Geoff McIntyre
The Third Annual Seminar on Wine and Liquor Law in British Columbia, held in late February, was one of the best attended years yet – and it should come as no surprise why. Given the provocative promises in the 2012 Provincial Budget announced just a week before event, those stakeholders –from lawyers, winery owners, members of the retail sales and hospitality industries to regulators and advisors of the B.C. Liquor industry – came together to discuss the proposed changes and speculate on what they might mean for the industry.
In their February 21, 2012 Budget Announcement, the B.C. Liberals indicated that in the coming months they will “review the rules that govern liquor sales to modernize liquor standards and create more opportunities for growth.” In recent weeks, B.C. Minister Rich Coleman has hinted that he would like to see the myriad of licensee discounts phased out in order to provide a level playing field for all liquor distributors by instituting a single, consistent wholesale price.
Any move to simplify the current system of mark-up and differential discounts would definitely make sales budgeting a simpler process for most B.C. wineries. This is assuming that most wineries will want a consistent total retail price, no matter where their wine is sold (Wineshop, LRS store, LDB store, VQA store). Then having a consistent wholesale price to start with makes calculating net sales revenue easier.
Since many of the existing sales channels would have the same wholesale pricing structures, calculating budgeted net sales revenue becomes much less dependent on the specific mix of sales channels. The result should be a little more revenue predictability for wineries.
The most promising regulatory change on the horizon for the B.C. Wine Industry continues to be the progress of Federal Bill C-311, which proposes to introduce a personal use exemption for wine. Under Canada’s current Prohibition-era law, it is illegal for private parties to import alcohol across provincial borders. Bill C-311, if enacted, would change all that, setting the stage for each province to implement their own limits around personal use.
The Private Member’s Bill, which was introduced in Parliament by B.C. MP Dan Albas, is expected to pass third reading this spring and then proceed to the Senate with hopes of becoming law as early as June, if not by year-end.
Industry experts at the Wine Law Seminar did express some concerns that the provinces, fearing a loss of revenue from their current monopoly on liquor importation, might impose a very restrictive interpretation of personal use, thereby limiting the effectiveness of Bill C-311. Assuming the provinces set reasonable limits consistent with the spirit of the legislation, Bill C-311 could prove to be a significant opportunity for many smaller wineries and for the B.C. wine industry as a whole.
Benefits of this bill are far-reaching.
Wineries would be free to fully exploit their wine clubs and internet sales, which means Canadian visitors to B.C. would be able to have their favourite wines shipped to their home. They could share the wine with friends and family, thereby creating a second level of loyal customers and Canadian wine industry supporters. Since direct-to-consumer sales are by far the most profitable sales channel for B.C. wineries, the ability to ship direct to customers outside of B.C. could be very beneficial, particularly to smaller producers.
More B.C. wine flowing to customers outside the province should create a growing awareness of the quality and diversity of B.C. wines in general among Canadians. If more Canadians know about B.C. wine, then there should be an increased demand for more and varied B.C. product in public and private liquor stores across the country. This should create increased opportunities for B.C. wineries wishing to grow their sales volume by developing out-of-province sales.
There is also the hope that growing Canadian awareness of the B.C. wine will result in increased tourist traffic.
Clearly, this should be an interesting year for the B.C. Wine Industry. Hopefully, next year at the Fourth Annual Seminar on Wine and Liquor Law in British Columbia the focus will be less on the same structural problems in the industry and more on new opportunities created by real change.