By April Ingram
Real Canadian Superstore South Surrey announces B.C. wine sales beginning today. (CNW Group/Loblaw Companies Limited)
A ‘Foreign’ Concept Hitting British Columbia Supermarkets
With changes to recent laws in some provinces, Canadians can now find local wines on their grocery store shelves. This is a relatively new concept for the country, although very common in other parts of the world. In fact, a recent report found that in the United States up to 70% of all wine is sold in grocery stores. In the beginning, the change in British Columbia (BC) legislation seemed like a sweet deal for grocers to share in profits generated by alcohol sales, for consumers to enjoy the convenience of one-stop shopping, and for Canadian wine producers to reach more of these consumers. However, once the confetti settled and all the rules and restrictions became apparent, many were left scratching their heads.
Although the actual policy changes, set by the BC government’s Liquor Control and Licensing Branch, went into effect on April 1, 2015, change has been slow due to the complexity and challenges of adhering to the rules. In addition to the change in provincial laws, each municipality also has restrictions, so sorting it all out can be tricky. The Vancouver city council voted 9-1 to ban grocers from selling wine, despite some grocery stores in the city moving ahead with store renovations to accommodate the new market. As of June 2017, there were still only 21 BC grocery stores with wine for sale on their shelves.
The most significant changes in the sales policy have to do with the required distance between stores, what type of stores could sell what kind of alcoholic beverages, and retailers getting their hands on the particular type of license required. These licenses restrict sales to exclusively BC wine that meets the Vintners Quality Alliance (VQA) standards. The BC VQA program is an “appellation of origin” system, similar to the AOC and DOC systems in France and Italy. The system guarantees the origin of the grapes and ensures that qualifying wines meet certain minimum quality requirements. The VQA wines are more expensive than many other foreign and domestic wines.
Limited Licenses
With only approximately 60 licenses available province-wide, the process is highly competitive, and grocers are using multiple approaches to get needed licenses.
Overwaitea is a large grocery chain, and their strategy has been to sign operating agreements with the BC Wine Institute, which owns 21 licenses that allow for sales of only 100% BC wine. Loblaw’s, the parent company of Real Canadian Superstore has been buying some of the provincial government’s 24 licenses, previously considered ‘dormant’ at provincial auctions.
Stores must meet specific criteria to bid on licenses. They must be at least 929 square meters (10,000 square feet) in size, not currently licensed to sell liquor, be more than one kilometer (0.62 miles) from a privately-owned liquor store, and have the accompanying deposit of $25,000. The government has stated that the rules and restrictions are in place to protect the financial viability of private liquor stores. Although the deposit doesn’t sound unrealistic for a large corporation, competition has driven the prices from the minimum bid of $125,000 to a whopping $6.9 million paid by Loblaw’s to buy its first six licenses in April and May 2016.
A Wine Shop Experience, with a Catch
The wine isn’t just appearing on store shelves, next to the crackers and soda. Stores are undergoing extensive reconfiguring and renovations to create a wine shop experience within the supermarket. Transformed from typical store aisles into inviting spaces with hardwood-looking floors, softer lighting and inviting displays, most are right in the center of the market, carry approximately 400 varieties of BC wine, and keeping wine experts on hand to providing tastings, recommendations and food pairing inspiration. Some locations invite local winery representatives and wine makers to come in and have pouring events.
The current legislation does make for some strange situations between wine producers and stores. If a winery representative wants to stage a tasting event at a grocery store, they cannot bring in bottles direct from the winery – as is permitted at non-grocery BC VQA wine markets – they must purchase the bottles at retail price from the store, a substantial markup that includes tax. The government has noted that they plan to look into these types of situations and see if more standardization of practices and pricing would level the playing field.
Underage Concerns
Initially, there were fears that wine on grocery shelves would lead to easier access for underage buyers. Stores within the Overwaitea group have put safeguards in place to prevent minors from walking out with a bottle. They have tight security and ever-present cameras in place and to their knowledge, having sold more than one million bottles out of 13 stores thus far, not a single theft has occurred. Store cashiers have to be at least 19 years of age, with their system login including a confirmation of age. If an underage employee attempts to scan a bottle of Pinot Gris for a high school friend, the scanner will fail, and the system requests manager approval. Standard practice for stores is to ask for two pieces of ID from any customer who looks younger than 40. These grocery stores already carry cigarettes and have pharmacies within their locations, and have systems in place to ensure that controlled substances don’t end up in the wrong hands.
Local Exposure
There are currently over 250 wineries in BC, so one could expect store shelves to be brimming with local options. The original intention for supermarkets only carrying locally produced wine was to showcase what was made nearby, however small and medium-sized wine producers have concerns. According to the group BC Alliance for Smart Liquor Retail Choices, with the licenses being snatched up by large chains, the concern is that most of the wine orders will be filled by a handful of big wineries with more extensive inventory and lower price points, leaving smaller producers on the sidelines. Not all small producers agree, however, and some have had excellent experiences with grocery managers reaching out to smaller wineries to invite product and event participation. Some smaller producers have made direct contact with the local managers to get their product in stores. The new law provides an excellent opportunity for small wineries that aren’t on shelves in government or private liquor stores and rely mainly on onsite winery sales.
International Concerns
Although the exposure of local wines to consumers was intended to be a tremendous opportunity, particularly for smaller producers, not everyone is happy about the change in the laws. Many of Canada’s trading partners believe the practice to be discriminatory. This past January, the United States launched trade-enforcement action against Canada at the World Trade Organization (WTO), and New Zealand and the European Union were quick to announce that they will join the action. Shortly after, Argentina and Australia also followed suit. Consumers also thought that the exclusivity was a bit strange, noting that if a retailer is going to sell wine, then sell a selection of all types of wine and let the customers choose what they want.
The local industry fears that if the international trade challenges succeed, then BC wine, which only has 17% of market share, will be displaced on the shelves by higher-volume, lower-priced products. What first appeared to be a promising prospect for both BC wineries and grocery stores, may now be a limited offering. If upheld, the trade challenge will require adding imported wines to Canadian grocery stores, or the government will abandon the initiative altogether.
The government continues to make attempts to modernize legislation around alcohol sales and support the local wine industry, an overall boon for the provincial economy. According to the BC Wine Institute, the BC wine and grape industry contributed $2.8 billion to the economy in 2015. Legislative adjustments continue to address current challenges, and recent changes are relaxing liquor laws, allowing any business that doesn’t serve children to apply for licenses, such as barbers, bookstores and art galleries.
