Tuesday, August 31, 2010

Beating Canada's Wine Communists

Dwayne PERREAULT - To this day, most Canadian wine consumers go to the same place Soviet citizens went to get their wine: the government shop, monopoly and cash cow created for and by the state.

Growing up in Canada in the seventies and eighties, I remember the wine section was almost an afterthought in the Provincial Liquor Board shop in my town, one or two aisles filled with mostly Liebfraumilch, Mateus and Baby Duck, a Canadian sparkling sweet wine made from vitis labrusca varieties. It was extremely popular, so much so that Andrés, the company that made it, actually discouraged Canadian vintners from planting vitis vinifera varieties.

The vintners eventually did plant European vines, and the quality of Canadian wine increased dramatically, thereby not only creating a viable Canadian wine industry but also sparking consumer interest in wine in general. The selection in the government shops has grown better: I can buy Grand Cru Classés and even Dom Perignon in my Saskatchewan hometown, and happily I came across some wines by Chapoutier in New Brunswick.

Still, I find it appalling that so many years later, provincial govenment shops still have a monopoly on the liquor industry in Canada. And it is ironic, since the province of Alberta has been quietly showing for the past 25 years that there is a better way. In 1985, the Conservative government there toyed with the idea of privatisation by granting three licenses to privately operate wine stores. By 1988, this had grown to twenty licenses; strangely, the number is now five or six.

I visited Andrew Hilton Wines in Lethbridge, where owner Max Baines holds one of these licenses. It is obvious from even outside the shop that this a store with some individuality, which takes pride in the wines it sells. Compare the following two pictures:

Andrew Hilton Wines in Lethbridge, AlbertaAndrew Hilton Wines in Lethbridge, Alberta

Government store, Moncton, New BrunswickGovernment store, Moncton, New Brunswick

Baines had started a local Opimian chapter in the late 1970s, and I hope in the future to post about Opimian, a very useful and ground-breaking wine society in Canada. He jumped at the opportunity to get one of those early licenses, and now runs a succesful business in the rather unlikely location of Lethbridge, Alberta (pop. 86,659).

According to Baines, real privatisation happened in 1994. “At that time, there were only three private wine stores. (Then-premier) Ralph Klein saw what private wine stores were able to accomplish. So he privatised the entire industry, effectively creating two industries: retailers and wholesalers, including importers and sourcers.

“To sell wine in Canada, producers need to work through an agent. In 1994, we had about 100 agents. Now we have over 400. This allows small producers to find specialized agents. Some of these are small, maybe only bringing in 20 cases a year. But the agents consolidate the orders, which saves costs which is passed on to the customers.”

Max Baines, owner of Andrew Hilton WinesMax Baines, owner of Andrew Hilton Wines

And this is how one competes with a government goliath, by offering top quality wines from smaller producers, creating more variety for the consumer. By instilling a sense of pride and individuality in your assortment, instead of having a huge stock for a homogenous selection available everywhere.

“A government controlled system isn’t able to support the small orders, say five cases, that I get,” says Baines. “But this was the idea of the government: they wanted 50% of my sales to be from own import. They wanted to offer more choice to the consumer.”

And it has worked. There is now seven times as much choice for wine consumers in Alberta compared to pre-privatisation. The private wine store also seems to be catching on in neighbouring Saskatchewan, where two stores have opened. British Columbia has speculative listings, where certain wines not in the common stock may be ordered and shipped through government stores. So there are signs of progress.

What stands in the way? Well, there’s the cash cow thing. It’s not that a government willingly relinquishes a multi-million dollar monopoly overnight. One serious roadblock would be the union. Government store employees work for the government of course, and they have a very strong union that would naturally resist privatisation.

And yet, so much could be gained, not only for wine professionals but especially for the consumer. It would be a big step forward, perhaps creating a renaissance for wine in Canada. I just doubt it will happen soon.

In the meantime, the house wine of choice for most seafood restaurants in New Brunswick is French Cross Pinot Grigio, a blend of Canadian and French wines (one would hope made from Pinot Gris). It tastes as good as it sounds and is available everywhere.

5 comments:

Remy Charest said...

This is a topic that would have deserved a bit more research, before passing judgment over all of Canada through childhood memories from over 20 years ago, and two wine stores in two of 10 provinces.

I'm sure the New Brunswick monopoly stores are not the most amazing, but Albertan privatization is not necessarily heaven, either. Oh, and check out what an SAQ store looks like: http://www.grenier.qc.ca/images/saq65.jpg

At any one time, there are close to different 8000 wines available in LCBO stores, in Ontario, and over 8500 wines available at SAQ stores in Quebec. Alberta lists some 15 000 wines as represented in the province, but that does not mean, in any way, that all those products are available at any one time.

If you had the thousands of products available as private imports in Quebec as well, the total number of wines represented in that province is very much comparable to Alberta.

Also, overall, it is harder to find a product in Alberta than it is in Quebec or Ontario, where customers have access to real-time inventories showing them what is available in any store in the province. If you're in Alberta, you have to go store to store, and many stores (including Andrew Hilton) don't provide online inventory or even their whole catalogue.

What about prices, you ask? Let's take one product, out of many: Cusumano's Benuara blend of syrah and nero d'avola costs 18.95$ in Quebec, and 21.99$ in Alberta (and over 30$ in BC, which has unbelievable markups and taxes through the BCLDB). In any case, the Quebec monopoly is the best deal. (Data from Wine Searcher: http://www.wine-searcher.com/find/benuara/1/canada)

I'm not saying monopolies are awesome: they are bureaucratic, throw their monopolistic weight around, and can be very frustrating.

Oh, and Alberta privatized retail, not the actual import, which still goes through the Alberta Liquor Board. So there is still a lot of state involvement - and taxes - in "privatized" Alberta.

Soviet communism is not an up-to-date comparison. If the word communist was to apply, it would be Chinese communist, something that has nothing to do with communism, except for the state control part.

Christian said...

In general you can truly say that the Canadian Liquor Monopoly is a cash cow for the Government - nothing else. On the other hand, it's also a cash cow for all the companies affiliated with that - warehouse, distribution etc. For example - in Alberta the cost for the storage of the products in the Govt. Warehouse is the highest in all North America.

On the products themselves - there's 1200+ private Liquor stores in Alberta - for +/- 3mio people. thats the highest per-capita store summary worldwide. And to be real honest - selection wise maybe 100 stores care about the products they carry - the rest goes after mainstream brands.

Lets look at the top-selling wines in Alberta - No. 1 is Wolff Blass Yellow Label Cab, followed by Yellow Tail Shiraz - and when you look at all the others that follow - that's the who-is-who of industrial wine production. This whole list is dominated by Liebfrauenmilch, Yellow Tail, and Co. Not that I want to say these are not good products - don't get me wrong - everyone should be drinking what they like. But in general you can say (and I'm sorry to say that), that Albertan's are uneducated when it comes to liquor.

Albertans take pride in their in-province produced beef - own regulations for quality for AAA certified beef. But then they drink Yellow tail with it. There are a few stores and other companies that try to bring education to the people here, but then are constantly undermined by the importers of industrial-produced wine that retails for $7.99 - and this ruins all the hard work these "educators" are providing.

Agencies with these cheap-ass wines should rather think about what they are doing for the whole industry. The only benefit there is is for their shareholders as they maximize the profit.

I had a chat with a store owner a few months ago - he just bought the store 3 months before. I knew the previous owner, and his wine selection was not great, but fairly good - a bit of everything. The new owner complained to me that his revenue was down by some 30% and he had to lay off 2 employees because the income is so low. I had to tell him that the previous owner's average bottle of wine was at around $15.99. The new owner's selection was down to an average price of $ 11.99 as he switched all to mainstream and cheap brands. Now guess where his 30% are??? Now his poor decision to go cheap did cost two people's jobs.

I'm sure these weren't the only two that have lost their job because of poor decisions. And do the big agencies care - of course not, their product is in the store, thats all they care.
There the only good thing about a Government store is, that people won't loose their job if that happens - but thats about the only good part.

Dwayne Perreault said...

Dear Remi,

I enjoy reading your writing, and as a wine journalist and blogger living in Quebec, I’m not surprised you might have a different view than I do here in Amsterdam, where I’ve been for the past 19 years. That’s why I sent you the link for the posting, hoping you might have a comment. Thank you for sharing.

If you’re upset that I didn’t mention Québec, it’s for practical reasons. Obviously a book would need to be written for this subject to be handled in depth, but I have to limit myself to about 700 words. You know how it is. But I travelled to Alberta, Saskatchewan and the Maritimes this summer, so I mentioned stores in those provinces.

I agree, the SAQ (Société des Alcools du Québec) is far ahead of other provinces when it comes to assortment, price, atmosphere and knowledgeable service. But shouldn’t one expect a cetain savoir faire from a French speaking province? I had very positive experiences in the shop on Beaubien, when I went back to Montréal for the Grey Cup in 08. They had the Cahors Château du Cèdre for the same price I sell it here.

By the way, it was explained to me that New Brunswick’s wine selection comes through the SAQ, I think that’s for the Sélection stores.

I point out in my third paragraph that provincial liquor boards have come a long way over the years, from my own perspective as an ex-pat travelling home. But having lived here for so long, the idea of a state-run monopoly on the liquor industry just seems ridiculous to me. Some Scandinavian countries have a similar system.

I don’t interpret that you are status quo on this subject, at least that’s not what your third last paragraph suggests. Nation-wide, don’t you think things could be better? On a forum where I posted a link for the posting, Saskatchewan’s special order desk was described as a bottleneck. Most people feel they are being gouged with taxes, with the result that some people buy their wine out of province (i.e. Alberta).

You are right that import still goes through the government; there will always be taxes, privatised industry or not. And Alberta, with so many listings, is a small market compared to Québec or Ontario. I wonder what an experiment in privatsation could accomplish there? Would that necessarily be a bad thing? Some actual competition in the market couldn’t be bad for the consumer, could it? And instead of having special order desks, private imports and speculative listings, have actual bottles in the shops. Different shops with different bottles.

But I know, I’m a dreamer.

Remy Charest said...

I'd agree about privatization if it seemed to work, but let's look at a couple of other products:

Chianti Classico San Felice:
SAQ: $19.20
Alberta: $21.89

Fuzion Shiraz-Malbec:
SAQ: 8.75
Alberta: 9.38
(LCBO beats it at $7.80)

Brouilly Georges Duboeuf
SAQ: 18.25
Alberta: 18.95
(Oh, and darn, LCBO wins again: 17.80$)

Alberta had a small edge on Mouton Cadet, but after looking up several products, it's the only one I could see that was actually cheaper.

So where's the advantage to having supposed competition in the market? If the wine hasn't gotten cheaper and it's actually harder to locate a more specific wine, how has competition been better for the Albertan consumer.

Looking beyond Canada, I can give you other examples from New York, where I worked and travelled to quite a bit, a few years back. Often, the sticker price on the bottle would be the same on wines in NYC than in Quebec - and that's when the Canadian dollar was worth about 65 cents US. Not much advantage, again.

The difference is, notably, that bargains don't happen on wine in Quebec or Ontario, normally. Once the price is set, it's set. Then again, when speculation hits a high-scoring wine, prices also don't go up in Quebec and Ontario, where they do in more open markets.

You might say that French wines will be much cheaper in France, or Italian wines in Italy, and you would be right about that. However, try to find an Australian, Californian, Spanish wine in France or Italy...

Would I love to have an artisan/natural wine caviste in Quebec City? Heck, I probably would be opening the store myself. But overall, I'm not sure the tradeoff is that great for the consumer.

Mike said...

Hi, Thanks for the blog. I just found it recently and love the site. As someone trying to learn more about Bordeaux, it's great.

I'm in Newfoundland where, like most of Canada, the liquor stores are government run. I've got to say, I'm of a mixed mind about it. On the one hand, I'm always amazed at how much cheaper wine can be in the States. Here in Nfld the prices are often near double what I see advertised on American on-line sites. That can be frustrating, of course, because it causes me to fantasize about having twice as many bottles of Branaire-Ducru in my cellar! On the other hand, Newfoundland has a very small population and I'm not sure privately owned stores could afford the selection that the government stores provide. I live in St. John's. At a population of about 100,000 it is by far the largest city in the province! No other town comes even close in size. And yet, despite our tiny population, the liquor stores bring in some pretty amazing wines. I recently bought 6 bottles of the 2000 vintage of Chateau Pontet-Canet! If I wanted to do a vertical of, say, Domaine de Chevalier, I can go to my neighborhood government liquor store right now and pick up bottles of the 04, 05 and 06 vintages (reds and whites), and have a mini-vertical. Want a first growth? We can get them off the shelf (at least some of them), no special ordering required. Unfortunately, I don't have the $3000 required for the '61 Chateau Haut-Brion, let alone the the $900 for the '99 Lafite. But the fact that these wines are available here, in a town of 100,000, is amazing and entirely the result of the policies of the Newfoundland Liquor Commission.

That being said, selection remains spotty. The NLC offers a great selection in certain areas, less so in others. There's great Bordeaux on offer, but its primarily the classed Chateaux that you'll find -- although there are holes in the stock, I can get almost any Cos of the last two decades, some from the 80s, and even a '75 if I wanted it, and could afford it! What you won't find is much of a selection from unclassified or off-the-beaten-path wineries, the sort of thing Alice Feiring likes to write about. There's a limited amount of Burgundy, but almost nothing from the Loire. There's a pretty good selection of Aussie stuff, and not just the critter wines. The selection of Italian offerings, I'm afraid, seems to be slipping a bit. Increasing amounts of Chianti seem to be pushing Barbaresco and Barolo off the shelves. As a fan of nebbiolo that's a development I can do without. There's a selection of Super Tuscans and big named Cali Cabs, but again, selection is limited. Oddly, there's not as much Canadian wines as one might expect to find in a Canadian store! Nonetheless, having lived in southern Ontario and Calgary, I remain impressed by what is on offer in this very tiny town. I just can't imagine a private store being able to offer the same level of selection and quality, even in the limited areas available through the NLC.