What do Retailers Do with the Liquor They Don't Sell?

Managing unsold spirits is a multifaceted challenge for retailers, particularly in regions where alcohol sales are strictly regulated. In Ontario, Canada, for example, the Liquor Control Board of Ontario (LCBO) operates under a government-controlled environment. This unique context poses significant challenges for retailers in terms of inventory management and the proper disposition of unsold liquors.

Government-Controlled Environment and Inventory Management

The LCBO operates as a monopoly, and its inventory control system is highly sophisticated. This system tracks what is selling well and what is not. Unwanted or unsold liquors are grouped together and eventually discontinued from sale. During this period, customers can request these bottles to be sent prepaid to their local outlet for pickup. This indicates that the LCBO has a mechanism in place to cycle through and distribute unavailable products more efficiently.

Return to Distributors and Credit

In most cases, unsold liquor is returned to the distributor for credit. Retailers often prefer not to handle this process because they are compensated on a commission basis. This makes the return process a less attractive option for them. Similarly, non-code beer is typically taken by the distributor. Liquor that is not intended for direct sale but can be sold at a discount is usually considered as long as it is above the purchasing price. However, this is done primarily when only a few bottles are left, to maximize profit.

Legal Requirements and Discounted Sales

Typically, by law, retailers in Ontario must return unsold spirits to the distributor. Regardless of their expiration date, as liquor does not "go bad" over time, it can still be sold at a discounted price to clear shelf space for better-selling items. In some states, minimum prices for spirits may be enforced to prevent excessive discounting. This regulation ensures that retailers maintain a reasonable profit margin, avoiding the potential for illegal price wars.

Strategies for Retailers

Retailers have several strategies to manage unsold spirits effectively. These include:

Grouping and Discontinuation: Collecting unwanted liquors and discontinuing them from sale until they can be reused in other promotions or returned to the distributor. Discounted Sales: Offering significant discounts (often around 50%) to quickly clear shelf space for better-selling items. Donation and Charitable Purposes: In some cases, retailers may choose to donate unsold liquor to charitable organizations, particularly those focused on community events or religious ceremonies.

Quotation and Lore

It is often said, as quoted from the Rubaiyat of Omar Khayyam:

I wonder often what the Vintners buy One half so precious as the stuff they sell.

This poetic sentiment encapsulates the thought process retailers might have regarding the value of unsold spirits and their potential uses beyond the usual retail channel.

Conclusion

Managing unsold spirits requires a combination of legal adherence, efficient inventory management, and strategic use of marketing techniques. Retailers in controlled environments like Ontario must navigate these challenges to ensure profitability and compliance. By understanding the nuances of the system, retailers can optimize their operations and maximize their bottom line.