WineLaw.ca
Ontario Reforms Wine Laws for VQA & CIC Wine
- Wednesday, 14 October 2009 09:59
- Written by Mark Hicken
The Ontario government has announced changes to their regulatory regime which affect both VQA and Cellared in Canada (CIC) wines. Supposedly, Ontario is attempting to move consumers away from CIC blends and toward VQA product made from 100% Ontario juice. There will a change to the minimum domestic content requirement for CIC wine sold in Ontario from 30% to 40% overall (and to 25% for any single bottle). By contrast, B.C. has no domestic content requirements at all for CIC wine. The Ontario changes will obviously create increased demand for Ontario grapes but not in time for this year's harvest for which there is a glut of unsold product. By 2014, the domestic content requirement for CIC wines will be eliminated along with the tax breaks that Ontario currently provides for this category. The government claims that during this time, VQA sales will increase and consumers will move toward true Ontario product. However, as noted, B.C. has zero domestic content requirement for CIC wines and, in fact, CIC wines far outsell VQA product. As a result, the B.C. experience would seem to suggest that the Ontario strategy will be difficult to achieve on the consumer side.
The VQA Support Program is also returning in the LCBO. This program, which was canceled a while back, is similar to BC's VQA rebate program for government liquor stores. In Ontario, the program will return an extra 30% "rebate" to the wineries in order to encourage wineries to sell through the LCBO. Generally, VQA wine sold directly from wineries is not subject to liquor board markup (in either BC or Ontario). However, wine sent through the liquor boards is subject to full liquor board markup which means that the wineries must take a substantial cut in their profit margin in order to sell through government stores. The VQA rebate programs are designed to encourage wineries to send product into government stores by rebating some of the selling price and thus increasing the wineries' profit margins.
However, there is a serious issue as to whether these programs are sustainable in the long term as a result of Canada's obligations under international trade agreements such as NAFTA and GATT (a related though less serious trade issue is discussed here). An earlier challenge under GATT by the EU regarding discriminatory liquor board markup policies was successful and resulted in a settlement agreement under which Canada pledged to eliminate such differential pricing.
This story is now also covered in Wines & Vines. A summary of the massive amounts of recent publicity on Cellared in Canada wines is on my marketing site. A full update on all of these issues will also be provided at the upcoming November conference on Winery and Wine Distribution Law. There is also a good summary of recent developments on the Wine Case Blog.
A Possible Way Out of the Shipping Law Mess
- Friday, 09 October 2009 10:23
- Written by Mark Hicken
As usual, I have been thinking too much about the shipping law mess that Canada has by virtue of our 90 year old post-prohibition era law, the Importation of Intoxicating Liquors Act (IILA). From a consumer's perspective, the simple solution would be to repeal the law. That would open up inter-provincial trade for the wine industry and treat wine much like any other consumer product (except for the necessary legal restrictions on age etc...). However, there are practical problems in simply repealing the legislation, the most prominent of which are: 1) the IILA acts as a legal support for the various provincial liquor monopolies, and 2) the IILA also provides legal support to various preferential provincial policies that affect the wine and liquor industries.
One way to at least start fixing the problem would be to amend the IILA so that it basically mirrors the comparable U.S. legislation governing inter-state shipping. The Canadian law says that you can't ship wine (or any liquor) across provincial borders unless it is going to the relevant government or liquor board in the receiving province. This provision is now rather foolish because it assumes that the receiving province wants all shipments to go directly to the provincial government or liquor board. Because we now have private involvement in certain aspects of the wine business, this requirement is, in fact, no longer desirable for certain product going into British Columbia (imported wine destined for agents) and Alberta (shipments direct to consumers in amounts for personal consumption). By contrast, the U.S. law (the Constitution) says that you can't ship across state borders if the shipment results in a violation of the laws in the receiving state. If our law was changed so that it did the same thing (i.e. you can ship but not if the shiment results in a violation of the laws in the receiving province) then the shipping problem is fixed for BC wineries shipping to Alberta (because of their personal use exemptions). The situation for shipments to the other provinces would depend upon their provincial laws.
From the federal government's point of view, this type of amendment would mean that they had truly passed the buck on this issue to the provinces (which is, in fact, what was the original intention of the IILA anyway). This might prove an attractive option for the federal government politically. It's not an instant fix for all of the shipping issue facing the wineries but this approach would force the provincial governments to deal with the issue. To date, most provincial governments appear to have been steadfastly refusing to deal with this, deferring to the liquor boards to do so (which have an obvious conflict of interest). I would be interested to hear any thoughts on this issue.
House of Commons Pulled Into Shipping Law Morass
- Tuesday, 29 September 2009 14:17
- Written by Mark Hicken
Canada's outdated wine shipping laws were under the microscrope again today with no lesser body than the House of Commons pulled into the debate. It turns out that the House of Commons was planning to have a "wine tasting reception" for MPs and Senators later this year where they would compare wines from across Canada in order to select a house wine for the Commons. Wineries in BC were among those invited to ship samples direct to Ottawa. Of course, normally wineries can't ship out of province at all due to an ancient post-prohibition federal law which is still on the books. The law contains an exemption for the government but winery owners were understandably miffed when asked to do something for elected officials which the rest of us can't enjoy - the Vancouver Sun covers the story here. More coverage from the National Post here. Personally, I think it's great that the MPs and Senators want to sample Canadian wine - a comparison tasting of many Canadian wines is a fine idea. However, it doesn't leave a good impression when the elected officials are able to organize something which the rest of us are prohibited from doing. Maybe our elected officials should take a short break from non-confidence motions and think about changing the 1928 federal law which stops the rest of us from having similar tastings.
Time for Government to Exit the Retail Wine Business
- Thursday, 24 September 2009 09:20
- Written by Mark Hicken
I wrote an op-ed piece for today's Vancouver Sun in which I argue that it's time for the BC government to get out of the retail side of the liquor and wine business. I have really only glossed over the myriad of problems in this piece but suffice to say, I think that British Columbia is long overdue for sweeping reform of both its retail liquor and wine distribution system and the related regulatory framework. Simply put: our government could make more money, grow the industry and have more effective liquor policy if it adopts broad changes. It's time to bring B.C.'s liquor laws and retail system into the 21st century - and it's a perfect Olympic legacy project.
By the way and not surprisingly, the BCGEU's president, Darryl Walker, disagrees with me on these issues (which is fine). However, in a response on his web site, he labels me "a lobbyist". Just FYI ... I am not a lobbyist and have not been paid by anybody to advance my opinions. My opinions on reform of BC wine laws are solely motivated by the fact that I am passionate about wine and care about the wine industry.
Poor Regulation of Cellared in Canada Wines in the News
- Saturday, 19 September 2009 07:58
- Written by Mark Hicken
British Columbia's inadequate wine laws were in the news again this weekend as the "cellared in Canada" issue got prominent coverage on CTV News, BCTV, the CBC and in the Vancouver Sun. This story is an important one because it relates to a long standing practice where some of B.C.'s largest wineries sell imported wine with misleading packaging such that consumers think that it is B.C. wine. The LDB is complicit in this because they list and display these products as being from British Columbia when in reality they consist of almost all imported juice.
The full story on the cellared in Canada controversy is on my marketing site.