Media Reports on Ontario Supermarket Wine Plan

The Toronto Star is reporting the details this morning of the Ontario government's plan to roll out wine sales in supermarkets: Ontario Uncorks Plan for Supermarkets. The plan calls for a phased roll-out of wine sales in supermarkets with an equal number of licenses to be issued at each stage for: a) "Ontario-only" wine, and for b) the sale of all international wines. In the first year, 35 licenses of each type would be issued (70 total). In 2019, 40 more licenses of each type would be issued (80 more for a cumulative total of 150). At the end of the phase-in period, all licenses would permit the sale of all types of wine. There is no limit to the number of licenses eventually issued. The licenses would permit the sale of wine on regular supermarket shelves (does not require segregated store within a store). The issues surrounding this plan and BC's supermarket plan will be discussed at the upcoming Wine Law Conference in Vancouver, to be held on February 20th. Please attend the conference for a full analysis of the issues.

BC Wine Law Conference Provides Regulatory Update

The upcoming BC Wine & Liquor Law Conference will provide a comprehensive regulatory update on many issues facing the wine and liquor industries in British Columbia. The conference will take place on Monday, February 22, 2016 at the Metropolitan Hotel in downtown Vancouver (this is the beginning of the "Vancouver International Wine Festival" week). The agenda includes coverage of: the ongoing changes to BC's liquor laws (including those focused on BC's retail environment, wholesale pricing structure and distribution system), as well as interprovincial shipping, developments in the discussions around new British Columbia appellations, new water management laws, liquor host liability for wineries, and some views from south of the border on distribution in the U.S. and the use of social media for direct sales. There is a discounted tuition fee of $300 USD for those working in the wine or liquor industries. Full information and registration is here: Law Seminars BC Wine & Liquor Law Conference.

Saskatchewan Announces Liquor Retail Reforms

The Saskatchewan Government has announced some major changes to its retail system for liquor, contingent upon the Brad Wall government being re-elected in April 2016. Details on the changes can be found here: SLGA - Future of Liquor Retailing and in this PDF: Future of Liquor Retailing Backgrounder. If implemented, there will be some very significant changes to to the liquor retail system in Saskatchewan that can be contrasted with the changes being made here in British Columbia:

Expansion of Private Retail. Saskatchewan plans to convert 40 of its existing 75 government liquor stores to private retailers. In addition, it will issue licenses for 12 new private retail stores in communities that have been designated as underserved. The end result of this expansion will be that the government retailer will only operate 35 stores. Saskatchewan currently also has 4 private liquor retailers, 190 rural liquor stores, and 450 "off-sales" locations. Saskatchewan is not introducing liquor sales in grocery stores. By contrast, BC's changes have included an expansion of government liquor retailing through extended hours as well as the introduction of wine sales in a limited number of supermarkets. There has been no increase in the number of freestanding private liquor retailers in BC.

Level Playing Field. Saskatchewan is planning to introduce a new wholesale pricing system for liquor such that all retailers (both government and private) pay the same price for all products. British Columbia has also done this to some extent, with the one exception that BC's new supermarket wine vendors, as well as its existing VQA stores, currently pay significantly less at wholesale than everyone else. In addition, Saskatchewan will permit restaurants/bars/hotels to buy liquor from any retail source that they choose. By contrast, BC still requires that these customers purchase only from government channels. Saskatchewan will also create consistent business operation rules (e.g. hours of operation, pricing, discounts) for all retailers. 

Discounts on Wholesale Pricing. Saskatchewan will allow individual retailers or retail chains to negotiate lower wholesale pricing from suppliers through incentives (see below). Presumably, this could be based on volume or other factors. It will also allow suppliers to set "system-wide" discounts at the wholesale level. In contrast, British Columbia only allows "system-wide" discounts. 

Inducement and Trade Practice Rules. Saskatchewan will eliminate its prohibitions on inducements (financial incentives provided to retailers from suppliers such as co-op advertising that are common in other retail sectors). The only restriction in SK will be that incentive/inducement arrangements cannot exclude competitive products. In contrast, British Columbia has not reformed its inducement and trade practices rules (a 2010 industry consultation appeared to indicate that it would do so but that did not happen).

Changes to Liquor Board Markups. Saskatchewan has introduced a new system of liquor markup at the wholesale level which will generate the "wholesale prices". Retailers will then set their own retail level prices themselves with varying retail level profit margins. This system is basically the same as BC's new system. However, the new markups for wine in SK are dependent upon alcohol level and are higher. For wine that has 14.5% alcohol or less, the markup will be 94% on the first $12.50 per litre of supplier cost and then 53% markup on the remaining value. Wine that has an alcohol level higher than 14.5% is treated the same as spirits with a markup of 125% on the first $25 per litre of supplier cost, 83% on the next $12.50 per litre of value and then 56% on the remainder. These markup levels are considerably higher than the levels imposed in British Columbia (89% on the first $11.75 per litre of value, 27% on the remainder for all wines). For wines that are over 14.5% alcohol (which would include many New World wines as well as pretty much all fortified wines such as sherry and port), the resulting consumer prices in SK will be extremely high (certainly higher than in BC and significantly higher than in AB). 

None of the above changes will actually be made unless the current SK provincial government is re-elected in April 2016.

Saskatchewan open for DTC shipments from BC

Saskatchewan is now open for DTC shipments of wine (and spirits) from BC. However, the customer must obtain an authorization permit from the SLGA which is valid for one year. The maximum quantity of wine per shipment is 9 litres (one case) but multiple shipments during the year are permitted. Upon receipt of a shipment, the customer must pay a significant markup to SLGA which for wine is $5.25 per 750 ml bottle. See the SLGA info page here: Direct Shipment of Wine.

Charges Dismissed Against FedEx in Nfld Wine Shipping Case

Charges against FedEx for shipping BC wine to Newfoundland were dismissed today by a court in St. John's. The charges had originally been laid against FedEx as a result of a shipment of BC wine to that province last year. FedEx's lawyer argued that there was no case against FedEx because: a) the federally regulated courier company was not subject to provincial liquor restrictions, and b) there was evidence that the Newfoundland liquor board had set up the case by having the wife of a liquor corporation executive order the wine in question. The prosecutor agreed that there was no case. The judge dismissed the charges before FedEx's counsel had an opportunity to make any constitutional arguments. FedEx's lawyer has asked that the Newfoundland liquor corporation pay FedEx's legal fees in the case (a decision on the costs issue will not be made until late September). See CBC report here: FedEx Accuses NLC of Set-up to Protect Wine Monopoly and this longer report from the St. John's Telegram: FedEx Contraband Wine Case Uncorked. Following the decision, FedEx Canada issued a series of tweets indicating that it believes that all Canadian provinces should remove interprovincial shipping restrictions. This case is interesting because FedEx argued that, because it is a federally regulated business, it was not subject to provincial laws affecting interprovincial transport. It appears that the Crown accepted that there was no reasonable likelihood of conviction, at least partly due to this. If this argument is correct, then provincial governments and liquor authorities would not be able to prevent couriers from transporting interprovincial shipments of wine or other alcohol. Unfortunately, there was no definitive ruling on this question ... but there appears to have been no real arguments made against FedEx's position.