The impact of the Government of Nunavut’s Iqaluit beer and wine store’s non-profit business model may end up costing the community, if the effect on the local legion is any indication.
Royal Canadian Legion 168 is a not-for-profit, and houses two establishments – a large main room and a smaller lounge.
“Donations given out to community organizations in 2017 totaled $456,997. Year-to-date donations in 2018 total only $27,770 after the first quarter. A significant reduction in community support,” said president Chris Groves.
All revenues minus operation expenses are donated back to the community through school programs, elders programs, youth programs, cultural activities, funeral expenses, medical travel assistance, air cadets and community sports groups, to name a few.
“In a nutshell sales have declined about 35 per cent,” said Groves.
The legion has also had to reduce staff.
The Storehouse Bar and Grill, a for-profit business, is in a similar position.
“We felt the impact, as we knew we would,” said manager Rod Ayres. “We were doing incredibly well.”
Ayres wouldn’t divulge the financial effect on the business, but he did make the point it contributes to the community via food programs at schools, the food bank, and Embrace Life Council.
“So we’ve got to change our thinking,” he said.
The Storehouse, which has the benefit of built-in clientele due to a very busy Frobisher Inn, added special nights, such as free pool, a DJ, ladies night, happy hour and food specials.
“It’s improving, people are coming back,” said Ayres.
The legion is taking the same approach, but Groves doesn’t sound as optimistic.
“We are trying to be as creative as possible in order to entice our customers back with new entertainment, new food items on our menu, additional happy hour prices throughout the week,” said Groves. “Sales continue to waver but it is too early to establish a predictable trend, but it has been in a steady decline since the beer and wine store opened.”
Both men point to non-competitive prices at the beer and wine store as the main culprit.
“There is no way for a non-profit organization to remain financially viable when we are purchasing product from the warehouse and being charged the same retail price as the consumer who walks in off the street,” said Groves.
Ayres is of the same mind.
“Maybe the pricing should be a bit higher and maybe some of that money should be going towards rehabilitation. Based on the social situation here I would think they’d want to be using some of that money, because it has been so successful, going towards helping out the community. So maybe charging a little bit more,” he said.
“It would still be well below what we’re charging. It would bring people out even a little bit more.”
In opening the beer and wine store, the government took great pains to ensure those who were against it were accommodated. That means the store is considered a harm reduction initiative, meant to curb bootlegging and the high consumption of spirits.
All legal sales of liquor in the territory go through the Nunavut Liquor Commission, including what Iqaluit establishments purchase and except what is permitted to come in outside the commission. The beer and wine store only increases its price in retail sales to the extent it recovers costs, such as buying, shipping, and warehousing product, and other costs.
Customers of the store pay the same price as the establishments, confirmed Department of Finance assistant deputy minister Dan Carlson, and for the first time, licencees need to compete with beer and wine products that are available locally, just like the rest of Canada.
“Iqaluit customers have more choice. There are still a lot of reasons to go out,” he said.
The GN knew the beer and wine store would impact the community.
“Part of the pilot is to understand these impacts from different perspectives.”
Carlson says the licencees in a non-competitive market were able to mark up their prices by two or three times.
“It’s not uncommon to go out and purchase a beer for $8 a can, or $7. I think what the store has done is highlighted to residents just how much of a mark-up licencees charged. All of a sudden everyone understands that they can also buy a beer for $2, then that competition is now allowing consumers to make a choice,” said Carlson.
“What we tried to do is come up with a pricing regime that makes sense.”
What recourse do the local businesses have? Carlson said decisions are made by elected officials and, in this case, the Minister of Finance is the authority.
“We will continue to pursue the matter with the Government of Nunavut, while at the same time our legion executive and management are also looking at other means to offset the decline in sales, and we will continue to monitor the situation very closely,” said Groves.
“I don’t think that anyone was prepared for such a dramatic downturn in sales. Obviously, we knew there would be an impact but not to the scale that has happened.”
The Iqaluit beer and wine store is a three-year pilot project.