The company aiming to become B.C.'s main liquor warehouser and distributor was among 20 that vied for the Alberta contract when it was put out to tender in December 1993.
Coopers and Lybrand independently evaluated bidders before Exel Logistics (then Tibbett and Britten Group) and two others were shortlisted. TBG got the nod to take over the Alberta Liquor Control Board's St. Albert warehouse in a June 1994 move overshadowed by the earlier sale of the province's 202 government liquor stores.
In British Columbia, the 197-store retail chain of the province's Liquor Distribution Branch (LDB) is not for sale, but its warehouse in East Vancouver, which Exel estimates is worth $40 million, is to be sold separately from the April 30 logistics tender.
A five-year contract extension for Exel-owned Connect Logistics in 2007 contemplated moving 261,000 cases per average week and 13.8 million cases annually in Alberta. Between 2001 and 2008, Exel's revenue from its Alberta contract tripled to $66 million. The company's before-tax profit of $10 million in 2008 increased to $14 million in 2009.
Exel has an established B.C. presence in the Aldergrove-based EV Logistics joint venture with Versacold that has served Overwaitea Food Group since 2001. In February 2011, Exel closed Summit Logistics in Burnaby after it lost the Canada Safeway contract. Exel is appealing the $283,000 fine levied in February 2012 by the U.S. Occupational Safety and Health Administration fines for failing to report 42 serious injuries over four years at a Pennsylvania Hershey chocolate warehouse. In March, the European Commission found affiliated companies were part of a vast, five-year price fixing conspiracy, but they avoided fines for being first to reveal the cartel.
The top executive of Exel parent Deutsche Post resigned in 2008 and admitted to a German court he evaded nearly 1 million Euros in personal taxes. Klaus Zumwinkel received a two-year suspended sentence in 2009.
As of March 2006, there were 21,554 liquor products listed in Alberta, with nearly 13,000 available at any one time. There were only 3,325 products before privatization. Connect suffered the perfect storm of a lack of warehouse space and labour shortage that created an order backlog in fall 2006. The result was a $1.7 million pre-tax loss just a year after a $5.2 million profit.
From 2001 to 2006, facility costs rose 300%, transport costs were up 70% and employee costs jumped almost 90%. Hourly labour jumped $16 an hour to $30.
PricewaterhouseCoopers reviewed the Alberta liquor supply chain in 2007 but recommended keeping Connect. Canada's National Brewers and the Beverage Alcohol Importers Council of Alberta (BAIC) both opposed the single-entity model. BAIC wanted an industry watchdog "to audit every link of the liquor supply chain."
The Alberta Gaming and Liquor Commission (AGLC) reviewed the arrangement again in 2009 but opted to stay with Connect. In 2010-11, AGLC netted $683.5 million on $2.03 billion in sales. A decade earlier, it netted $468.4 million on $1.27 billion.
B.C. LDB reported an $890 million net income on sales of $2.82 billion in 2011.
Exel operated Connect B.C. during the mid-1990s under the LDB agent restocking program, but in 2002 beer agents were allowed to store their own products. Connect B.C. lost clients to ContainerWorld and eventually closed. •
