A Profitable Brew

Privatizing the Saskatchewan Liquor and Gaming Authority’s (SLGA) liquor retailing has once again been put on the political agenda. In June 2014, the Premier, Brad Wall, publicly declared that “[t]he old public store-only option is not sitting [well] with Saskatchewan people,” and that “people are really interested in new stores being private or all stores being private.” Wall went on to say that he would consider campaigning on the issue in the next provincial election. If successful, this would provide the government the legal authority required by the Crown Corporation Protection Act to sell the Crown assets.

The Premier’s musings about selling the SLGA’s retail stores to private industry is certainly not idle talk. Since coming to power in the 2007 election, Wall’s government has sold off several government enterprises and generally divested itself from various parts of the provincial economy. This approach has been applied to the SLGA as well. In 2008, shortly after the Saskatchewan Party formed government, two privately-owned wine stores were allowed to open in Regina and Saskatoon. In 2012, the SLGA was forbidden from opening new retail stores. Licenses were then awarded to major food retailers to open three liquor stores that could carry a full selection of products comparable to an SLGA store. In April 2014, the SLGA closed four rural stores, which has left the Crown Corporation with the smallest network of stores in at least two decades.

Turning liquor retailing over to private industry clearly fits the ideological predilections of the current government. The Saskatchewan Party is committed to the idea that economic decisions should be made by private industry, not public institutions. There would appear to be little room for publicly-owned enterprises in the government’s vision for economic growth in the province. But would such a move be financially wise for the province? The notion that private retailers will be more effective at producing revenue for the government and that the public will be financially better off in the long run is hardly a foregone conclusion. With over $600 million worth of liquor sold in the province every year and upwards of $250 million in public revenue generated annually, the decision is too important to be made on the basis of ideology.

The following report assesses the financial merits of the proposal for a full or partial privatization of the province’s publicly-owned liquor retail business. To do so, key financial metrics of Saskatchewan’s liquor operations are compared to those of other western provinces where liquor retailing is done by private industry (Alberta), both private and public entities (British Columbia), and a government agency (Manitoba). According to the Premier, part of the promise of selling off the Crown’s liquor retail stores in Saskatchewan are the “one-time proceeds” that would be reaped and made available for investment elsewhere. The report therefore attempts to calculate the likely return the province would receive from selling its liquor retail related assets. The provincial government’s current strategy of restricting the SLGA’s expansion while supporting an expansion of privately-owned stores is also financially analyzed as it represents a sharp divergence from the Crown Corporation’s previous business strategy. Preceding these assessments is a thorough description of the current operations and finances of the SLGA’s liquor distribution business.