HALIFAX, WEDNESDAY, OCTOBER 22, 2003
STANDING COMMITTEE ON PUBLIC ACCOUNTS
8:00 A.M.
CHAIRMAN
Mr. Graham Steele
VICE-CHAIRMAN
Mr. James DeWolfe
MR. CHAIRMAN: I will call this meeting of the Public Accounts Committee to order. I have been advised that there is an accident on the Angus L. Macdonald Bridge this morning, so I expect that anybody coming over from the Dartmouth side may be a little late.
I would like to start, if I might, by introducing myself. I am Graham Steele, the MLA for Halifax Fairview and the Chairman of the Public Accounts Committee. I would like to ask the members of the committee who are here if they could introduce themselves, starting with Mr. Epstein.
[The committee members introduced themselves.]
MR. CHAIRMAN: Over on the other side we have our witnesses this morning. I would like to introduce, in the middle, Mr. Peter McCreath, the Chairman of the Board of the Nova Scotia Liquor Corporation. Mr. McCreath, if you would be so kind as to introduce our other guests today.
MR. PETER MCCREATH: Yes, indeed, and I should apologize in advance, Mr. Chairman. I have a hearing impairment and I find the acoustics a bit challenging in here. Better to state that up front so you will know, so if people would speak up for me, it would be very helpful. I would like to introduce Ken Barbet, who is the Acting President of the Nova Scotia Liquor Corporation, in fact celebrating one month in that office, I might add, and Greg Beaulieu, who is the Corporate Secretary of the Nova Scotia Liquor Corporation and I am sure he is familiar to many of you for his past policy roles with the government.
1
MR. CHAIRMAN: I would also like to make note of the presence in the Chamber today of Mr. Roy Salmon, the Auditor General of Nova Scotia, Mr. Alan Horgan from the Auditor General's Office, and Mr. Gordon Hebb from the Office of the Legislative Counsel.
Without further ado, I would now like to invite you, Mr. McCreath, to make an opening statement if you wish. I would ask that you aim for 10 to 12 minutes. At 15 minutes I will turn the floor over to the members. You have the floor, Mr. McCreath.
MR. MCCREATH: Mr. Chairman, I certainly hope I won't be trespassing upon your time. I was delighted to see the press are here so early this morning. Certainly times have changed since I was a reporter.
Mr. Chairman, members of the committee, allow me to first congratulate you all on either your election or re-election to the Legislative Assembly and to your appointment to this very important committee. I have already introduced Ken and Greg, so I will skip that part. I want to begin by thanking you for the opportunity to appear and to share with you an update on the activities of the Nova Scotia Liquor Corporation. I welcome this opportunity. In fact, it is the first I've had to appear before the Public Accounts Committee. No doubt I may have future occasions.
As you know, when the current provincial government took office in 1999, it undertook a comprehensive review of agencies, boards and commissions. This examination was undertaken by a committee of deputy ministers which commissioned an external study conducted by PricewaterhouseCoopers to examine organizational options for the Nova Scotia Liquor Commission, as it then was. The study made no actual recommendations but rather did an evaluation of the returns to government of six different options. I believe that study is in your briefing book. At least they sent us a copy of the briefing book so I assume members have had that and have had an opportunity to look at it if they were interested. The conclusion of the review committee, that is to say the government's review committee, not PricewaterhouseCoopers, was that there was no material difference between an Alberta model approach, which is designed in that report, where the retail network is replaced with private stores, and the existing NSLC corporate model. The agency store approach was seen as valuable but an incremental way to improve the NSLC corporate model.
The government then decided that the retail delivery of beverage alcohol should continue to be provided by NSLC-owned and operated stores, supplemented in relatively remote areas by a limited number of agency stores. At the same time, the government decided that the Nova Scotia Liquor Commission should be transformed into a Crown Corporation. This was indeed done by legislation in the year 2001.
The corporation's present board, the first consisting of outside directors, was appointed on December 18, 2001, and held its first meeting during late January 2002. In accordance with the law, our board comprises seven voting members appointed by Order in
Council for specified terms, together with the President of the NSLC and the deputy minister so assigned by the government as non-voting ex-officio members.
The Act creating the NSLC, as the Nova Scotia Liquor Corporation, mandated four specific responsibilities for the corporation: one, the promotion of social objectives regarding responsible drinking; two, promotion of industrial and economic objectives regarding the beverage alcohol industry in Nova Scotia; three, the attainment of suitable financial revenue to government; and four, the attainment of acceptable levels of customer service.
During the first few months following our appointment, we sought to learn about the new corporation, our responsibilities as boards of directors in this new environment, and to meet with key stakeholders of the NSLC, including our employee representatives, our union locals, supplier groups and key customer segments such as the licensees, who make up approximately 20 per cent of our customer base. Notwithstanding the practices and governance of the past, it was one of our objectives to make the NSLC a supplier, customer and employee-friendly organization while at the same time meeting the expectations of the shareholder represented by the minister so assigned by the Premier under the Act. We were also determined that the organization should undertake, on a continuing basis, appropriate objective research with respect to marketing and product selection, employee satisfaction and customer satisfaction.
Prior to the appointment of the current board, the government, in keeping with its fair hiring policy, had undertaken an external executive search to identify and ultimately appoint the first president and CEO of the new corporation. This process led to the appointment of Andy Barker to this role, effective May 1, 2002. During the course of the last year and a half, considerable progress has been made. The NSLC has become a significantly more supplier, customer and employee-friendly organization. For the first time, we are now having quarterly research undertaken with respect to marketing, employee satisfaction and customer satisfaction.
At the request of the government, we have inaugurated a test project of four private wine specialty stores and we have done an external review of the agency store program. I should indicate that agency stores were established just prior to our coming into our role. That study, incidentally, yielded very positive results. I believe it is also in your book, is it not? Yes. Overall, our goal has been to fulfill a mandate given us by the government of transforming the NSLC into a modern, cost-effective, customer-focused retail organization.
Over the course of the last year, we are generally pleased with the progress that has been made in this regard. Nevertheless, we believe that further changes are needed if we are to fully achieve our goal of becoming Canada's number one retailer of beverage alcohol products, within the context set out by the government following the PWC report, that is of a Crown Corporation delivering service primarily through NSLC stores and supplemented, where appropriate, through commercial partnerships.
The NSLC remains an organization in transition. As the board became more familiar with the organization, it discovered that an introspective culture had developed within the old NSLC over several decades. Thus, one of the board's principal goals has been to open up and modernize the NSLC as a Crown Corporation. This necessarily means change in the way things are done, not fundamental, structural change such as wide-scale privatization, rather the modernization and updating of processes and practices, the implementation of efficiencies to ensure that we optimize our return to the people of Nova Scotia through the provincial government while at the same time achieving the highest possible standard of customer service and choice.
To effectively lead a corporation through change requires synergy between a board and senior staff, in particular the president. There must be a common approach to the processes of governance of the organization. There must be shared values and visions. In recent months, the board came to conclude that such a synergic relationship did not exist between the board and the president. I mention this because I understand a recent change in the president's office is one of the reasons you have asked me to appear before you today.
I can tell you that representatives of the board met with the former president during the past few months and discussed our working relationship. In September we concluded that it was appropriate that we make change in the presidency. An organization cannot move forward unless the board and the CEO are in sync. We concluded that the board and the president were not in sync and had different visions as to the processes and visions of how the NSLC could move forward toward the attainment of our government-mandated goals. Thus, the board made the decision to exercise Clause 5 of Mr. Barker's contract to end his role with the NSLC.
This decision is not and was not intended to reflect negatively on Mr. Barker. He is a personable, intelligent, accomplished business executive. Mr. Barker made a significant contribution to the NSLC during his time with us. His open and welcoming style made him popular with employees, suppliers and licensees alike. Nevertheless, it was our conclusion that the change was necessary in order for the corporation to continue the process of modernization, which we began a year and a half ago, and so we made the change. I expect that some of you may wish to question me further with respect to the details of this decision. I would remind you that what we are talking about here is both a business decision and a personnel matter. Thus, it's not one I can appropriately comment on in more detail. Similarly, I am sure you understand that it would be inappropriate for me to go into the details regarding confidential board discussions.
You are undoubtedly aware that this past June, following an internal investigation on behalf of the board, I referred a matter to the HRM police for investigation of allegations surrounding the awarding of a contract. The fact that this matter is still under investigation precludes my commenting more specifically about it. I am sure the committee would not wish me to prejudice this investigation; however, I do wish to advise you that in order to ensure
that such incidents do not recur, the board, through its audit committee, has commissioned an external forensic audit of financial, purchasing and related procedures of the NSLC. We anticipate receiving the results of that report within the next couple of months, and will, of course, make the findings public. But from the board's perspective, equally important is the fact that we believe this audit will provide valuable information that will assist us in ensuring that the NSLC continues to progress towards being not only an efficient, effective retail organization, but a state-of-the-art Crown Corporation as well.
Meanwhile, our immediate goal is to achieve the financial target established in our business plan for this year to assist the government's need to maximize revenues for the current fiscal year, as outlined in the Minister of Finance's recent statement, while at the same time maintaining a high standard of customer service and fulfilling our other responsibilities under the Act.
Mr. Chairman, we will continue to move forward our process of modernization. A major network plan is now in the development stages. It will see the development of a broader number of service points, including a limited number of flagship stores that in themselves will become shopping destinations. Our strategy also includes identifying more store locations that will improve convenience and access to customers, improve product selection, provide more effective merchandising, and customer service through effective design and modernization, while reducing our rents and minimizing our capital commitments through partnering with major retailers using the store-in-store concept where it makes business sense. In sum, we will be building new and improved stores as opportunities present themselves.
I believe that the NSLC already benefits from informed customer-friendly in-store staff; nevertheless, we will continue our emphasis on employee training to assist our employees to continue to improve their product knowledge, customer service capability and sensitivity. Certainly, we are in the midst of a major upgrade and redevelopment of our Bayers Lake warehouse that will enable us to provide greater capacity and more efficient service, especially to our licensee customers.
Mr. Chairman, members of the committee, the last year and a half has been a period of change and transition for the NSLC and its employees. This period of transition will continue for a while yet. However, I am confident that we have initiated changes that will make the NSLC a Crown Corporation and a retail organization of which all Nova Scotians, including our key stakeholders, employees, customers, suppliers and our shareholders, the people of Nova Scotia through the minister, can be truly proud. Now with the assistance of my colleagues, I would be pleased to attempt to answer any questions you may have. Thank you.
MR. CHAIRMAN: Thank you very much, Mr. McCreath. The first 20 minutes belong to the NDP caucus, starting at 8:14 a.m.
Mr. Epstein.
MR. HOWARD EPSTEIN: Mr. McCreath, an interesting overview of where it is you are now. Of course, you correctly identified one of the chief reasons that we were interested, as a committee, in listening to what it is that the current state of play is at the corporation. It, of course, is a very puzzling thing to find the chief executive officer, the president of the organization, leaving so soon after having been recruited as a result of an extensive external search, which you identified.
[8:15 a.m.]
The timing seems to have been, as I follow it, that in December 2001, the newly-structured corporation, with its board of directors, was put in place; the executive search took place; there was a hiring in May 2002; then in September 2003, suddenly there's a termination of the employment of the president. Now, this is a very peculiar thing, and I think it does call for some explanation. So far you've told us that there doesn't seem to have been any wrongdoing and the press release at the time, put out by the corporation, simply says there was a different vision for the corporation on the part of the president and the board of directors.
Today, what you've told us is that there has to be synergy between the CEO and a board, there has to be a good working relationship, I think you told us, and that the board and its president found themselves not in sync. I have to say that, in the end, I don't find myself any more illuminated as to the reason Nova Scotia taxpayers were called upon to pay $90,000 to a president of an organization who had been carefully recruited after an external search. Although you suggested that this was a personnel matter and that it had to do with the private deliberations of the board, I have to tell you, in front of this committee, such considerations don't apply. I think you're in the hands of the good sense of the committee. There may be a point at which we might stop asking questions, but for the moment I'm asking is there anything else you would care to tell us, before I ask more detailed questions?
MR. MCCREATH: Certainly, thank you for your question. Obviously you've focused on what I read in the press, was one of the principal interests that this committee might wish to raise. With respect to the process you outlined, I should mention that the search was in fact inaugurated well before our board came in. We came in towards the end of it. Notwithstanding, that's just to clarify the record. As I said before, there was a fundamental change that was made in the Nova Scotia Liquor Commission to Corporation. The organization operated basically in isolation, in my perspective, with the general manager reporting directly to government.
The creation of a Crown Corporation changed the governance structure of the organization in a very fundamental way, in that the responsibility and the accountability was transferred from somewhere between the general manager and the minister to the board. The
assignment was that the organization would run as a corporation, with the additional implications of being a Crown Corporation. Therefore, that meant that the board had the ultimate responsibility for the running of the corporation. As I indicated in my general remarks, what we found over time, in the working relationship that we had with the president, that the role of the board was not kind of recognized in the same context by the president as it was by the board, in our understanding, and indeed as specified . . .
MR. EPSTEIN: I'm not saying you didn't have the legal authority to buy out Mr. Barker's contract. Clearly, you had the legal authority to buy out his contract. There must have been a clause in it that, as you said, you triggered and the amount was either negotiated or was predetermined, according to the contract.
MR. MCCREATH: It was specified in the contract.
MR. EPSTEIN: That's fine. You have the legal authority to do that. What I think we really need to know, though, is what are, in essence, public dollars, because, as you pointed out, the sole shareholder of this corporation is the Government of Nova Scotia, which operates only with taxpayers' dollars. What we have to understand is whether taxpayers' dollars are ultimately being used wisely. Really, there's a policy point that has to be looked at here as well, because although there's some beating around the bush, I can only assume that what it comes down to, if there was no wrongdoing, is a difference of vision as to where it is that the corporation ought to be going. That's certainly what was said publicly at the time.
If that's the case, can you explain to us what exactly the difference in vision was? What was it that the board believed should be the future of the corporation, if indeed it was future-oriented that was the issue, and what is it that Mr. Barker as president thought? What were the differences? I think we have to understand that, so that we can understand why it was worth $90,000 to change leaders.
MR. MCCREATH: Absolutely. There are two observations I would make and comment. One, as I mentioned in my remarks, the differences that we had had not to do with where we wanted to take the corporation, it had more to do . . .
MR. EPSTEIN: It had nothing to do with future plans?
MR. MCCREATH: It had to do with our perception of how we could move the corporation forward to achieve the goals that were set for us in the Act, and that we had as a board, in terms of maximizing customer service, maximizing profitability to the government and so forth. So it was more a matter of governance process. The difference of perspective that we shared had to do with the governance process, not with where we actually wanted to end up.
MR. EPSTEIN: Could you give us an example when you get the chance?
MR. MCCREATH: When we, as a board, as we do on an ongoing basis, as is the responsibility and the accountability of the board, we look at how are we going to get to where we go, how do we maximize the return. It was our conclusion that we would not do that and while we recognize the implication of a very significant financial payout that would be necessary, you only make that decision when you conclude in the long run the net return will be greater. That's the basis upon which we made that decision.
MR. EPSTEIN: I hear two elements - I hear you saying that there might have been a difference between the board and the president about how to achieve the long-term goal and now you're also suggesting that he might have had a different view of what the ultimate financial returns part might be. So, are there two points of difference?
MR. MCCREATH: No, that's not what I said I don't believe. What I said was that we believed - first of all, our goal unequivocally is to achieve the four goals set out in the mandate. That's our accountability as a board to do that.
MR. EPSTEIN: Let's go through those, I want to go through those. Are you telling us that promoting the social objective of responsible drinking was something that either Mr. Barker didn't agree with or that you had a different view on?
MR. MCCREATH: I didn't say that.
MR. EPSTEIN: So, I take it that means no. Then, what about the question of customer service? Was customer service a point of difference?
MR. MCCREATH: No.
MR. EPSTEIN: All right. What about the economic objectives of developing the liquor industry in Nova Scotia, was that problematic between the board and Mr. Barker?
MR. MCCREATH: Not specifically.
MR. EPSTEIN: What about the financial returns to government?
MR. MCCREATH: No, that was widely recognized. That was mutually recognized. As I said before, the issue was not the goal of where we wanted to get to, but the process of how decisions would be made within the corporation and how we would move forward . . .
MR. EPSTEIN: Okay, we really need an example.
MR. MCCREATH: . . . and how the board would be able to fulfill its responsibilities, its fiduciary responsibilities as well as its trustee responsibilities. As you know, in a corporation, directors have a fiduciary responsibility to the corporation to see that the corporation achieves the objectives for which it has been established. It also has a trusteeship responsibility to the public, who are the ultimate shareholders. So it's kind of a mixed responsibility that you have as the board of a Crown Corporation.
MR. EPSTEIN: We understand all of that. I'm still looking for an example.
MR. MCCREATH: Well, this is very difficult. Over a period of several months of dialogue back and forth, one on one, in small groups, with the president, we found that we were from time to time, frequently we just didn't see things the same way that we should proceed forward and therefore, we made that decision.
MR. EPSTEIN: Did it come down to a personality clash? Are you telling me it's that or is it something substantive that actually has to do with specific business plans of the organization?
MR. MCCREATH: As I've said before, it really came down to the fact that we had a different vision of how the corporation should be run. We had the view that the responsibility, as specified in the Act, resided with the board to be the ultimate decision makers.
The NSLC, for many years, when it was a commission, operated without a board. They had commissioners, I'm not sure what the role of those commissioners was, but it clearly was not a role of being in charge of running the corporation. That represented a fundamental change to the staff of the organization when the board of directors came in and it was critically important that people on staff understood the nature of the change that had been made structurally by turning it from a commission - which was kind of like an agency or a junior department of government - into a Crown Corporation mandated to run like a private sector business, but with a government shareholder. (Interruption)
Let me finish. What we found over time was that we couldn't bring Mr. Barker to share that understanding of the responsibility of the board. As a result of which, we found that if we were going to effect the transformation that had to be effected, because that's why the government made the change and our responsibility was to fulfill what the government set out for us in the Act, that's where we came to, in a sense, the conclusion that we were not going to get there without making a change in the leadership of the staff.
MR. EPSTEIN: Mr. McCreath, you pointed out to us that the board identified what you called introspective culture in the organization as a whole. But, of course, your president, Mr. Barker, didn't come from that organization. He wasn't part of that introspective culture, he came from outside the organization and he came from the private sector.
MR. MCCREATH: That's correct.
MR. EPSTEIN: So, what was the problem?
MR. MCCREATH: Well, it's interesting, Mr. Epstein. When we came in, what we found was - one of the first things that we did when we were appointed as a board, one of the first things I did as chairman, I went out and met with stakeholder groups. I met with the ministers' advisory committee, I met with representatives of the brewing industry, I met with representatives of the wine industry, the spirits industry and so forth. I met with stakeholders and I went out and I met with licensees and everybody told me the same thing - this place is not user-friendly. It needs to be opened up. So that was the first priority that we as a board made, that we were going to send out a message that there was a new team in town and that the NSLC was going to be user-friendly.
It's in the same context that we made the decision that they had to start doing research. There was no research being done. You would ask questions like, how do you know what products should be listed? How do you know what marketing research is there? There wasn't any. How do you know how the customers feel? There wasn't any real customer satisfaction research being done. How do you know how the employees feel about things? What input do the employees have? That's one of the reasons that we started this process of opening up the organization.
To his credit, when Mr. Barker came in, he was very much of the same frame of mind with respect to making the organization, the NSLC, open and user-friendly to those key stakeholder groups. That process has continued. But, when it came to making internal changes, we found over time that instead of being a vehicle for internal change, Mr. Barker became, in a sense, a part of the old culture of being averse to change.
MR. EPSTEIN: Okay.
MR. MCCREATH: Okay? I mean, in theory, I could sit here and pull out little examples. But, I don't want to take stuff out of context. What we're dealing with here is a dialogue that took place over a period of months between Mr. Barker and the board that led us to the conclusion that we should go our separate ways. The most effective way to do that was to exercise Clause 5 of his agreement.
MR. EPSTEIN: Okay, I want to be as clear as I possibly can. First, I don't know Mr. Barker. I have no mandate on his behalf. I'm not trying to advance his personal interests and so far as I know, he has made no public statement about his dealings with the board and I don't think he has a claim to advance. I'm not trying to advance any kind of claim that he might have. The only interest we have is in understanding what the dynamics are at the corporation and how it is that it came to spend this amount of money and decide to make the change at the top, which of course is a matter of public concern because of the dollars
involved. Not only the dollars that were spent for severance, but if this has implications for the financial future of an important organization that is ultimately owned by the government. That's our concern.
I still find what we're being given somewhat amorphous so I'd like to try a couple of specifics. Let's start with what I think is unfortunately the most obvious, which is the question of the police investigation. I would like to ask you if the decision to part ways with the president had any relationship at all to the matter that you've referred to the police?
MR. MCCREATH: Absolutely and unequivocally not. The incident that gave rise to the investigation occurred before Mr. Barker joined the corporation. I want to say unequivocally that it's my experience that Mr. Barker is a very honourable man. In no way does that relate to him.
MR. EPSTEIN: That's fine. That was my understanding as well. I wanted to give you the opportunity to put that on record since the two occurred around the same time and so it seemed necessary in terms of coming to public attention. I wanted to make sure that this was put on the record.
The other though has to do with the question of the potential for what you called making the organization user-friendly and how that might relate to what were the declared plans of the Progressive Conservative Government to try to advance, in some measure, the privatization aspects of the corporation. So, to what extent does the difference of vision and this question of synergy have anything to do with the potential for future privatization, either through agency stores or through any other mechanism? Was that part of the difference of vision between the board and Mr. Barker?
[8:30 p.m.]
MR. MCCREATH: Absolutely not. Again - and I mentioned that in my opening statement - those kinds of decisions were not a factor. As you know, with any company, if one of your objectives is to maximize return to the shareholder, there are two ways you can do it: one, you can drive revenues up; and the other, you can control and contain expenses.
As I mentioned before, we found the NSLC, when we came into it, a tired organization. We found that there was a great deal of modernization that was necessary. For example, when I first went out there, in this day and age I was shocked to find there was no voice mailbox system and a very antiquated telephone system. The commuter systems didn't work effectively, our stores were not online, and that meant changing things. It was an organization that when you said, well, why do you do it that way, inevitably the answer was because that's the way we've always done it. So then if you wanted to say well then I think it's time to do it differently and move this great beast forward, that meant there had to be strong synergy, not only with the board and with the guy at the top of the staff in terms of,
you know, how quickly we should move forward in fixing those things and modernizing the organization.
As far as the issue of privatization that you mentioned, we are still operating under the guideline that was established by the government following the PricewaterhouseCoopers report. We see the NSLC as being an organization that delivers its service essentially and primarily through our own stores. We see some changes in those stores to make them more modern, to make them better, but we will basically be delivering our services through our stores, supplemented as was done a couple of years ago in a small number of instances where you have a remote area where we have these agency stores and they seem to have worked very successfully. I know Mr. Chataway can tell you there's a very successful one in his district, up in New Ross.
MR. EPSTEIN: In fact, I'm curious about the success of both the agency stores and of the private wine and speciality stores. Is there any formal study that has been done yet by the corporation of how these are all working out?
MR. MCCREATH: A study was done. We were requested in fact, about the time we came into office, by the minister of the day, Rodney MacDonald, to have an assessment done; it was done by Unisys. The report is indeed, I believe - is it in the package as well? If not, we can certainly make it available.
MR. EPSTEIN: I must have missed it, my apologies. Perhaps you could just provide . . .
MR. MCCREATH: Is it in the deck there, is it in that? Yes. If not, we certainly will make it available to the secretary, because that was done and, indeed, it indicated that it was a successful experiment from the point of view of all four mandates of the corporation. Now, with respect to the private wine speciality stores, as you know they are just very new; in fact the most recent one only opened about a month ago. I think the first one opened in April roughly? Yes. And my early indication, I've attended those stores a couple of times, you know, and had a look at them, I think that they're going to be a good thing. They seem to be successful, going concerns.
One of the principal advantages that they offer is that they have increased significantly the choice available to customers, because under the contract in which we established them they cannot carry product that is on our general list. They can carry product from our Port of Wines specialty list and they can carry anything else, so what it has done is probably increased by roughly 30 per cent the offerings in the choice available to the public. But that's still a test, and after it has had a reasonable opportunity to work its way through, I would expect that we would do a study similar to the one that we did with the agency stores to see whether it's a successful model for Nova Scotia.
MR. CHAIRMAN: Mr. Epstein, your time in this round has expired. Now I would like to turn the next 20 minutes, starting at 8:35 a.m., over to the Liberal caucus, and I recognize the Leader of the Liberal Party.
MR. DANIEL GRAHAM: Thank you for coming, gentlemen. I found the exchange with Mr. Epstein quite illuminating on a number of critical points that I think sets the foundation for some of the questions that we have. Just to complete some of that foundation - do I understand correctly that it cost in the range of about $109,000 to recruit a president and CEO, ultimately turning out to be Mr. Barker?
MR. MCCREATH: That's the number I have read in the press. I believe that's, generally speaking, reasonable.
MR. GRAHAM: And it cost $90,000 I understand, according to Clause 5 of his agreement, to ultimately provide him with a severance?
MR. MCCREATH: In actual fact, I think the number is more in the vicinity of $92,000.
MR. GRAHAM: And his salary over the 17-month period that he worked there would have been in total, counting all 17 months, about $200,000 worth of payout, given a $135,000 salary and 17 months?
MR. MCCREATH: I presume your numbers are correct, Mr. Graham.
MR. GRAHAM: Well, based on $135,000, the total cost of this, Mr. McCreath, is about $400,000 for 17 months worth of work and I think that, to a certain extent, reflects the interest in providing some questions to you as the chairman of the board and to the rest of the board in these circumstances. You have indicated that Mr. Barker was scrupulously selected, he was an accomplished business professional who made a significant contribution to the corporation and was popular with employees, and what I also understand is that, and please correct me if I'm inaccurate in the paraphrasing of this, while you didn't have a different vision of where you wanted to be at the end of the day, you did have a different vision of how you're going to get there internally?
MR. MCCREATH: That's fair.
MR. GRAHAM: That sort of sums up what your difference was?
MR. MCCREATH: It has to do with the governance structure and how the company would move forward from a governance perspective.
MR. GRAHAM: And the conflict was in large part a difference between what Mr. Barker felt and what the board felt?
MR. MCCREATH: It was a difference between the way we were able to come together and make decisions. Yes, it would be fair to say what you said.
MR. GRAHAM: So the board had one vision of how to get to its goal and Mr. Barker had a different vision?
MR. MCCREATH: Well, as I indicated earlier, you know, to achieve the objectives that are set forth for us, we have to both drive sales and contain costs. Containing costs involves making significant internal change in the corporation and it was in moving forward with those kinds of changes that I think the board and Mr. Barker had a difference of approach.
MR. GRAHAM: With respect to the issue of remuneration, was remuneration ever a concern with Mr. Barker, his remuneration package?
MR. MCCREATH: Not that I'm aware of.
MR. GRAHAM: And there were no disputes concerning that?
MR. MCCREATH: Correct.
MR. GRAHAM: Were there ever issues raised with respect to the remuneration of board members or people who were on the board with Mr. Barker?
MR. MCCREATH: No.
MR. GRAHAM: Has the remuneration package for board members changed over the last period of time while Mr. Barker has been around?
MR. MCCREATH: No.
MR. GRAHAM: So, for example, your remuneration has not changed?
MR. MCCREATH: That's correct.
MR. GRAHAM: And there's no anticipation of that happening in the next short while?
MR. MCCREATH: I would sure like to think so, but I don't necessarily expect so. I think at the present time, I'm probably paid at an hourly rate less than our casuals.
MR. GRAHAM: Yes. Reference was made to the . . .
MR. MCCREATH: I say that for the benefit of the government members, Mr. Graham, in hopes that they might convey that to the minister.
MR. GRAHAM: Has a request been made, Mr. McCreath, for an increase in remuneration?
MR. MCCREATH: First of all, I want to make it clear I'm happy to have you pursue that line of questioning, but it has nothing to do with Mr. Barker, I want to make that clear. When the government established the Nova Scotia Liquor Corporation, they obviously had to come up with a compensation system and, in doing that, they had to anticipate what would be involved in the job. I can't speak with objectivity about that, but I can tell you it's my personal opinion that there has been a heck of a lot more to it than certainly I thought there would be when I was invited to become chairman of an organization that would take perhaps a day or so a month. In fact, there's a lot more to it than that.
So, you know, in my totally objective view, I think that the office should probably have a higher stipend attached to it, but that's a decision for government and that's an issue that in due course I expect the government will, or at least I hope the government will, take a look at and I would trust and hope that when that time comes, that the Opposition Parties
will think it well worthwhile.
MR. GRAHAM: I'm sure we will take that under clear advisement. Mr. McCreath, I, too, am still a bit unclear about the difference in the process that you're talking about. Perhaps it might be helpful for us to have a sense of when it became clear to you or the board, or when you began discussing the issue of whether or not Mr. Barker should continue on as the president?
MR. MCCREATH: Well, I would say, probably around 10 months ago, we started talking about these issues with Mr. Barker. There were differences of perception of what the governance structure of the organization was or is. So it's been over an extensive period of time. I met with Mr. Barker a number of times and discussed these matters with him, explained the concerns that we had. So there was no one triggering incident. It was not a decision, let me assure you, that was lightly made. It was a decision that was made, and the reference has been made and, you have, indeed, to the cost implication of the decision. The decision to make the change, the cost implication of the decision is that $92,000 payout, give or take a few dollars, whatever the final number was; that's the cost implication.
Part of the process of making that decision is asking the question, what's going to be the financial impact down the road? If, in fact, the conclusion is that the financial impact down the road is that we're going to result in returning a greater dividend to the people, through the shareholder and the government, well, the financial consideration, if you take it out of that context and look at it, yes, it's a large sum of money. It's not a sum of money, I might say, that's out of line with severances that are awarded both in the private and in the public sector. Indeed in this very province, if you think back over the last few years to people who have departed the province, it's not out of line. But you make business decisions based on where you think you're going to go in the future. It was our conclusion that the financial return to the shareholder, the financial return to the people of Nova Scotia, in the medium and long term, would be significantly better by making this change than by not making this change. So we made that decision.
MR. GRAHAM: You had indicated that you were reluctant or you would find it challenging, perhaps, to provide specific examples of how there was this different vision of the process that needs to get you to the final result. I can appreciate that could be challenging, but is there any way of taking, perhaps, some of the more general points and giving us a clearer sense, through examples, of this? What would have been the discussion around - without the fine details around personalities - the board table concerning his continued employment and how it didn't fit with what the board was seeing as their vision in the process?
MR. MCCREATH: Mr. Graham, I think I've indicated to you, in a general way, what underlay the decision that we made. I'm sure that the committee would not wish me to publicly launder Mr. Barker's personnel file. I don't think that would be appropriate. I think the committee would agree with that. It certainly would be consistent with the guidelines and the principles set up in the FOIPOP process, which I think is a pretty good guideline to follow. As I say, I think I've given you an explanation as to the frame of mind that led us to make that decision. I really can't be much more specific. If I tried to find little nitpick things here and there, that would take out of context something that in fact happened in kind of a macro way, not in a micro way.
There was no one specific trigger. It was kind of an emerging relationship that we realized was not working to the best interests of the corporation. That's why we, exercising the fiduciary responsibility we have as a board of directors, came to the conclusion that it would be best to make a change, and that's what we did.
MR. GRAHAM: We would not want you to enter into a discussion about personalities in these circumstances, but I think that there are broader issues, presumably, than nitpicking, that provide even a more complete framework. I think that the explanation still appears to be somewhat vague. I'm just wondering if there is any way, without nitpicking, without referring to personalities, that you are able to give us a sense of how that implementation of the vision was different?
[8:45 a.m.]
MR. MCCREATH: As I indicated before, the NSLC is an organization in transition. We've made, I think, a very good start in opening up the organization. We see further changes that are necessary that will make the organization more effective and successful in both containing costs, while at the same time more effectively serving our customers. That's where we want to go. Moving forward with change is something that the board has identified as being something that we have to do. We found that we couldn't bring Mr. Barker to agree to move at the same level or rate - I guess rate would be better - that we felt we needed to move forward in, in bringing the organization forward and modernizing it.
MR. GRAHAM: A reference was made by Mr. Epstein to the investigation that the police are doing, and I appreciate your having said that Mr. Barker has always been above reproach and is considered to be a person of great integrity. I think it is important to have that on the record in the way that you've described it. Could you tell us whether or not Mr. Barker took an active role in speaking with potential witnesses or drilling down on what the specific problem was in regard to what appears to be a problem?
MR. MCCREATH: You're not talking about the police investigation?
MR. GRAHAM: Yes.
MR. MCCREATH: You're talking about the . . .
MR. GRAHAM: No, I'm sorry. In the police investigation, I'm wondering whether or not Mr. Barker took an active role in trying to get to the bottom of what appears to be a problem.
MR. MCCREATH: Well, again, let me just phrase it slightly differently, and then if I'm not in sync with you, let me know. We received a complaint from an individual with respect to how a particular RFP had been handled. The complaint came through the board, a member of the board in fact. We, indeed, invited the gentleman in to meet with the president. There were a couple of meetings that took place with this gentleman. I was present at one meeting, not with the gentleman but with the board member who brought in the problem. Mr. Beaulieu, I believe, attended a meeting when the gentleman actually came in himself.
Following hearing what he had to say, when this was reported to me, it was my view that we had to take a very close look at this. We asked our internal audit team, and Mr. Barker was very much involved in that decision, that internal audit should take a look at that, and a drill-down on it. They did a drill-down and they brought a report forward. When we got the findings of that report, it was our conclusion that it was appropriate - there are two issues here, this is what I'm coming to - that we should take that to the police, from a criminal
perspective, and that's what we did. That's their ball game. How they handle it, well, that's up to them.
Our concern, and my concern as chairman, was, is this symptomatic or is this a one-off, this situation? That's why, as I mentioned in my opening remarks, we commissioned a forensic audit, a significant audit of the corporation, to find out if that was a typical behaviour or whether in fact there were other problems that may exist. Mr. Barker - this was put forward by the board - was not actively involved in making the decision to do that, but I would be at pains to suggest that Mr. Barker did not support the initiative.
MR. GRAHAM: He did not support which initiative?
MR. MCCREATH: The initiative to do the audit.
MR. GRAHAM: So was there a difference of opinion of how to approach this investigation between the board and Mr. Barker?
MR. MCCREATH: I think the board took the whole matter very seriously, and because the board is accountable, we took the action.
MR. GRAHAM: It sounds as if there was a difference of opinion between you and Mr. Barker about how to deal with the matter that's under police investigation.
MR. MCCREATH: I would not characterize that as being the case. I think Mr. Barker took it very seriously. As I mentioned before, one of the things that was readily apparent about Mr. Barker from the day he walked into the NSTU - the NSLC. Gee, I'm going back to my old days, I do it at the board table, too, I must confess, from time to time. What was I saying now?
MR. GRAHAM: With respect to whether there was a difference of opinion . . .
MR. MCCREATH: Oh yes.
MR. GRAHAM: . . . between the board and Mr. Barker.
MR. MCCREATH: As I said, the board took the matter very seriously, and Mr. Barker respected the fact that the board had made a decision that it was going to do that. He co-operated fully with the audit.
MR. GRAHAM: Just to be absolutely clear, it sounds like Mr. Barker did not agree with the approach of the audit.
MR. MCCREATH: He certainly did not indicate that to me.
MR. GRAHAM: We're into a lot of negatives here, and I want to make sure that we're clear. Did Mr. Barker support the idea of going forward with the audit?
MR. MCCREATH: I presume so, yes. As I said, it was the board that made that decision. I indicated to Mr. Barker and Mr. Barker indicated he would co-operate fully with it, and advise his staff to do the same, which he did.
MR. GRAHAM: Did he express an alternative route and did that become an issue of discussion?
MR. MCCREATH: No.
MR. GRAHAM: Do you know if he has interviewed potential witnesses in relation to this or taken a personal interest?
MR. MCCREATH: With respect to the audit? Yes, I think he has been interviewed by people with respect to the audit. I have no knowledge of the criminal investigation, as to whether he was interviewed or not.
MR. GRAHAM: Thank you.
MR. CHAIRMAN: The honourable member for Halifax Clayton Park.
MS. DIANA WHALEN: Mr. Chairman, just a couple of questions I would like to ask. I wonder, how often does the board meet?
MR. MCCREATH: Generally speaking, the board meets once a month. It seems that during the early winter, during the business planning and budgeting session, we tend to meet maybe twice a month. Generally, the board meets once a month and may meet only once over the summer.
MS. WHALEN: Is your involvement more than that, than this once a month meeting - are you involved more on a day-to-day basis, or in any way?
MR. MCCREATH: I would say I am involved with the Liquor Corporation a minimum of five, and sometimes seven, days a week.
MS. WHALEN: So it's really full-time, the commitment that you have?
MR. MCCREATH: I wouldn't say it's full-time - full-time is a relative term. I would say it probably averages 25 to 30 hours a week of my time.
MS. WHALEN: I can appreciate that.
MR. MCCREATH: But I'm the guy who doesn't work 40 hours a week, I have always been somebody who is Type A and goes at a furious pace.
MS. WHALEN: I was really just wondering because you talked a lot today about governance. There is a balance between the management of an organization and the board, or the board of directors. My thought would be that the board of directors would be setting the policy and you would give that manager or the CEO the targets that you want to meet. So would that be fair to say that that is how you approached it?
MR. MCCREATH: That's the way we have attempted to approach it, indeed. It's the CEO's job to run the company and it's the board's role to set the directions.
MS. WHALEN: That's right. So you agreed on the ultimate direction of where you wanted to be. Did you set some targets along the way that the CEO could then achieve or not, that you could measure him by?
MR. MCCREATH: As part of his annual performance review, we indeed did. In fact, the initial targets that he came with, in essence would have been defined by the contract that he had initially.
MS. WHALEN: Could you tell me if he met those targets? I know there was only a short period of time - 17 months is not all that long.
MR. MCCREATH: Well except that the performance review is a biannual process, so that, with respect to the first year, some of the targets were met and some were not. The principal target, frankly, for all persons, with respect to the corporation, is to achieve our financial target.
MS. WHALEN: And was that one of the targets that was achieved?
MR. MCCREATH: No, it was not.
MS. WHALEN: Now you've talked about the two elements, the expanding revenue and containing costs. It sounds to me from the discussion already that it had more to do with cost containment that was the issue. Would it be fair to say that?
MR. MCCREATH: I think it would be fair to say that.
MS. WHALEN: So, which initiatives are the board now going to go forward with that will have a more significant effect, I guess, in cost containment?
MR. MCCREATH: We are undertaking a review of the organizational structure of the organization, and I expect in due course that Mr. Barbet will be coming forward to us with proposals for transforming and it's . . .
MS. WHALEN: So it isn't clearly defined as yet?
MR. MCCREATH: He has come a long way in a month but he's not, I don't think, quite ready to tell us what his proposals are.
MR. CHAIRMAN: The time for the Liberal caucus has expired. The next 20 minutes, starting at 8:55 a.m., belong to the government caucus.
The honourable member for Waverley-Fall River-Beaver Bank.
MR. GARY HINES: Mr. Chairman, sorry about being a little late this morning. I want to welcome you gentlemen this morning to present to us. I'm going to take a step out that some might question, and that's to go to a social conscience side of things. Being on the Tory side of the House, sometimes we're not getting much credit for having that, so I'm going to go that way.
On my way in this morning I heard on the news that Lockview High has established a breathalyzer program at the school, and in fact, implemented it at their recent dance. That leads me to ask you to give some comment on what your board pursues in terms of Safe Grad, Safe Prom, and in fact, if you have been involved or will be involved with the school breathalyzer program which I think you will see become a more active component of your area of expertise.
MR. MCCREATH: Well, Mr. Hines, as you know, that's one of our mandated responsibilities and it's one that we take very seriously. We have set up and recently activated a social responsibility committee of the board, chaired by Paula Minnikin. That committee has been meeting regularly reviewing the programs the NSLC has with respect to its social responsibility mandate. Over the past few years, they have in fact developed a program in this area. Specific staff has not been dedicated to it and I think over the next year we're going to see more specific staff attention devoted to that. I'm sure you're all aware of the concept that the NSLC has been working on, starting with young children and working up the line so that they have had a series of programs starting with the brown bag program which you may have experienced yourselves if you happen to frequent one of our stores around Christmastime - you may get your bottle of product in a brown bag that has a picture drawn on it by elementary school students. That's a program that we have partnered with - do you know how many schools?
MR. KEN BARBET: Yes, 242.
MR. MCCREATH: Two hundred forty-two schools. We then had a program moving up to the next level of education involving the police band, Blue Thunder, a program that we've been involved in for several years. We have also been involved in supporting safe grad around the province and we have also worked with Metro Transit on New Year's Eve getting people home safely.
There have been a number of programs. I think it's an area that we're going to be more aggressively pursuing. I personally am not familiar with the specific one that you mentioned. Perhaps the president is?
MR. BARBET: I, like you, heard that on the radio this morning. I was not aware that was an ongoing program. It's not something that we are personally involved with, but obviously that's something we would like to explore.
MR. HINES: Yes, they implemented it at the last school dance. In fact, two members of their hockey team are no longer playing on the hockey team because they were the first two that were apprehended under the program. I just wondered if it's something you would consider down the road in participating and if maybe you would be pursuing it with the schools or if you'll wait for their move on it?
MR. BARBET: We're actually interested in participating in any kinds of programs that promote social responsibilities as far as beverage alcohol is concerned. We're open to explore any new avenues that haven't already been explored.
MR. CHAIRMAN: If I could interrupt for just a moment please. I would just like to remind the witnesses and Mr. McCreath, if you want to ask one of the other witnesses to answer a question that I will need to recognize the person for the benefit of the person controlling the video and the audio so that they know who is going to be speaking. Thank you.
MR. MCCREATH: My apologies, Mr. Chairman.
MR. HINES: My next question is regarding specialty products. Occasionally I hear from constituents that they're able to get specialty liquor products from the NSLC. They're pleased with the changes that your board has been implementing. What have you done or how do you pursue that program to identify new and previously unavailable liquor products? How do you actively pursue that?
MR. CHAIRMAN: Mr. Barbet.
MR. BARBET: The strategy as we speak so far is our vice-president of marketing and merchandising has a mandate to explore new products and expand our selection of products within our stores. We are hoping to add another 600 products this year to a list that we've
already added 500 to over the past 12 months. Nova Scotians are telling us very clearly that they want to see an increased selection of products so we're definitely focused on increasing that product selection and making sure that our stores are able to handle the number of products that are being added.
[9:00 a.m.]
As well, we've got a number of programs. Shop the World is one of our programs where customers can phone in and we can get products from anywhere in the world that they know of. Those are some of our programs right now.
MR. HINES: Mr. Chairman, I will pass it on.
MR. CHAIRMAN: The honourable member for Chester-St. Margaret's.
MR. JOHN CHATAWAY: Mr. Chairman, I certainly very much appreciate the opportunity to ask some questions because, basically, from what I've heard so far, it's very informative, at least to this MLA and I would like to compliment you all for changing from a commission to a corporation, and a very good Crown Corporation. I think it's not only the envy of many people in Nova Scotia, but I would imagine people that do the same chores right across Canada, I think are very knowledgeable about how you've come along so far.
Basically, it's been referred to by the chairman of the board that I have the honour of representing an area called New Ross and that's one of the agency stores. I was the municipal councillor for the area and at various times people came in and talked to us from the Liquor Corporation. Basically it's been known for generations that rural, possibly suburban, but certainly rural sites in Nova Scotia have never been served. In fact, here's the opportunity. If you happen to live in the New Ross area, if you wanted to have any liquor at all you would have to go between 80 to 100 kilometres to go to the store and back. Many people did that, of course, some others had what was called in the old terms, bootlegging, but it was done not for great wealth for one person or a group of people, they did it because they just wanted to help the people.
That agency store has done a lot, not only for the people with an idea to drink beer or whatever, but also the stores in the area. Inevitably, many rural areas are places where there are recreational properties and inevitably they have to go and get things that they need and it has helped all the stores because they had to have three things: they had to have a good hardware store, a good food store and a liquor store. Now they have it all and it's improved all business about 20 or 25 per cent.
I'm very proud of what's happened in my riding in that regard. You could talk about various places, Calder's Convenience Store in Advocate, Dominion Chair in Bass River, Ossinger's Grocery in Freeport, T.J. Corner Store in Salmon River and I'm sure you could add to that same story. Basically, I think it's very good that you're improving. Nobody stays the same.
To improve is to change and I'd like to know more specifically about what the Unisys study has put to rest when they did that study that privatization strategies might result in financial loss for NSLC. The report concluded the agency program provided an increase in total liquor sales and remain profitable for the corporation. What changes in the future liquor sales do you foresee or can you comment on that?
MR. MCCREATH: Mr. Chairman, I believe the study is in the deck here somewhere. It's called Nova Scotia Liquor Corporation Agency Store Review.
There were a number of questions. Would it negatively impact the existing liquor stores? Would they be viable on their own? Would the corporation's mandate for pursuing social responsibility objectives be less rigidly enforced than at the regular liquor stores? So there were a number of very legitimate questions that were raised.
The theory of doing it in the first place was to provide service where service was not readily available, as you've indicated in your remarks. One of the by-products is that, indeed, it did put a lot of bootleggers out of business. I guess it was an anti-entrepreneurial action in that regard.
One of the things that it has done in the stores, and I should say seven of the eight stores have proved to be very successful, one of them, as you may have noted this summer, the store itself went out of business. So we actually have an RFP out looking to replace that store. I don't think we have, as yet, had a compliant application. As I say, if you don't have the study, we would be glad to make it available to you. What the study shows, really, very definitively, was that for the stores that participated, they profitably participated in the liquor sale side, the beverage alcohol sale side, and made a little money, but they also got a lift in their own stores. So in a community like New Ross, where you basically had two grocery stores, one got this one and the other one didn't, that's helped the sales generally in the store that did. It's been good for the viability of those local stores that have participated in the program.
But equally important, I think the study demonstrates that the social responsibility dimension has not been any less effectively handled through those stores than in other stores. Because those stores are attached to one of our regular stores as kind of the host store from which they purchase their product, because those stores have created incremental sales in beverage alcohol products, the net result has been the host stores, in fact, have had a lift in
their sales as well. From the conclusions they made here, in those particular locations, as I say, with the exception of the problem in Iona, it was a very successful experiment.
MR. CHATAWAY: Peter, has the Nova Scotia Liquor Corporation heard from people who live in the area about improvement in service to the people in the area? What's their general reaction to these agency stores that are largely rurally based?
MR. MCCREATH: I think it would be fair to say that the general reaction in the communities has been very positive.
MR. CHATAWAY: I think one of our second-biggest industries in Nova Scotia is tourism, to a point. People visit all parts of Nova Scotia and sometimes they would like to have what they could get in other places, in the rural areas. I think these agency stores certainly fill a need for people who want to visit that area. Ken, you mentioned, too, that recently you had 500 new products going on the shelves. Could you explain more about that, and what work has gone into doing that?
That's very much a compliment that you're not just selling this old stuff, you're getting into the future. I know a bit more about Lunenburg County than other areas, but I know there's a winery there and they were very pleased, they have to go and do that the best they can. It's not just one winery, there are many wineries in Nova Scotia, and I know many Nova Scotians would very much like to have their product. The 500 new products is a good step in the right direction.
MR. CHAIRMAN: Mr. Barbet.
MR. BARBET: The biggest thing for us in moving to 500 new products is our embracement of the category management model. What we've looked at internally, is setting up category managers who are responsible for groups of products, and very much going through and analyzing our product mix in each of those categories and looking for and finding missing products in those categories. For example, our Rums of the World - we have a unit called Rums of the World - we have brought rums from all over the Carribean and all over the world that now reside within that premium rum section. It's been very good for rum drinkers of Nova Scotia to experience those new products that they've never had a chance to taste before. In fact, it is a model for beverage alcohol; as far as the different jurisdictions across Canada, ours is the first to embrace such a move.
MR. CHAIRMAN: Mr. McCreath.
MR. MCCREATH: Just adding to that, I think one of the objectives in driving revenues, of course, is to buy up, not necessarily to buy more. The rum shop initiative, which I think is now in 50 of our stores, offers 25 premium rums, up to, I think the highest price is around $75. One of the objectives in the marketing approach that the corporation has been
taking that Ken alluded to, is to get the consumer interested in the product. So if a person is a spirit drinker or a person is a rum drinker, if we can, through marketing, convince that person, instead of buying a $21 bottle of rum to buy a $37 bottle of rum, we have had a lift in our sales but we haven't had any more drinking taking place.
You can grow the business. Obviously, from a business perspective, we have a desire to grow volumes by, for example, having tourists purchase their beverage alcohol here as opposed to bringing it in the province with them, which is technically illegal anyway. If we can get people to buy up, buy more expensive wines, through our Beers of the World program, where you will find we have 15, 20 non-domestic beers from countries all over the world - those are premiums, they're a little more expensive - but if we can get people to experiment and try those other products and find that they like those other products, then we get a lift in our sales.
We're offering a greater choice to the customer, to the consumer, which means we're fulfilling our mandate with respect to customer service and choice, but we're also, at the same time, benefiting on behalf of the people of Nova Scotia, by having people buy more expensive product, which yields a greater return.
MR. CHATAWAY: I know this is my last question. The Unisys Canada study recommended that the corporation develop a strategic framework for the future of the agency program. Have you had this discussion within the corporation? If you could, could you indicate what direction may be taken in the future? I think you referred to all of the things, but . . .
MR. MCCREATH: I mentioned in my opening remarks that we're developing a network plan and strategy. That's underway. Mr. Chairman, with your indulgence, I would ask Mr. Barbet to comment, since in his previous role he had a major role in that.
MR. CHAIRMAN: Mr. Barbet, you have the floor.
MR. BARBET: As part of our network development plan, we've looked at a number of options, as Peter has spoken to, the different sizes and designs of our stores, as well as agency stores in the rural settings where access to Nova Scotians is a problem. That's something that we constantly look at and provide information back to the board, so that as the government is ready, we are ready to move forward with stores in under-serviced locations.
MR. CHATAWAY: I think that's certainly - two minutes?
MR. CHAIRMAN: There is a minute and a half left, which you're not obliged to use, of course, but feel free if you wish.
MR. CHATAWAY: I very much appreciate this opportunity just to compliment you. We've changed, all Nova Scotians have changed. The NSLC, the corporation, is owned by all Nova Scotians, and we have a very competent group of people doing this. We can't just stay in the old-fashioned way, you're going into the modern things. I've certainly appreciated, too, the social responsibility that has been referred to. I think what was brought forth was very knowledgeable, and of course any future things in that regard, too. I know I only have less than a minute, but basically I would like to hear more in that regard. All Nova Scotians feel responsible for our citizens.
MR. CHAIRMAN: The next round of questioning will take place in 12-minute blocks. The next 12 minutes, starting at 9:15 a.m., belong to the NDP caucus.
The honourable member for Dartmouth South-Portland Valley.
MS. MARILYN MORE: Mr. Chairman, my apologies for being late. I was caught in traffic. In reviewing the transcript from the last visit of the Nova Scotia Liquor Corporation officials here, the question was asked whether or not the board had developed conflict of interest guidelines. As I understand it, the answer was no. I'm just wondering if you could give me an update on that situation.
[9:15 a.m.]
MR. MCCREATH: We, of course, are bound by the government's conflict of interest guidelines. Under the legislation we are bound essentially by government policy and guidelines and if there's a compelling reason why we should have a different set of guidelines, then it's up to us to develop a bylaw that meets that and to ascertain Cabinet approval for that bylaw. So at the present time we're simply operating under the government's conflict of interest guidelines.
MS. MORE: So the fact that the Liquor Control Act gives you the right to develop further guidelines has not indicated to the board that there might be some necessity for that?
MR. MCCREATH: With respect to a conflict of interest, I would say not specifically. I don't think we're any different than any other Crown organization or agency. I mean, the conflict of interest guidelines that the government has, you know, as far as I'm concerned, are appropriate for the NSLC.
MR. CHAIRMAN: The honourable member for Halifax Chebucto.
MR. EPSTEIN: Mr. Chairman, thank you very much. Mr. McCreath, can you tell me, please, what are the plans of the corporation with respect to Sunday shopping this year?
MR. MCCREATH: Mr. Chairman, can I refer that question to Mr. Barbet?
MR. CHAIRMAN: Certainly. Mr. Barbet, you have the floor.
MR. BARBET: Pending approval of the bill in the House here, the board has approved moving forward with the opening of a number of our stores for the public in the 1:00 p.m. to 6:00 p.m. range for the six weeks before Christmas. We will probably move forward with a selection of our stores and using that as sort of a test vehicle to test the public's willingness to look at different sites. We will probably start with about 58 stores that will be open on Sunday.
MR. EPSTEIN: I think I've seen a letter from the president of your staff union, that is the Nova Scotia Government Employees Union, dated October 8th, requesting a meeting and I'm wondering if this meeting has been scheduled. It was requested in a letter dated October 8th from Joan Jessome, President of the NSGEU, for a meeting with either yourself or with Mr. McCreath, or both of you, in order to discuss a number of outstanding items. I would think that if you're planning on opening on Sundays, this might also be something that you might want to discuss with them and I'm wondering, has that meeting been scheduled in response to her request?
MR. BARBET: Well, as far as the Sunday shopping, we've been in constant discussions with both of our union locals about Sunday shopping over the course of the last say, six months. As far as the offer to meet, that's something that we are still willing to do, that both Peter and myself are willing to meet with the union.
MR. EPSTEIN: That's fine, but no specific meeting date has been chosen yet?
MR. BARBET: Unfortunately, I was away last week so we haven't selected a date as of yet.
MR. EPSTEIN: I'm sure you will attend to it. Can I ask about the financial targets of the corporation. In last year's business plan it showed two things. One, it showed a target for the end of the previous fiscal year, that is 2002-03, of net revenue of $160.2 million, that's net based on the full sales, and then for 2003-04 a target of $166.8 million, again a net figure. As I recall, you were below the target for 2002-03 by a little bit and I'm wondering where you stand with respect to meeting the target for 2003-04. Does that remain your target in your business plan?
MR. MCCREATH: Absolutely that's our target. It's a challenging target, but we certainly are determined to meet it and I think we have a reasonable prospect that we will meet it.
MR. EPSTEIN: Is that target set in consultation back and forth with the minister?
MR. MCCREATH: I think that would be a fair statement.
MR. EPSTEIN: In order to meet that target, have you had to increase prices again?
MR. MCCREATH: No, our option is never to increase prices. Now, suppliers sometimes increase prices and that, obviously, is something over which we have no control. As you know, there was an across-the-board price increase on April 1, 2002. I believe it was the first one in 11 years by the corporation. It would be my hope that I never have to do that again.
MR. EPSTEIN: I think you said your option is never to increase prices. Surely, in light of what happened last year, that can't quite be correct?
MR. MCCREATH: No, No . . .
MR. EPSTEIN: Surely you meant that your preferred option might not . . .
MR. MCCREATH: My preferred option is never to have to increase your prices, that's right. That having been said, I think it's important for members of the committee to understand that suppliers sometimes increase prices, and there's a difference between our raising prices and suppliers raising prices.
MR. EPSTEIN: One of the things I'm curious about is how you're able to deal with cost containment. This is a factor you identified as something that was of concern to the board and I'm wondering what steps, if any, you've taken on the cost containment front?
MR. MCCREATH: Mr. Chairman, could I refer that question to the president?
MR. CHAIRMAN: Mr. Barbet.
MR. BARBET: Mr. Epstein, as far as cost containment is concerned, we strive very diligently to stay within what is an industry average for our cost for operating our warehouse and our stores. We are trying to stay within our percentage of sales. That's the general target that's used within the industry and generally those are the two cost containments, looking to achieve a bottom line return on investment of what our target is set for.
MR. EPSTEIN: I've seen your stats on this. They seem to be relatively stable over time and there doesn't seem to be a lot of maneuvering room with respect to cost containment. So in order to meet your revenue targets, wouldn't you either have to increase volumes of sale or, as Mr. McCreath I think used the term, induce customers to move up?
MR. BARBET: I guess one of our key strategies is exactly that, moving customers through different product mixes to products that actually generate more revenue for us. This year our volumes are, in fact, up over last year, in the range of 6 per cent. As well, we have moved a lot of customers from product to product by introducing those new products I spoke
of earlier. People are trying different things and you've seen a combination of both those things increasing our sales this year.
MR. EPSTEIN: Yes, so 6 per cent in fact would get you towards your financial target, I guess, not exactly on it, but certainly on to it. I'm curious, if I may, about the privatization plans that the corporation has and the possibility of expanding any of the agency stores or of the other specialized outlets. I'm one who believes that there was no reason why the corporation itself could not have placed stores in remote locations that needed them. If New Ross needed an outlet, it seemed to me that it was well within the possibility of the corporation to place an outlet there. If there was a demand for specialized products in terms of wine or anything else, I don't see why it is that the corporation couldn't have done that on its own. Given that, I guess what I would like to know is whether there are any immediate plans that you have, or plans within the next couple of years, to expand the network of agency stores or of the private line and speciality stores. Earlier there was a reference to something called the major network plan. I'm wondering what elements of the major network plan might relate to the point I've raised?
MR. MCCREATH: Well, I'm not sure what the time frame is, but if I may respond, Mr. Chairman. There are two or three questions there, Mr. Epstein, and I will try to answer them all. In response to your question with respect to agency stores, there's a critical mass that makes an NSLC store viable and where you have a rural community where the potential sales are relatively small, it's simply - the agency store is a vehicle through which it is possible to provide service to those customers by partnering with a local enterprise. Whereas if a decision were to be made to put one of our stores in there, the store would not be viable. The store wouldn't pay for itself and so that's where that piece fits. What the Unisys' study demonstrated was that was a viable concept to do that.
You should be aware that we frequently get requests from communities and, indeed, we have unsolicited letters, I suspect there's a file in the president's office. (Interruption) There are some in the deck from store operators interested in participating in that program. So that's why we have those, that's why they were set up. It's a model that is quite common in several other provinces. For example, it's a very well-developed concept in New Brunswick, as well as in Quebec and Newfoundland - although a limited product offering in Newfoundland, that you sell beer and I think, a little bit of wine.
On the private wine speciality store it is indeed, I suppose, quite possible that that could have been done by the NSLC. That was an experiment that was undertaken by the NSLC at the request of the minister. I expect that in due course, after it has had a reasonable time to operate, a similar review of the success of that initiative will be done, and I guess at that time a decision will be made by government whether they would like us to expand or not expand that program.
MR. EPSTEIN: So no immediate plans of your own to go forward with this at the moment?
MR. MCCREATH: No.
MR. EPSTEIN: It awaits policy direction from the government.
MR. MCCREATH: And it awaits evaluation first, and then, I presume, policy direction. I would expect in the normal course of events we would have an evaluation done of the success of that test, and then when we get the findings of that review we would go forward to government with a recommendation.
MR. EPSTEIN: So what's the major network plan, Mr. McCreath?
MR. MCCREATH: The major network plan is taking a look at our 100 stores and asking how we can modify, change, or improve those stores to make them more customer-friendly, to enable them to drive sales further, to attract more clients.
MR. EPSTEIN: Do you have that for us? Is that ready? Is that a document you have adopted now?
MR. MCCREATH: No.
MR. EPSTEIN: It's still a draft?
MR. MCCREATH: No, it's still in the process of development.
MR. CHAIRMAN: Mr. Epstein, you have about 15 seconds left if you care to use them.
MR. EPSTEIN: I would be happy to cede my 15 seconds to Mr. Graham.
MR. CHAIRMAN: Thank you, Mr. Epstein. The next 12 minutes belong to the Liberal caucus.
The honourable member for Glace Bay.
MR. DAVID WILSON (Glace Bay): Mr. Chairman, let me backtrack, I would like to go back to Mr. Barker. Just a hypothetical question first of all, do you think you would be here testifying before the Public Accounts Committee if Mr. Barker wasn't fired?
MR. MCCREATH: Mr. Chairman, the first thing I would say - as any good, wise person with political experience would know - it's not really a useful thing to respond to hypothetical questions.
MR. DAVID WILSON (Glace Bay): Mr. McCreath, I kind of expected that answer knowing your background, your history, and how astute you are politically. So let's deal with some facts instead of hypothetical questions.
You said Mr. Barker was respected, popular, a good employee, got along with people, an honourable man - some of the comments that you have used to describe him here this morning. Why would a man who was recruited - and you went to so much trouble to do that recruiting of such a person - end up being fired by the Nova Scotia Liquor Corporation, and in particular by the board of directors? How did it come to that?
MR. MCCREATH: Well, Mr. Wilson, I would respond with two observations and then I would be glad to come to your question. First of all, I would take umbrage at the use of the word "fired". In my judgement we did not fire Mr. Barker - firing is something that happens for cause. What I indicated was that we made a decision to exercise a clause in his contract to end his employment with us, not because of impropriety in any way on his part, but because we had different visions as to how the corporation should move forward, how the governance of the corporation should take place, and that's where we went.
With respect to the pains that were taken - you made reference to the great pains that were taken - that was not a decision of the board which I chair, that was a process that was put in place by others. I believe the process is, in principle, consistent with the approach the current government has taken with respect to hiring people from outside of government - that has been done through a search process. Search processes, especially if they involve executive search firms, are perhaps the epitome of fairness, but they're also an expensive process. So that was the decision that the government made to identify the person who would be the first president of the Nova Scotia Liquor Corporation and that was the decision and the call of the government.
MR. DAVID WILSON (Glace Bay): Here is what it sounds like to me, Mr. McCreath, and you can - I'm sure you will - answer this directly. It sounds to me, from the testimony I have heard - and I may be drawing a long bow here - like Mr. Barker and perhaps yourself, or perhaps others, didn't get along that well, and there were decisions that perhaps Mr. Barker was about to make, or had made that you didn't agree with, and perhaps you didn't want Mr. Barker making those decisions, that you felt those decisions should have been made by you or others. That's why Mr. Barker is no longer in the employ of the Nova Scotia Liquor Corporation.
MR. MCCREATH: With respect, Mr. Wilson, I think you're engaging in an exercise in hypothesis. I would rather try to answer questions that I can answer. I can't hypothesize . . .
MR. DAVID WILSON (Glace Bay): But you can answer those, Mr. McCreath.
MR. MCCREATH: I can tell you very clearly that Mr. Barker had a very cordial working relationship with the board, that there were no specific issues substantive to the business of the corporation on which we disagreed. The circumstance that led us to conclude that we should have a parting of the ways had to do with our concepts of how the corporation should be governed. I stated that, I think, on a number of occasions this morning, and I'm happy to reiterate that point. I don't think it would be appropriate to draw conclusions unrelated to what I have said.
MR. DAVID WILSON (Glace Bay): I'm only drawing conclusions because you're one of the key people in this whole thing who could answer the questions that we're asking. My conclusions, hopefully, will be drawn on direct answers that you're giving, but so far you've said that there was a difference of opinion, you said that there was a question over the governance process that Mr. Barker had with yourself or with the board, you've said that there was a disagreement on cost-cutting, you said many things, but directly, the bottom line, is that Mr. Barker is no longer there. Was there not any consideration given to the fact that this whole package deal would cost Nova Scotia taxpayers in excess of $400,000 at the end of the day?
MR. MCCREATH: As I stated earlier, Mr. Wilson, the cost of this decision to have Mr. Barker leave the corporation was in the vicinity of $92,000.
MR. DAVID WILSON (Glace Bay): The overall package was a heck of a lot more than that, Mr. McCreath.
MR. MCCREATH: Again, if I may respectfully disagree with you, the cost of the decision to have Mr. Barker leave was in the vicinity of $92,000. The salary that Mr. Barker was paid while he was with us was salary that was earned, salary from which the people of Nova Scotia, through the Nova Scotia Liquor Corporation, got value.
MR. DAVID WILSON (Glace Bay): There was also the considerable recruitment costs as well, was there not? You brought in somebody who was recruited and respected, as you said, an honourable man, who is no longer there. Is it the policy of the Nova Scotia Liquor Corporation to get rid of honourable men?
MR. MCCREATH: I think . . .
MR. DAVID WILSON (Glace Bay): I will answer that for you.
MR. MCCREATH: . . . that's quite a stretch, Mr. Wilson.
MR. DAVID WILSON (Glace Bay): Well, we have to stretch it, because so far the details on Mr. Barker's - whether you want to call it a firing or not, he's not there - termination are not coming forward. When I asked you the hypothetically question as to why you think you would be here, whether or not Mr. Barker had been terminated, I would respectfully suggest that you probably wouldn't be. The only reason the Nova Scotia Liquor Corporation and its officials are here today is because of the fact that Mr. Barker was fired. I'm hypothetically asking, again, was this a question of not letting the CEO do his work and someone else trying to run the corporation? Again, whether or not you want to answer that question or not is entirely up to you.
MR. MCCREATH: Mr. Wilson, if you give me an opportunity, I will be delighted to respond to your question. I would like to think that one of the reasons that we're here today is because the members of the Public Accounts Committee are interested in the safeguarding of the public's money, the public purse and expenditures that are made. I mentioned earlier, and I'm happy to reiterate, the decision we made with respect to Mr. Barker was not made in isolation of the recognition of the cost implication of that decision in the short term, but it was also made in the context and our belief and our judgement as a board that in the long term the financial benefit that would accrue back to the people of Nova Scotia through the Nova Scotia Liquor Corporation would be enhanced.
So if you want to take the severance cost in isolation, that's up to you, if you choose to do that. But I think if you want to, with some degree of common sense, fairness and equity, recognize it for what it was, that is to say a business decision, that, in the opinion of the board, would ultimately result in the accrual of greater return to the Nova Scotia taxpayers, that's why we made the decision.
MR. DAVID WILSON (Glace Bay): So you're saying, and you've said it already, before, you would be more profitable without Mr. Barker. What analysis did you do to come to that conclusion?
MR. MCCREATH: Mr. Wilson, you can spin what I say however you wish.
MR. DAVID WILSON (Glace Bay): I'm not spinning anything, Mr. McCreath. I'm just asking you questions, that's all I'm doing. Mr. Chairman, that's not my purpose . . .
MR. MCCREATH: You may draw your conclusions and I will draw mine.
MR. DAVID WILSON (Glace Bay): . . . here today, to spin anything. My purpose is to get to the bottom or attempt to anyway, to get to the bottom of what's going on.
MR. MCCREATH: Indeed. Well, as I explained earlier, and I would be happy to reiterate, we made a decision over a period of months of working together with Mr. Barker. We came to the conclusion that we had different visions of how the governance should function at the corporation. It is not the desire of the board of the corporation to do the president's job, but we have an accountability and a responsibility to see that the president does his job in line with the priorities established by the board.
If the conclusion that you ultimately come to as a board is that that synergy is not there, that the desires, not so much the desires as the goals set forth and the process set forth by the board as to how the corporation should function, if they are not being carried out in the manner that seems to be consistent with the way the board feels it should be done, that's the point at which you have to look at the relationship and decide, is it in the interest of the corporation to continue forward on that basis or to make a change. We concluded that it was in the interest of the corporation, on behalf of the people of Nova Scotia, that we would make a change, and we did.
MR. DAVID WILSON (Glace Bay): Just one last question before I turn it over to my colleague, Mr. Chairman.
MR. CHAIRMAN: You have two minutes, Mr. Wilson.
MR. DAVID WILSON (Glace Bay): Very quickly then, is it fair of me to say - and I'm not putting words in your mouth, I don't even think I could put words in your mouth, Mr. McCreath - that someone, somewhere, thought that there was a fire where they supposedly saw smoke in the termination of Mr. Barker, but you're saying there's no fire there, there's nothing wrong, nothing happened?
MR. MCCREATH: What I'm saying, Mr. Wilson, is that we concluded that it would be in the interest of the corporation, because we did not see Mr. Barker and ourselves working in sync as to how the corporation could best move forward to achieve its objectives, we concluded that it was in the interests of the corporation, thus the interests of the people of Nova Scotia, for us to make that change. We see many circumstances, Mr. Barker is an able business executive, he made a useful contribution, a valuable contribution while he was there. As I've said before and would reiterate, we had a cordial working relationship, he did with his staff, as well as with the board, as well as with the industry. He's an honourable man, but sometimes things just don't mesh, so you make a change, and that's what we did.
MR. DAVID WILSON (Glace Bay): Thank you, Mr. McCreath.
MR. CHAIRMAN: With one minute to go, the Leader of the Liberal Party.
MR. GRAHAM: Mr. Chairman, it's just a short snapper, perhaps to Mr. Barbet. If workers refuse to work on Sundays will their decision to refuse be respected?
MR. BARBET: Absolutely. We have no interest in having individuals who have no interest in working Sundays work.
MR. GRAHAM: So that plan for 58 stores being open is, in fact, tentative and dependent on whether or not you have workers there?
MR. BARBET: Right.
MR. GRAHAM: Their rights will be respected.
MR. BARBET: Absolutely. It's on a voluntary basis.
MR. GRAHAM: Thank you.
MR. MCCREATH: Could I just, Mr. Chairman . . .
MR. CHAIRMAN: Mr. McCreath, a supplementary answer.
MR. MCCREATH: . . . very briefly add to that. I think it's equally important, Mr. Graham - and I would suggest the Legislature might want to consider this - that employers respect the rights of people whose day of worship is Saturday or whose day of worship is Friday. I have indicated to Mr. Barbet, as this issue has come to the fore, that it's important to respect the right of people who don't wish to work on Sunday, but we also have to respect the right of our employees who may be of other faiths for whom Saturday or Friday is a key day.
MR. GRAHAM: I concur . . .
MR. MCCREATH: I would suggest that the legislation ought to address that as well.
MR. CHAIRMAN: Thank you very much. The next 12 minutes belongs to the government caucus.
Mr. DeWolfe, the member for Pictou East.
MR. JAMES DEWOLFE: Welcome, gentlemen. I'm very pleased to have you here today. Mr. Barker, it was indicated, didn't share the NSLC Board of Directors enthusiasm and perhaps vision for the future. That would be rather fair to say, would you agree?
MR. MCCREATH: No, I wouldn't agree. I say where we differed was on our perspective of governance, how the corporation should make its decisions and determine what decisions should be moved forward.
MR. DEWOLFE: Mr. McCreath, where I was going with this was the fact that even family businesses can have disagreements, look at McCains as an example that was well documented. Such may be the case here. Because of the honourable member for Glace Bay's questioning, persisting in asking about Andrew Barker and his departure, I feel it is inappropriate, irresponsible and probably unnecessarily damaging to Mr. Barker, to discuss personal, confidential employment matters in this public forum? Would you agree?
MR. MCCREATH: I would, indeed.
MR. DEWOLFE: It seems to be unfair when he is not here to defend himself. That's the point I was going to make.
MR. MCCREATH: With respect, Mr. DeWolfe, I don't think anybody has attacked Mr. Barker here today, on either side of this House.
MR. DEWOLFE: You mentioned the Sunday shopping with the last speaker and I was wondering how you feel about that and how it extends to the NSLC, as people debate whether they should be able to purchase liquor on Sunday. I am just wondering how you feel about all that. Perhaps you could tell us about some of the debates that have taken place to date and where we are going with that, the broader issue of Sunday shopping.
MR. MCCREATH: Mr. DeWolfe, as with any company, we listen to the shareholder. In our case, the shareholder is represented by the Government of Nova Scotia so that the issue of Sunday shopping is one that should and will be decided by the government. Indeed there is a bill before the House, as we know. If the government determines that it is appropriate for the NSLC to be open on Sundays, then we will, in fact, comply with that. As to the specifics, Mr. Barbet spoke to them earlier with respect to the upcoming one. If you wish, he can further clarify that.
MR. CHAIRMAN: Mr. Barbet.
MR. BARBET: Mr. DeWolfe, with respect to Sunday shopping, we have had that as an understanding over the course that we followed as has everybody else, what's happened in the press as far as Sunday shopping. Part of our mandate is always to be ready for whatever eventualities may happen. So over the last six months, we have constantly been talking with our union locals and also with our IT staff, et cetera, making sure that if such a thing does come to pass that we have thought of every provision to allow us to be as ready as we can to be open for the number of stores that we need. So we have gone through a lengthy look at what we deem as probably the right stores to be open and have chosen 58 stores as that number.
MR. DEWOLFE: How much revenue did the NSLC contribute to the Province of Nova Scotia last year?
MR. BARBET: Is the question to me?
MR. CHAIRMAN: Mr. Barbet.
MR. BARBET: Oh, $158 million.
MR. DEWOLFE: Does the money go into general revenue?
MR. BARBET: The money goes to general revenue, yes.
MR. DEWOLFE: How much does the province collect in taxes due to the NSLC?
MR. BARBET: The HST is above and beyond the $160 million.
MR. DEWOLFE: The agency store program that was introduced in 2001, did it simply relocate the revenues from other stores or did it provide an increase in total liquor sales?
MR. BARBET: We actually saw an increase in those areas where the agency stores existed of approximately 3 per cent.
MR. DEWOLFE: I know we touched on this before but I just wanted to confirm that. I see some gaps, like in Pictou East, my constituency for instance, we don't have any store in the rural area, only in the Town of Westville. I know there are some changes taking place in the way we do business down there but it is rather a vast area, Pictou East, because of its shape. There is quite a distance from town down to say Lismore and many fishing villages along the way it would probably be an area to consider for expanding agency stores. I was wondering if any consideration has been given to that - maybe Mr. McCreath would have a handle on that, perhaps locating a store in that particular area?
[9:45 a.m.]
MR. MCCREATH: I think, on an ongoing basis, whenever requested we review potential locations for expanding our network, whether that be by way of an agency store or an NSLC store. The specifics, I'm not sure if we've - I'd refer to Mr. Barbet - whether we've looked at that area in particular.
MR. BARBET: Mr. DeWolfe, part of our development process is to constantly be looking at the nature of rural Nova Scotia to see what opportunities may exist for agency stores should that ever become an option. The reason is to be ready to make sure that we provide that access for rural Nova Scotians. I couldn't speak specifically to any one particular area, but I do know that we are, on an ongoing basis, looking to make sure that we have as good a coverage as we can possibly have for the province.
MR. MCCREATH: Just to add to that - one of the criteria in the determination of the need for an agency store is the proximity of another NSLC store and I think 25 kilometres is the normal rule of thumb. It would not make sense to put a new point of sale in place if it's simply going to undermine the viability of one down the road. So that rule of thumb of 25 kilometres was established when the initial thing was done.
Also, in some municipalities, depending on what the current status of the law is, it may be necessary to hold a plebiscite if we wish to go into a new area. Under the existing legislation unfortunately - in fact Mr. Beaulieu, at my request, has been in dialogue with the Chief Electoral Officer of the province - in some cases we can't piggyback that onto some vote that's taking place, so it's a very expensive process in the area. We looked at doing one, for example, in Cumberland County a year ago, and it was going to cost us $25,000 just to have the plebiscite done. So we're hopeful that we might persuade the government to change the legislation so that it's a less costly process to carry out that plebiscite, if indeed a plebiscite is appropriate.
MR. DEWOLFE: The area that I mentioned is well beyond the 25-kilometre zone, between Antigonish and New Glasgow, certainly.
MR. MCCREATH: I think, Mr. DeWolfe, it would be fair to say we would be prepared to undertake that. I would ask Mr. Barbet to have his staff take a look into that and get back to you specifically or, if it's more appropriate, Mr. Chairman, to the committee as a whole. Or is it okay to just go back to Mr. DeWolfe on that?
MR. CHAIRMAN: I think to the committee as a whole, given the nature of the context that we're working in would be most appropriate.
MR. DEWOLFE: My colleague for Chester-St. Margaret's made a good point, where an agency store was put in place the increase in sales in the surrounding stores was prevalent. So it would really be good for local communities to have such a store I believe, and give them an uplift in their communities. People do drive to town to get their bottle of wine for Aunt Matilda and tend to stop and shop for other things while they're in town, of course, because it's such a great distance to travel from some of our rural communities, and they take advantage every time they go to town to do as much shopping as possible and it would take away from the rural area.
I was wondering what - well I guess the question is, what are we famous for down here now? I remember always hearing that we were famous for our rum-drinking and I think you go through phases in your age, but I note that in the circles that I travel in now there is more wine drinking. I'm just wondering what the trend is generally in Nova Scotia - just out of curiosity.
MR. BARBET: Mr. DeWolfe, right now our prime product that we sell is, of course, beer. That's 85 per cent of our market and it's growing very slowly, by volume. Our wine
market definitely has a huge increase, and that is spurred mostly on the higher-end levels of wine drinking, people moving up into different and more exotic kinds of wine. We spoke to the Nova Scotia wines earlier. That's definitely an important part in what we're showing. For the last five or six years there has been a huge increase in the amount of coolers that have been drunk, and our spirit volumes have been relatively flat, a slight growth with some of the new alcohol-based coolers that are on the market now.
MR. CHAIRMAN: Mr. DeWolfe, you have about 10 seconds left if you care to use them.
MR. DEWOLFE: Speaking of wines, I would hope that you promote Nova Scotia wines, get them out in the front and the centre isles and so on, as a promotion to our growing industry here in Nova Scotia.
MR. BARBET: We have a special section dedicated just to Nova Scotia wines, yes.
MR. DEWOLFE: Great. Thank you very much, gentlemen.
MR. CHAIRMAN: That concludes the question and answer portion of this meeting. Mr. McCreath, you are entitled up to five minutes for a closing statement if you choose.
MR. MCCREATH: Mr. Chairman, I would take advantage, not to reiterate things that I've said, but just to raise one or two subjects that have not actually surfaced this morning. As I indicated, the support of the local alcohol-producing industry is one of our responsibilities and I trust and hope that all members of the committee are aware, at the present time, the fastest growing segment of agriculture in Nova Scotia is grape growing. We now have seven, eight commercial wineries producing excellent product, growing in their market share. One of our determinations over the next year is to find ways that we can continue to support those industries.
As you know, they operate farm wine gate stores, where they get considerably less - part of their sales, the money they've spent, they pay us a lot less on sales through our stores. That's one way we support them. We're continually looking for ways to support grape growers because grape growing is a very high economic, as well as a tourist attraction, for the province. So these wineries are an important thing.
We have the only single malt distillery in North America in Cape Breton, Glen Breton. I'm not a Scotch drinker personally, but I always have a bottle in my house. So if somebody wants a drink of Scotch in my house, they have to drink Glen Breton first. Then if they want to move to something else, we perhaps give them another option.
Of course, we have a burgeoning cottage brewing industry and they are starting to grow in their market share as well as brew pubs. Plus, as you know, we have two major breweries that we don't think of them in the context of the small burgeoning beverage alcohol industry in the province, but they are very important to the province in terms of the employment and the economic impact that they have. Indeed, one of those breweries is by far the largest share of market for the beer-drinking population of Nova Scotia and, indeed, has had a profound impact right across the country.
The other comment, I think it's important to know that this is a very important part of our responsibility and one we want to work with those industries to grow them. The other, and my final thing, would be to bring to your attention much of the medical research that has been done recently that pretty well establishes definitively that moderate alcohol use is very good for your health. Through the Canadian Association of Liquor Jurisdictions, there has been a lot of work done in this area and I've found it interesting - as I have attended on behalf of Nova Scotia - that the primary amount of time at those meetings is taken up with things like social responsibility and, recently, we've had a number of presentations with respect to health and moderate alcohol use. So the name of the game is to encourage everybody to drink moderately, not seven drinks on Friday night, but maybe one drink every day. It's like they used to say - an apple a day keeps the doctor away. Well, a half a glass of red wine keeps your heart in good health and maybe keeps the doctor away. Thank you, again, Mr. Chairman, for the opportunity to be with you this morning.
MR. CHAIRMAN: Thank you, Mr. McCreath, Mr. Barbet and Mr. Beaulieu for attending here today. There is one item of correspondence which I will ask the clerk of the committees to distribute to the members. It is not an action item. It's simply flowing from the resolution of the committee concerning the committee's composition. Following the direction of the committee, I did write to the Chairman of the Internal Affairs Committee of the Legislature and have an acknowledgment from the chairman of that committee of the item of correspondence. This is for the information of members only.
The next meeting of the Public Accounts Committee will be held on Wednesday, October 29th, at 8:00 a.m. in the main Chamber. The subject is the district health authorities and the witnesses will be the Deputy Minister of Health, the Associate Deputy Minister of Health and the Chief Financial Officer of the Department of Health.
Are there any other items that require the attention of the full committee today? If not, is there a motion to adjourn?
MR. EPSTEIN: I move to adjourn.
MR. CHAIRMAN: Mr. Epstein, thank you.
Would all those in favour of the motion please say Aye. Contrary minded, Nay.
The motion is carried.
The committee is adjourned.
[The committee adjourned at 9:56 a.m.]