certainly, a rise in fatalities and violence in a lot of these establishments in the city. I'm wondering if we can get an update on the MLCC's review of these securities on these establishments. I'm not sure if that's your department or the minister's, but I guess, being MLCC, you probably have an opinion on it.
Mr. Selinger: Just briefly. MLCC has been asked by our government to look at measures to improve security. They've been asked to do it in a timely fashion. I'll ask the CEO to give an update on the process he's followed to do that.
Mr. Lussier: What we did was get together with the industry and the Winnipeg city police shortly after the incident. So we convened a meeting of the hotel association, restaurant association, city of Winnipeg police, an organization called MTEC, which does all the security training for us, and ourselves. That group met with a facilitator for two days in late November, and is scheduled to give us a report before Christmas with recommendations on how to improve security. Obviously, the report is not ready yet, but it will be timely.
Mr. Graydon: So then this inquiry took place at the end of November, you say?
Mr. Lussier: Yes.
Mr. Graydon: You expect a report probably before Christmas? In your hands.
Mr. Lussier: Yes, I do.
Mr. Graydon: So, then, Mr. Minister, we would expect a response from your office then early in January or an implementation of some changes to–and would that be regulatory changes?
Mr. Selinger: I haven't actually seen the recommendations yet to come back to me. Two things have happened. One, we know that some of the establishments have taken their own measures without being required to do it. In the case of the one where we had the most serious incident lately, they've actually shut down. They haven't been operating since the incident occurred. I guess it's their way of making sure no more incidents occur until they figure out how to operate that place better.
When the organization, MLCC, gets back to me with their report, then we will certainly make an announcement, but the corporation, itself, can make its own announcements with respect to arrangements it makes in terms of licensing with the establishments that they license. But I would get a report, and, in all likelihood, I would ask the corporation to put out its own information on that.
Mr. Graydon: So then let me better understand this then. You will make the recommendations, you'll put out a report and then you'll deal with whatever comes out of that after. But you'll be making that report public, that's my understanding.
Mr. Lussier: No, we'll make the report available to the minister to see what he wants to do with it.
Mr. Selinger: We'll likely work out an arrangement where it's jointly released so everybody knows what the score is. I can assure you there'll be a public response to the incidents and with the new measures that are being recommended to us.
Mr. Graydon: Well, thank you, Mr. Minister. Now I'll turn it over to my colleague. I know that he's anxious to ask a few questions.
Mr. Borotsik: You're making some assumptions; I don't know if that's fair or not. The critic had indicated that he had bought us dinner prior to this. He never did buy us any drinks and he never has ever bought us any drinks. So I think, maybe, that's one area that he has to be taken to task for.
First of all, Mr. Lussier, congratulations. It's a record profitability this year, fiscal year 2007, $207,944,000. This is as good as the corporation has ever done. I assume, correct me if I wrong, are you on the same kind of a profitability for fiscal year 2008? Are you achieving your goals at this point in time?
Mr. Lussier: Yes, we are.
Mr. Borotsik: Are you meeting all of your projections? Are they above projections? Do you anticipate that you will be above the $207 million this coming fiscal year?
Mr. Lussier: Yes. Our budget is in at $212 million, and we're exceeding the budget at this point.
Mr. Borotsik: I'm sure the government's quite happy with that, so they can go and spend more of your money, Mr. Lussier. They should congratulate you.
An Honourable Member: It's our money.
Mr. Borotsik: Our money.
I've noticed on the, and I can make comparables, obviously, from 2006 to 2007, you had a 7 percent increase in gross sales from 2006-2007, which was about 7.1 percent. Your general administrative expenses went up almost identical. They went up 7.2 percent from 2006 to 2007. They went up from $58 million to $53 million. I assume, and I've gone over some of the expenses under the general administration, quite a number of them are fixed costs. Is that a normal increase, 7.2 percent of general administration?
Mr. Lussier: Yes. Our largest cost is, quite honestly, salaries and benefits. As our volumes grow, so does our staffing. We use an activity-based scheduling model in our stores. So, as volumes increase, your staffing increases in order to handle that volume.
Mr. Borotsik: Actually, that just segues perfectly into the next question. Your salaries, benefits and pension costs comparables went up 10 percent, 9.6 percent, from $30 million to $33.8 million. You've answered a portion of that, being that your staffing levels increase according to volume.
How many staff do you currently have with MLC comparisons last year 2006 to 2007?
Mr. Lussier: I have to consult my colleague. I know what we're at now, but I'm not sure what we were at that time, because you want it in full-time equivalence, probably.
Mr. Borotsik: You just told me that your staff increases according to volume, so, obviously, if your volume was increasing on that basis, then I assume your staff is. So, if I could have the numbers, that would give me the indications to what your staffing numbers are.
Mr. Selinger: Are you working off a particular page that we can reference as a group?
Mr. Borotsik: Oh. It's just on the financial side. It's page 24 of the financial statement. It's the general administrative expenses, No. 5.
An Honourable Member: Which year?
Mr. Borotsik: That's 2007. I'm sorry. I'm not going back to 2004. That's a whole different issue. I fought that argument too and lost. But, anyway–
Mr. Selinger: Twenty-seven, did you say?
Mr. Borotsik: Page No. 24.
Mr. Selinger: Twenty-four. Thank you.
Mr. Borotsik: It's under 5. Heading 5, general administrative expenses, salaries, benefits and pension costs are $33,824,000. Again, as Mr. Lussier has indicated, staffing costs, 10 percent increase is fairly substantial, but you have to give me the comparables in employees. That would be–
Mr. Chairperson: Mr. Lussier.
Mr. Lussier: Yes. We don't have the numbers with us, but the staffing changes in stores accounted for almost $900,000 in that increase. Then there were contract increases under our collective agreement, which were another 6, almost $700,000.
Mr. Selinger: I just want to clarify, perhaps just to follow up on your point. When you say staffing increases in stores, is that because you opened new stores?
Mr. Lussier: Yes. That's partially it, and higher volumes in existing stores. That's correct.
Mr. Borotsik: I appreciate the numbers you gave me, Mr. Lussier, but I wonder if you could provide me with the increase in staffing from–not now. Now, don't get excited, everybody. No. Don't go. We've got lots of time to do this. If you could, at some point in time, in the not too distant future just jot down what the employee, the FTEs were for 2006 year-end to FTE's for 2007 year-end, and then I can get some comparisons. I do have on record now that you've got some, was it 900,000 for new employees?
Mr. Lussier: Yes. Staffing changes and stores.
Mr. Borotsik: Thank you.
I also noticed that you're travelling a lot more. The travel went up 21 percent. I don't know if that's a surcharge on gasoline, but you went from 269,000 to 325,000 for travel over your administrative expenses. Now is that CEO travel, or is that travel for trying to purchase new products and goods?
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An Honourable Member: It's abroad.
Mr. Lussier: It's abroad. Yes. A very small portion of it is abroad. Most of it is retail travel for Aboriginal training. So we did Aboriginal training for all of our employees in that year. So we have to bring our employees in or go out to them, and the bulk of that is around that program.
Mr. Borotsik: I do assume you do travel to some of your other suppliers, though, and I know that you bring in some Australian wine and you do bring in some European wine. I do assume that some of your salespeople do travel to those areas.
Mr. Lussier: Yes, they do. Absolutely.
Mr. Borotsik: I assume that that travel cost is included in this $325,000.
Mr. Lussier: Yes, it is.
Mr. Borotsik: Any other areas in which travel costs could be caught in these financials or would this be the total travel cost?
Mr. Lussier: This is the total travel cost.
Mr. Borotsik: I'm just going through my papers. The government owes you money. The provincial government owes you some $41 million as a receivable, a loan receivable, if I can find it. A long-term loan receivable, Province of Manitoba, and it says, seven and eight, which is your pension fund and your severance fund and things of that nature.
Does that mean that you give it to the government and you hope that they pay you back at some point in time?
Mr. Lussier: Yes, that was an unfunded pension liability built up over time. It has since changed and we are now funding that liability, but that's the outstanding liability left.
Mr. Borotsik: The unfunded liability was shown at the same amount in 2006 and 2007. Are you telling me that in the fiscal year 2008 that that will be cleared off?
Mr. Lussier: No, it will not be. No.
Mr. Borotsik: So the unfunded liability will continue to be shown on your books at $45 million for how long, or is the provincial government prepared to cover off that unfunded liability?
Mr. Selinger: The short answer is the liability is going to be funded over time.
Mr. Borotsik: Is there going to be a reduction in that unfunded liability on a payback schedule or is it just going to sit there in perpetuity?
Mr. Lussier: We've been working with the Department of Finance on that and so far haven't come to a resolution.
Mr. Borotsik: Okay, the unfunded liability, as it shows on this statement, is the unfunded liability of the Province. It's a long-term loan receivable that's owed to your corporation from the Province, if I understand this correctly, and you're saying that the Province is not prepared to give you enough money to cover off that unfunded liability in your pension fund. Is that what I am hearing right now?
Mr. Lussier: I wouldn't say they're not prepared to. We're at least in discussions with them to start a repayment schedule on it.
Mr. Borotsik: Well, Mr. Lussier, you just gave them a record $207 million in the last fiscal year. You just told me that that's going to increase at the very least to $212 million in the next fiscal year. I would suspect that you're in a fairly reasonable negotiating position and suggest even that some of those monies could be retained by the corporation to offset this unfunded liability. Has that been suggested to the Minister of Finance (Mr. Selinger)?
Mr. Lussier: I believe it just was.
Mr. Borotsik: I understand that the Province is somewhat reluctant to give your money back, but I would hope that you have better luck in the future. I will look at the 2008 statement to see if there is any reduction to that.
I can go forward. There are a couple of things in the statement, and I do want to talk about wine. I'll "wine" a bit then I want to talk about one other area and get on with the business.
Your occasional permits. We have a permit person here, I think. The occasional permits issued have dropped actually and it's been dropping since 2003. Is that because people are having less parties in Manitoba or do we have less people to have parties?
Mr. Lussier: We definitely don't have less people to have parties because the population actually is going up. We're almost at 1.2 million.
An Honourable Member: 1.174.
Mr. Lussier: One eight four, actually.
An Honourable Member: Seven four.
Mr. Lussier: Okay, whatever. I'll see you and raise you.
An Honourable Member: We prefer the higher number.
An Honourable Member: I'm sure you do.
Mr. Borotsik: Without being facetious, the permits have been dropping every year since 2003. Is there some reason for that?
Mr. Lussier: I believe it's just a cultural change, to some degree. That, you know, the baby boomers are through, so you don't have–and the echo boomers are going through, so you don't have as many wedding socials, which is the biggest part of that. So that's starting to decline.
Also, licensees have become more attuned to that marketplace and have shown some flexibility in terms of their pricing and been able to convince people that it should be run under their licence rather than under an occasional permit. From a liability point of view, that's a very good position for them to take. You have trained bartenders. You have people that have taken the It's Good Business course. So, with more people being concerned about social responsibility, I think that's reflected partially in that number.
Mr. Borotsik: I accept your answer, but is it also possible that your requirements are becoming more stringent and perhaps not being as flexible in allowing these permits to be issued?
Mr. Lussier: Well, certainly, we inspect the same number that we have for the last number of years. We inspect about 25 percent of permits, and we do it as well on a risk-based approach, so, if you're the Hells Angels society, you're probably going to be inspected. If you're–well I was going to say if you're Rick Borotsik's social you might also be inspected but–[interjection]
Mr. Borotsik: Volumes, it's interesting. You showed your slide about the volumes of litres as well as in dollars product sale. I'm particularly interested in the wine because wine has increased quite dramatically not only in this marketplace but other marketplaces. I've noticed that your dollar volume, let's just deal with dollar volume as opposed to litres, in wine you've gone from 67 million in 2003 but looking at the last two fiscal years you've gone from 87 million to 97 million. It's been a $10-million increase in dollars. Now, that increase of $10 million is with private wine stores, as well. You've got private competition. You've got private wine stores, eight of them in the city of Winnipeg right now, yet you've had an increase in your wine sales of $10 million, almost 15 percent increase in wine, dollar, after those two years.
Would you not say that you're working fairly well together, the private wine stores and the publicly operated wine stores?
Mr. Lussier: That dollar includes our sales to them, actually. So we sell to them at a wholesale price. So it's in that number, yes.
Mr. Borotsik: Actually, that was my next question, to see if that was inclusive of the private wine stores. So, in effect, and, Mr. Lussier, I don't think there's any question about the fact that you make money on selling wholesale to the private wine stores as well. As a matter of fact, that's reflected in the margins that you've shown in your total cost of sales in your net profits. So, really, the private wine stores, have they been that great an assistance in increasing the volume of wine in the province of Manitoba?
Ms. Carmen Neufeld (Chair, Board of Commissioners, Manitoba Liquor Control Commission): What we have found historically is that, when the economy is really rolling and people are doing well and they have more disposable income, they tend to make less homemade product and homemade wine is one of the major alcohol items that they would make on their own. So what we've seen is, as the economy is growing, so is the decrease in product made at home, thus the increase in our stores.
Mr. Borotsik: Do you have any statistics to prove that home wine kits have been dropping? I, quite frankly, have visited a couple of wine kit stores and they seem to be doing extremely well in this economy. So you're saying they aren't doing well and people are making less wine at home and that's why these volumes have gone up?
Ms. Neufeld: I'm just saying that's one of the contributors to the factor of the increase.
Mr. Borotsik: Do you have any statistics to show that they've–
Ms. Neufeld: Sorry, I don't have them here with me, but we can provide that information for you.
Mr. Borotsik: You can provide me with information on the private kit stores and how their volumes have dropped?
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Ms. Neufeld: We can't provide you with their personal corporate information, but we do know throughout the industry that there are some of the kit stores that have found a decrease in their volume. That's confidential information, being business owners, that they would not provide to us.
Mr. Borotsik: But you do have industry statistics to show that those volumes have dropped.
Ms. Neufeld: We do have some information we'd be able to share with you.
Mr. Borotsik: I'd really appreciate it if you would, with the other information that Mr. Lussier's going to put together. I would really appreciate that.
However, let's go back to the wine. We've got a $10-million increase year over year in the wine, and we do have private wine stores that are operating right now in the city of Winnipeg. Your wine volumes certainly haven't been impacted by it. In the industry, in the retail industry, when I was part of it, we felt that some of these uses were compatible, that, in fact, when you have individuals and a consumer that has other options, other choices, they have a tendency of developing a market.
Would you say, Mr. Lussier, that the private wine stores haven't necessarily impacted your wine sales in the Liquor Commission itself or in the public sector?
Mr. Lussier: No, I don't think they have. I mean, when you think of it–you've been in business–if you add eight outlets, you're going to add sales for sure, just on the basis of there are more outlets, there's more convenience, there's more variety, because they're bringing in different products than we are.
So are they helping propel the wine market forward? The answer is yes.
Mr. Borotsik: That's the answer I was looking for. Thank you. If that's the case in the city of Winnipeg, do you feel that having a private wine store in the city of Brandon may well assist your sales in that community with respect to wine, where you get more consumers who are more in tune with the wine, that that would in itself expand the market?
Mr. Lussier: I think Minister Selinger answered that question.
Mr. Borotsik: No, the minister said that there's a policy, that there's a moratorium. What I'm asking you–and we've seen the experience in the city of Winnipeg. Your volumes haven't dropped, quite the opposite. The wine volume has increased quite dramatically in your publicly held stores.
We have private competition here. As I said, when you get more consumer understanding of the product, then there's usually more sales that are on the uptake.
Policy aside, do you think, with your experience right now in the city of Winnipeg, that a privately operated wine store in the city of Brandon would impact your wine sales in the publicly operated stores in the city of Brandon?
Mr. Lussier: I think if we added another liquor store in Brandon, it would have exactly the same impact as what you're suggesting.
Mr. Borotsik: I didn't ask for a liquor store. Well, that's not true. There may be room in the marketplace for another liquor store. There may well be room in the north end. We've got some fairly viable retail down in that area. But, aside from that, not putting in a third liquor store–we have two–again, I'll ask the question as succinctly as I can.
Do you think a private wine store in the city of Brandon would impact negatively on wine sales in your public operation or would it impact on a positive basis your public operation?
Mr. Lussier: Would there be one more bottle of wine sold in Brandon if there was another outlet in Brandon? Yes, there would be. Absolutely.
Mr. Borotsik: Yeah, and, by the way, I can't dispute that. I'm sure there would be, but that's not quite what I asked. I said do you think there would be a negative impact on the public store?
Mr. Lussier: Yes, there could be.
Mr. Borotsik: Was there a negative impact on the Winnipeg stores when the private stores came in?
Mr. Lussier: Yes, there was some decline.
Mr. Borotsik: I don't see any declines from 2003 to 2007, quite the opposite. I see quite dramatic changes. We went from $67 million to $97 million in dollar sales, and now you say there was a negative impact. I don't understand that.
Mr. Selinger: I'd just like to make a comment. I think if you're going to do an apples-to-apples comparison, you have to have a comparable time frame. From 2003 to 2007, the market has changed, as is illustrated in the presentation. There has been an increasing taste and development of the palate of the consumers in Manitoba towards more wine, as I understand it.
The overall market has increased in all products, we've seen. Some are more dependent on weather, but in the case of the wine options, you can see that with the amount of money they spend on training staff in the stores, there has been a cultivation of a broader palate for these kinds of products, and the most rapid growth has been in the area of wine.
I mean, I know where you're going. You're asking about the interaction between private wine outlets and public wine outlets, positive or negative.
The only thing I'm trying to say is, that to be fair to our administration, we have to do it–it's hard to do it in a controlled way in the community where you can't really control the variables over time. Over time we've seen a change in market tastes and development and consumption patterns. That is also influenced by the prosperity people are experiencing, disposable income as well as taste changes. So there are a number of factors that are going on here. I don't think you can isolate it to those two public-private options.
Mr. Borotsik: The point I was trying to get to is I don't that there's been a substantial negative impact, but quite the opposite. I think because there has been more variety available to consumers in Manitoba that in fact wine has achieved a much higher volume than what it probably would have if it was just simply in the public venue.
I think the private operators have added another dimension, have certainly brought in a different marketplace, have brought in some different varieties that you would not have brought in as a public operator simply because of cost and simply because of space. I'm saying that it's done a fairly reasonable job for you. You said yourself that a lot of this $10 million here is wholesale prices to those same private vendors.
So all I'm saying is the wine industry is doing very well. Yes, there are other variables, there's economy. However, if you want to look at those variables, the other area is beer, spirits, coolers and ciders have not grown quite as dramatically even though the economy is very strong. Even though we've got more money in the hands of the consumers, those areas have not grown as dramatically as the wine has. So I'm saying, just as an old retailer, it's always good to have competition. It's always good to have more varieties out there so people can purchase the product. That's all I'm saying.
Then I also said was, do you think there would be a negative impact in the city of Brandon should there be a private wine store? At which time I was told that we're going to get a third liquor store. So I do thank you for that. I don't know when you're going to make the announcement, but I'm waiting patiently for it.
I also would like to say that you had indicated that when the original request for proposals went out and I think it was back in '94 or '95, there was only one uptake on the RFPs. I was led to believe that there was more than simply one individual who was interested in putting in a private wine store in the city of Brandon. So I'm confused. I thought there was more than one that came in the RFP.
Mr. Lussier: No, there was only the one.
Mr. Borotsik: Okay. I'll see if I can find out who the others were that worked at the RFP.
Obviously, it's not your job. I know, Don, it's not your job, and I'm not about to say it is. I will have to work with the minister on this to see if there could be another operation outside of the city of Winnipeg. It seems the city of Brandon has the ability to accommodate not only another private wine store but other facilities like casinos. We've seen that in reports. It's a huge market; it's a market that could certainly be developed. We'll work with the government and see if they at some point in time are going to change their policy. I know it's not your job to make that policy change.
I would like to talk and maybe shift gears just a tiny bit here. I'll pass it on. You said you had a thousand suppliers, if memory serves me correct on the slide. There are a thousand suppliers that you work with. Just for my own purposes–and I don't understand your business that well; I wish I did–how do you choose your suppliers? Do you put RFPs out? Do you negotiate price? Is it a set price? We do know there are premium brands and premium distillers, and I assume that you have to buy that just simply because it's what the marketplace wants.
But just in 45 seconds or less, can you tell me how you identify your suppliers?
Mr. Lussier: I thought I did fast on the first part, but 45 seconds is cutting it a little thin.
Basically, we have what we call a listing process so suppliers come to us and we also go to suppliers. So we would go, as you said, to foreign countries and visit suppliers and taste product and negotiate prices with them. More commonly, they come to us. We're a big buyer, so salesmen, agents of those suppliers would come to us, make submissions. We have basic forms that they fill out telling us the price, the standard stuff that you would do. The process then is we take a look at the trends in our marketplace and see if we need that, you know, do we need another Merlot from Chile? Is the price better than anything we've got? Is the quality better? That's how we make a decision. Then it comes into the marketplace, and if it isn't successful over a year period, we take it off and replace it with something else.
* (19:30)
Mr. Borotsik: Is that the same procedure with spirits as well?
Mr. Lussier: Yes, although spirits is a more mature part of the market, we don't have the same variety, choice that you would have in wine. Wine, there may be 200,000 wines in the world; spirits, you know, rum, rye, gin, vodka, how many ways do you do it? A lot of it is around packaging and new flavours, but process is basically the same.
Mr. Borotsik: Did you ever do any business with Maple Leaf distilleries?
Mr. Lussier: Yes, we did.
Mr. Borotsik: Did they work in the same fashion? Did they come to you or was there a list? What product did they provide you?
Mr. Lussier: Yes, they came to us. They were an in-province operator. They came to us with the various listings like Maple Leaf liqueur. Process is virtually the same, although you would look at–because they're local, you would want to support them as much as possible. So we might cut them a little more slack than someone else, put it on the market, see if it works. If it doesn't work, just like anything else, it's gone.
Mr. Borotsik: What products did they provide you? I'm not familiar with it. I know it's not in existence any longer, but what products did they provide?
Mr. Lussier: Probably their most memorable one was Maple Leaf liqueur, which they sold virtually across Canada. They had maple cream as well, but that was where they were going. Then, of course, they sold some vodka, rum, that kind of stuff that they bought from other suppliers.
Mr. Borotsik: You indicated that for a local supplier, local distiller, I guess is what it was, you would have a different set of rules, if you will, that there would be some sort of flexibility. So does that mean that their cost could be higher to you than what you could achieve from other suppliers?
Mr. Lussier: No, there are no mark-up breaks whatsoever. There used to be those kinds of situations across Canada with all the liquor boards supplying mark-up breaks to in-province suppliers. That doesn't exist anymore. That went away.
Mr. Borotsik: But all you had to achieve was a certain margin on the product. If the product to you was 10 bucks, then your–I see your margins in here, they go up to about 50. So you're about 400 percent, but that's good business, by the way. But your margins are your margins, so if they were providing a product at $15 instead of a product that you could achieve at $10, would you not go to the product for $10, or would you give them a break because they were a local Manitoba company?
Mr. Lussier: No, the price would go through on a percentage basis. So, if it started at $15 and we added 150 percent, it would end up higher than the product that you're talking about the product at $10 which is going to end up at a lower price. Ultimately, it would fail.
Mr. Borotsik: Were there any–I don't assume that there–well, maybe I don't; I can't assume anything. With Maple Leaf Distillers, did the MLCC, did they have any receivables that perhaps weren't collected or if there were any dollars, any money that you lost on their failure?
Mr. Lussier: I'm going to have to check this, but let's put it in perspective. They supply us with the product. We don't pay them until 30 days after. So they're in the receivable position from us.
Mr. Borotsik: I understand business well. I know that they're in the receivable position, but was there, for any other–anything else in place that there was money that was owed by any stretch of the imagination from Maple Leaf?
Mr. Lussier: I'm advised that they did owe us a small amount of money for some of the marketing programs that they had purchased from us.
Mr. Borotsik: Is there any chance that–and again, don't spend a lot time at it–but is there any chance we could find out what that amount of money, that small amount of marketing money might be?
Mr. Lussier: Evidently, thank you.
Mr. Borotsik: Spirited Energy. It's, it was–I'm not so sure it's still alive or not–did MLCC, were they involved in the Spirited Energy campaign at all?
Mr. Lussier: We were involved only as a client, so we got involved when the program was available. So we purchased banners for our stores and displayed them inside our stores. That cost us about $10,000. We purchased or we put the logo on our plastic bags, which cost us about $6,000, and we bought some T‑shirts for our employees, which cost us $2,000.
Mr. Borotsik: It's nice that you had those numbers at your fingertip. I would suspect that you'd have to ask your financial people, but you're prepared. That's very nice, Mr. Lussier, thank you very much.
Those were the total costs of the Spirited Energy campaign in MLCC?
Mr. Lussier: Yes.
Mr. Borotsik: Last question, then I'll think up more. Actually, two questions. The first one is, you said you were the fifth largest purchaser of alcoholic products in Canada. I was trying to go through it: Ontario, Québec, British Columbia would be the three, Alberta wouldn't be because they're all independents in Alberta. [interjection] They're the fourth largest?
Floor Comment: Yes.
Mr. Borotsik: Could you explain that to me, how Alberta could be the fourth largest?
Mr. Lussier: Alberta is still the importer of record as a government. So they take possession of the product for a millisecond and then transfer it. So, on record, it's the Alberta government.
Mr. Borotsik: So the Alberta government, in fact, does exactly what you do to the small little rural agencies, then. They actually take it for the millisecond. They have their mark-up and margins on it, then they give it to the private sector. So, in Alberta, what would their–in liquor sales–what would their annual net profits be just through wholesaling alcohol?
Mr. Lussier: I don't know what those numbers are, to tell you the truth.
Mr. Borotsik: I'm going to find those out so the next time we have this committee meeting I'll have that information for you. But it is interesting, and I assume–you're a bright guy and you'd know different jurisdictions. The Alberta government still makes money off of alcohol. They still buy. They still wholesale. They still make their margins, not the 150 or 400 percent that you do on some of your alcohol, but certainly they do generate substantial dollars just through the wholesale process in Alberta. Is that correct? But we don't know how much that would be?
Mr. Lussier: Yes, that's correct.
Mr. Borotsik: Okay, just another question. Ms. Neufeld, how long have you been the chair?
Ms. Neufeld: I've been the chair since February of 2000.
Mr. Borotsik: Five years.
Ms. Neufeld: Seven.
Mr. Borotsik: Oh, 2000. Sorry. Okay, so my math is off. I was worried about financials, not about that. Seven years. Did you have any business background before you came into the chair?
Ms. Neufeld: I certainly do. I've owned my own business for 17 years. I'm a meeting planner. I hire and staff about 15 full and part-time employees. I've won two Entrepreneur of the Year awards in Manitoba. I've also won a Business Excellence Award from the Manitoba Chamber of Commerce last year.
Mr. Borotsik: Congratulations. That's private sector. That's with competition, I assume. There are other people with meeting planners in the industry, I assume, and you've done very, very well in the private sector. Do you find being in a monopoly a lot easier to deal with than in the private sector?
Ms. Neufeld: We're not in a monopoly because of the vendor system that we have, the private wine stores and the beer distributors.
Mr. Borotsik: Wouldn't it be nice if we could expand that private sector and have other wine operations within the community? I know, sorry, that's a policy decision. Thank you, Ms. Neufeld. I thank you for that.
Mr. Chairperson: You're concluded, Mr. Borotsik?
Mr. Borotsik: Possibly. Yes, thank you. I pass it on to my colleagues, thank you.
Mr. Chairperson: Mrs. Taillieu, Mr. Derkach had his hand up prior to you. I'm not sure which one wants to–
Mr. Derkach: I defer to Mrs. Taillieu.
Mrs. Mavis Taillieu (Morris): Thank you, Mr. Chair. I just wanted to carry on with one question in regard to the Spirited Energy campaign. Was there any direction or suggestion made by any government officials or any government employees that you should participate in the Spirited Energy campaign and that you should buy these banners and should buy these T-shirts and should display the logos on the bags?
Mr. Lussier: No, there was not.
Mrs. Taillieu: Can you indicate who made the decision then? Was that a board decision?
Mr. Lussier: No, that was administrative. That was our decision to get involved in the program.
Mrs. Taillieu: Thank you. In terms of the board, and I think we just talked about Ms. Neufeld's being the CEO for the last seven years.
An Honourable Member: No. No. Excuse me.
An Honourable Member: Chair of the Board.
Mrs. Taillieu: Chair. Sorry, corrected. Chair of the–for the last seven years.
* (19:40)
The board members, are board members appointed, and for how long?
Mr. Selinger: The government appoints the board members for varying lengths. They can renew them if they wish, usually three years at a crack, and then they have the option of renewing.
Mrs. Taillieu: Thank you for that answer. Are these all renewed at a certain time, or are they staggered in renewals so that there is some continuity on the board, or how does that work?
Mr. Selinger: I have to check the specifics, but often there's a staggering process to have a variety of people come on and, at the same time, maintain continuity.
Mrs. Taillieu: For the licensing board, this is a board that appears to meet not that frequently. The licensing board, they're also appointed by the Lieutenant-Governor-in-Council. Are these people paid a per diem or are they a full-time board?
Mr. Selinger: They're appointed. They meet about once a month, and they're paid on a per diem structure.
Mrs. Taillieu: Thank you. Are these people employees of the liquor commission, or are they employees of the government, or are they people at large, or how are they picked?
Mr. Selinger: I just want to make a correction. Apparently, the licensing board members get an annual indemnity of about $4,000.
Your last question was?
Mrs. Taillieu: Sorry. My next question was: Are these people, people at large, or are they employees of the government, or are they employees of the Liquor Control Commission, or are they picked, are they suggested to people to be on this board, or how are they picked?
Mr. Selinger: They're citizens from the community that we believe would have an interest and a capacity to offer a contribution in that kind of function.
Mrs. Taillieu: Is there a mix of urban and rural people on this board or–?
Mr. Selinger: Yes.
Mrs. Taillieu: What would be the ratio of the mix, urban to rural?
Mr. Selinger: I have to check for that. I don't know if we have the list here. I'll see if I can get you the information before we leave tonight.
Mrs. Taillieu: Are there any private liquor vendors or liquor store owners on the board?
Mr. Selinger: I don't believe so.
Mrs. Taillieu: I noticed that in your presentation, which was very good by the way, there was a mention of Operation Red Nose, or maybe you just talked about that. Is that something that you contribute to or support, or how does that work?
Mr. Lussier: Yes. We are a sponsor of Operation Red Nose, and our employees volunteer as well.
Floor Comment: As do board members.
Mr. Lussier: As do board members, yes.
Mrs. Taillieu: In terms of your advertising, do you hire an advertising company or firm to do your advertising?
Mr. Lussier: Yes, we do.
Mrs. Taillieu: Could you tell me who that advertising firm is?
Mr. Lussier: That advertising firm is ChangeMakers.
An Honourable Member: From a social responsibility.
Mr. Lussier: From a social responsibility point of view, yes.
Mrs. Taillieu: Yes. Can you tell me who the principals are in ChangeMakers?
Mr. Lussier: Jim Kingdon, Michael, and I do not know who else.
Mrs. Taillieu: You also talked about doing surveys and polling. Can you indicate what company you used to do surveys and polls?
Mr. Lussier: We've used a variety of companies. We put it out to tender on each one. So we've used Ipsos Reid; we've used Criterion; we've used Viewpoints, a number of others. It depends on the response to the RFP.
Mrs. Taillieu: Can you indicate who you are currently using, if that one was tendered? Who received the contract?
Mr. Lussier: We don't have a survey in the field currently. We provided that information at the last meeting like this so it should be in Hansard. I just don't have it with me.
Mrs. Taillieu: Thank you. Can you tell me the last time that you used Viewpoints?
Mr. Lussier: I believe it was two years ago.
Mrs. Taillieu: Who have you used since then?
Mr. Lussier: I haven't had one in the field sinc