Auditor general accuses NSLC of not doing enough to promote local products

Nova Scotia's auditor general is unimpressed with the Nova Scotia Liquor Corporation's efforts to promote local beer, wine, cider and sprit makers.

In a report released Tuesday, Michael Pickup said although promoting local products is part of the Crown corporation's mandate, "management and the board failed to adequately plan for NSLC's role in the local industry."

"An appropriate strategic plan would align with NSLC's mandate and include clear goals and objectives for the local industry, including action plans with measurable targets to determine success," said the report.

The auditor general noted the corporation has a goal in its five-year strategic plan "to provide an engaged and collaborative business environment for local manufacturers." But Pickup concluded the corporation's five strategies to attain that goal "were not specific enough to clearly outline what is trying to be achieved and to hold NSLC accountable."

"The only performance measure for the local industry included in the plan is growth in local product sales through NSLC's retail network. This measure is reported annually. However, there is no specific target," the report said.

The number of breweries and other alcohol makers in Nova Scotia has more than doubled over the last five years, from 64 to 141, according to the report. Sales of local alcohol products through the NSLC have risen from $16.5 million in 2015 to $45.3 million in 2019.

Pickup's first recommendation is the NSLC "should clarify its role in supporting the local beverage alcohol industry and establish long-term goals and objectives that are specific and measurable."

The auditor general's office also took aim at a controversial markup charged to local producers, recommending the corporation review the five per cent charge for sales completed outside of the NSLC retail network. The liquor corporation has collected roughly $1.5 million from the charge over the last two years.

The auditor general's office is also recommending a review and evaluation of an agreement on beer trade between the Maritime provinces. That 2007 deal between Nova Scotia and New Brunswick is also applied to Prince Edward Island brewers. 

According to auditors, it gives breweries for those provinces an advantage over Nova Scotia beer makers.

"As identified by local manufacturers, the agreement is currently applied in Nova Scotia in a manner that is more advantageous to breweries from New Brunswick and Prince Edward Island than breweries located in Nova Scotia," noted the report.

Checking for minors

Pickup is also critical of how the NSLC handled another of its core mandates — ensuring minors are not able to purchase alcohol in the province.

Auditors reviewed the corporation's compliance program to see if those selling alcohol, in corporate stores, agency outlets or privately-owned operations, were adhering to the NSLC's identification policy of asking for proof of age for anyone who looks under 30 years old.

Although corporate stores fared well, with a 12 per cent fail rate, agency stores failed the test 19 per cent of the time, privately-owned business did not ask 37 per cent of the time and breweries failed the test 63 per cent of the time.

The results were from internal compliance checks called "mystery shops," conducted during a two-year period from April 1, 2017, to March 31, 2019.

Although the corporation acted on the results for its own stores, the audit found the "NSLC did not review the data received for private wine and spirit stores or breweries, and the results were not even communicated back to the retailers involved."

The report also noted although many of the 141 local manufacturers sell their own beverage alcohol products, most are not part of this program.

Auditors recommend the corporation review the program.

The NSLC has agreed with all 11 recommendations put forward by the auditor general's office.

Another question

The auditor general's office also noted a decision that could have saved the corporation $4.5 million in 2014 if it had been acted upon.

After an "extensive" review of rural NSLC-owned stores, the corporation's board of directors approved a plan to turn them over to private owners who would run them as agency stores.

"NSLC management told us businesses with an agency store generally see increased cash flow and net income from alcohol sales, as well as from attracting additional customers for the store's other offerings," Pickup noted in his report. "This may be the difference of keeping a service, such as a grocery store, available in a community."

According to the auditor general, the plan went to the McNeil government for approval but the corporation never received the green light to proceed.

Pickup told CBC News he didn't know what to make of what happened, but that his office would be delving deeper into the matter as part of a report it plans to issue later.