BC Grocery Wine Update

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Written by Mark Hicken Mark Hicken

Category: Latest News Latest News

Published: 16 November 2016 16 November 2016

Here is a policy update regarding the sale of wine in grocery stores in BC.

Possible Licensing

There are currently 4 main potential avenues for enabling the sale of wine in grocery stores in BC: 1) Transfer of VQA Operating Agreement, 2) Purchase of Auction Licence, 3) Transfer of Private Store Licence, and 4) Transfer of Government Store.

In respect of VQA store transfers, these licences are held by the BC Wine Institute. Most of the operating agreements associated with these licences have been purchased by a single grocery chain, the Overwaitea Food Group (Save-On Foods). A number of them are currently open for business. These licences only permit the sale of BC product and can sell wine on the regular shelves. There are no new VQA store licences being issued.

In respect of the Auction licences, the first round of auctions allowed bidding for the "right to apply" for 6 licences. All were purchased by Loblaws with cumulative bids totalling about $7 million. Another round of auctions for an additional 6 licences will be held at the beginning of December. The first of these stores opened this week in South Surrey (a Real Canadian Superstore). Like the VQA licences, these licences only allow the sale of BC product which can be sold on the regular shelves.

In respect of private store licence transfers, it is possible to transfer an existing LRS or IWS licence to a supermarket. This would generally result in a "store within a store" sales model although it is possible with an IWS licence to end up with the "regular shelves" model if the products sold are restricted to BC product. I am not aware of any such transferred licences being open for business at the present time ... although some grocery chains have purchased licences that they may eventually use in this way. No new private store licences are being issued.

In respect of the government store transfer, it is possible for a government liquor store (not technically a licensee) to move to a supermarket using the "store within a store" model. I am not aware of any such transfers being open for business at the present time ... although it is possible that some may be in the works.

Municipal Restrictions

Grocery store alcohol sales are also subject to municipal zoning and bylaw restrictions. Some BC municipalities have restricted the operation of the above licences by either not permitting the sale of alcohol in grocery at all or by making such sales subject to distance separation requirements (similar to the 1 km rule for private and government stores). 

Trade Compliance Issue

As discussed here earlier, many of Canada's international trading partners have complained about the grocery model on the basis that it discriminates against imported wines (i.e. BC wine can be sold on regular shelves but imported product cannot). This issue is ongoing and received additional media coverage this week: California Wine Lobby Group Says U.S. to File Complaint Over BC Liquor Reforms. The progress or resolution of any such complaint may be affected by the recent election of the Trump administration - which appears to be poised to take either an anti-trade stance or a more aggressive position on international trade issues. 

Ontario Grocery Wine Sales. The Ontario government has introduced a complicated system that will allow for an increase in the sale of certain beer and wine on the regular shelves of supermarkets as well as allow for the conversion of existing wine kiosks into "regular shelf" sales licenses.  Basic information on the system is available from the AGCO site here: Beer, Wine & Cider Sales in Grocery Stores. However, this summary (Ontario Announces Bid Process for Wine Licenses) from the trade organization, Drinks Ontario, also provides some very useful links. It should be noted that the Ontario approach also provides preferential treatment to "in-province" producers since many of the new licensees will only be able to sell Ontario product for the first 3 years of their license term and the other rules regarding sales appear to favour Ontario producers.

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InterProvincial Shipping Legal Update

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Written by Mark Hicken Mark Hicken

Category: Latest News Latest News

Published: 10 November 2016 10 November 2016

Here is an update on the status of the constitutional challenges to interprovincial alcohol restrictions that are currently before the courts in New Brunswick and Alberta.

Comeau Case (New Brunswick). The trial level decision found that New Brunswick's restrictions on the interprovincial importation of alcohol were unconstitutional. The case was then appealed directly to New Brunswick's Court of Appeal. The NB Court of Appeal has refused leave to appeal (i.e. they have declined to hear the appeal). This means that the lower level court decision stands and constitutes a precedent only within the Province of New Brunswick. It remains to be seen whether leave will now be sought for the case to be heard by the Supreme Court of Canada and whether such an application would be successful. CBC coverage of this decision is here: Acquittal of Cross-Border Beer Shopper Stands.

Steam Whistle, Great Western (Alberta). An injunction was issued earlier upon application by Steam Whistle (of Ontario) that prevented the application of discriminatory beer markups in Alberta which favoured in-province breweries. The Alberta government subsequently revoked the discriminatory beer markup system. However, it then instituted a "rebate" system for small Alberta breweries which had a similar practical economic effect. On November 9th, an Alberta court issued another injunction (upon application by both Steam Whistle and another brewery, Great Western of Saskatchewan) such that the breweries will not be affected pending resolution of the issue at a full hearing to be held in May 2017. The breweries will presumably argue that any discriminatory markup or rebate system is unconstitutional under s.121 of the Constitution which creates a "free" trade zone between the provinces for Canadian products. CBC coverage of the decision is here: Great Western, Steam Whistle win latest battle in Alberta beer war.

It should be noted that each of the above cases could potentially have significant effects for provincial liquor policy across the country. Most Canadian provinces currently impose some restrictions on the interprovincial transport of alcohol (see: Shipping Law Update). These could be overturned or affected by the Comeau case if it gets to the Supreme Court of Canada. In addition, many provinces (including BC) impose discriminatory liquor markups which favour their own in-province breweries, wineries or distilleries. These could be overturned or affected by the Steam Whistle/Great Western case if that case makes its way up the appellate ladder.

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Premiers Announce Limited Deal for Access to Canadian Wine

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Written by Mark Hicken Mark Hicken

Category: Latest News Latest News

Published: 24 July 2016 24 July 2016

On Friday July 22nd, the Premiers of British Columbia, Ontario and Quebec announced a limited deal to improve access to Canadian wine in their respective provinces. The joint press release is here: Increasing the Flow of Wine Among Quebec, Ontario and British Columbia. The press release does not provide any detail as to what the initiative covers but it refers to easier on-line access to wines produced in these three provinces. It also refers to the fact that the initiative will be implemented through actions of the liquor boards in each province. As noted, there is currently very little information about the extent of this agreement.

However, it is possible that the agreement is based upon a relatively new e-commerce program unveiled by the LCBO (Ontario's liquor board) late last year, which indicates a process for "special orders" of Canadian wines. The details of that program can be found here: LCBO E-commerce, particularly in the links labelled "e-commerce presentation to the trade" and "FAQs about e-commerce" (both are PDF documents). If the LCBO program is the basis for this provincial deal, then the following characteristics would constitute the fundamentals of the program:

• Wineries would be able to list their products on an e-commerce website run by the liquor board in the other province (e.g. LCBO or SAQ, Quebec's liquor board).
• Consumers in the other province could purchase any of the listed wines so long as they ordered by the case. 
• The wines would not be stocked by the liquor boards. Rather, they would be ordered by the liquor board from the winery following a customer order.
• The winery would ship the wine to the liquor board in the other province, who would then either deliver the wine to a government liquor store for pickup by the customer (free) or arrange for delivery to the customer's home or office at extra cost. Delivery would only be possible within that liquor board's particular province.
• It seems likely that the wines listed on the site would be subject to provincial liquor board markups, which in the case of Ontario are 73.5% for out of province wine. This would mean that the wines would either have a higher end-consumer price in the other province than they would in their home province or that the winery would have to sell to the liquor board at a significant wholesale discount.

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Alberta Govt Reverses Discriminatory Markup Policy

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Written by Mark Hicken Mark Hicken

Category: Latest News Latest News

Published: 14 July 2016 14 July 2016

The Alberta government has announced that, effective August 5th, it is eliminating the discriminatory liquor markup policy that was introduced in the last provincial budget. As reported here earlier, Alberta had previously had a liquor markup policy that applied equally to products regardless of place of origin. The budget changed that by providing lower preferential markups to small breweries located in Alberta and provinces that had signed the New West Partnership. As a result, an Ontario brewery, Steam Whistle, sued the Alberta government and obtained an injunction to prevent the change on the basis of a preliminary argument that s.121 of the Constitution (the "free trade provision") might prevent provinces from charging markups or fees that did not apply equally to all Canadian products. The Alberta government has now announced that they are reversing course and going back to a system that is non-discriminatory: Government to Create Consistency for Alberta Beer Markups. This move should effectively end the Steam Whistle case - which will also end the potential for a court ruling on the effect of s.121. At the same time, the Alberta government announced it will later introduce a "grant program" to encourage the growth of Alberta based small brewers.

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