Supermarket Roll-Out. The BC Government's plan to roll out limited alcohol sales in supermarkets has now launched with a single Save-On Foods store in White Rock (Surrey) being the first location. This store has been appointed as a third party operator for a BC Wine Institute license that permits the sale of only 100% BC VQA wines (i.e no imported wines). These licenses (there are currently 21) had previously only allowed for the sale of wine through freestanding VQA wine stores. Recent changes in government rules permit the transfer of those, and other licenses, into supermarkets. The rules are complicated and, depending upon the license type, may result in liquor sales either using a segregated "store within a store" concept (for beer, spirits and imported wines) or for "wine on regular shelves" if the licence is restricted to the sale of 100% BC wines (see: BC Announces Supermarket Wine & Liquor Rules). A second supermarket location was slated for the Urban Fare store on Alberni St. in downtown Vancouver but that opening is currently on hold due to compliance issues with the City of Vancouver's liquor policy. It is currently unclear how many, if any, of the other VQA store licenses may transfer to supermarkets ... or how many other existing private retail or government stores will make the move into supermarkets.
The government has also recently passed and given Royal Assent to the Special Wine Store Licence Auction Act which contemplates the auction of an unspecified number of additional licenses that would permit the sale of 100% BC wine on regular supermarket shelves. It is rumoured that the number of licences to be issued under this Act will be 24, but that is not confirmed ... and there is no announced time line for the implementation of this plan.
The above developments have given rise to concerns regarding both trade agreement compliance and wholesale pricing. Both the California Wine Institute and Wine Australia have already written to the BC Government and expressed their views that the "BC wine on regular shelves" supermarket model is not compliant with Canada's trade agreement obligations under both NAFTA and GATT. It is my view, as noted in earlier posts, that this model creates a trade violation that could give rise to serious consequences. In addition, other private retailers have raised concerns about the fairness of the model including the wholesale pricing currently being provided to the supermarket. The VQA stores have historically received, and still receive, a 30% "wholesale discount" (of which 26% goes to the store operator) and also operate under a consignment sales model from the wineries (i.e. no cost for stock). All other private retailers have substantially lower retail profit margins under the new wholesale pricing system (about 15-16%) and have to pay for their stock up front ... which obviously provides the supermarkets with a significant advantage.
Wine and Meat Labelling. In other news on the trade compliance front, a trade dispute relating to the labelling of meat products in the U.S. recently threatened to affect the import wine business in Canada. The WTO has issued a final ruling that the U.S. violated their trade obligations on the meat issue and, as such, Canada was set to ask for the authorization of retaliatory tariffs on a number of products including U.S. wine. To its credit, the California Wine Institute supported Canada's position in this dispute and urged Congress to repeal the meat labelling law. Yesterday, Congress appeared to set the wheels in motion to do exactly that: see US Congress Starts Repeal Process for Meat Labelling Law.
New Liquor Statute for BC. Finally, the BC Government has also passed a new Liquor Control and Licensing Act, which will come into force by regulation at a later date.