U.S. States Consider Retail Liquor Privatization

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Written by Mark Hicken Mark Hicken

Category: Latest News Latest News

Published: 09 February 2010 09 February 2010

Cash strapped state governments in the U.S. are also considering increased privatization of liquor retail in order to raise money to fight ballooning deficits. The basic argument is correct: government makes money from liquor retail by imposing taxes (or hidden taxes) at the wholesale level. Government involvement at the retail level is actually a drain on the wholesale revenue because the private sector can run retail operations more efficiently and less expensively than government can. This is true in B.C. and in most U.S. states with government involvement in retail. If government got out of the retail side, it would actually generate more money to fund social programs or fight deficits. Retail is simply not a "core government service". Pretty basic economics really. No doubt there will be more to come on this issue.

NY Wine in Supermarkets - Less Wine in Australia

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Written by Mark Hicken Mark Hicken

Category: Latest News Latest News

Published: 05 February 2010 05 February 2010

Two news stories are in the headlines today, both of which are indicators of important issues facing the wine industry in BC. The first is a an editorial in the New York Times supporting NY Governor David Paterson's attempts to open up that state's retail wine business so that its existing "standalone liquor store" provisions are removed and that state supermarkets also be permitted to sell wine and beer. Here in BC, we are still struggling to get our retail system to New York's current stage. Currently, we still have an unworkable mix of government retail and private stores all serviced by the government wholesaler who is in a conflict of interest. Just this past December of 2009, our laws were amended (sensibly) such that private stores no longer need to be associated with a bar or hotel license (hallelujah). However, all of those stores are bound by standalone provisions ... similar to New York's current laws. Supermarket sales are not even on the agenda. The second issue is the global glut in the wine industry. Australia's wine industry has grown by leaps and bounds over the last decade. However, global economic conditions and uncontrolled growth have resulted in a serious glut of wine in Australia. Australian regulators and wine industry groups are trying to figure out how to reduce production by 25% in order to restore economic balance to the industry. So far, BC's wine industry has escaped these global problems due to our protectionist system which creates inflated retail prices disconnected from the world economy and which discourages competition by making entrance to the market exceedingly difficult. However, the BC industry should be watching these issues carefully. Sooner or later, our system will have to change in order to comply with Canada's trade obligations. When that happens ... look out.

U.S. Seeks to Repeal Border Wine Markups

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Written by Mark Hicken Mark Hicken

Category: Latest News Latest News

Published: 28 January 2010 28 January 2010

Interesting political moves in the U.S. may end up having a beneficial effect for Canadian wine consumers and, perhaps, a broader effect that is harder to quantify on the Canadian wine industry. This story in the San Jose Mercury News indicates that there is currently a coalition of U.S. wine producing states that are lobbying Canada to eliminate its excessive border charges on Canadians bringing back wine from the U.S. As most wine enthusiasts know, the charges at the border verge on the ridiculous. In BC, anyone exceeding their miserly duty free allowance of 2 bottles generally has to pay an extra 100% tax and markup in order to bring any additional bottles back. Most Canadian wine lovers hate this system, as do U.S. wineries who lose a lot of potential sales due to the markups. The U.S. effort is described in more detail in this press release from New York Senator Charles Schumer who is lobbying on behalf of the NY wine industry.

This effort could have broader implications for the BC (and Ontario) wine industries. Currently, wine purchased directly from BC wineries escapes all BCLDB markup while wine purchased by a BC wine consumer directly from a Washington (or Oregon or California) winery is subject to full markup at the border. The differential treatment creates serious trade agreement problems which should have been addressed years ago. Unfortunately, the economic consequences of bringing BC and Canadian policies into compliance could be far-reaching and, frankly, I am very concerned about the effects on the BC industry. For consumers though, this is likely to be good news ... the large numbers of BC consumers who are sourcing their wine through Alberta (which has sensible border markups) would finally be able to stop doing so.

UPDATE (Feb 17 2010): This issue has now been covered by the trade publication, Wines & Vines: Canada's Wine Duties Hinder Trade. You may also wish to review this related analysis: BC Wine & Trade Agreement Trouble.

Ontario & BC to Remove Cellared in Canada Designation

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Written by Mark Hicken Mark Hicken

Category: Latest News Latest News

Published: 21 January 2010 21 January 2010

A story in the St. Catherines Standard by wine industry reporter, Monique Beech, indicates that Ontario will join British Columbia in removing the "Cellared in Canada" (CIC) designation from marketing in retail stores and from the labels of wine bottles. The BC LDB has already changed is signage in retail stores to remove the CIC description and replaced it with the more accurate "Bottled in British Columbia from International and Domestic Wine". Consumer surveys had found that the old CIC labelling was misleading to consumers, many of whom thought they were purchasing 100% Canadian wine when they bought this product.

Update (Jan 27, 2010): This story has now also been covered by Wine Spectator: Canadian Wine May Soon Be More Canadian. An interesting point brought up in this article was that the CEO of Andrew Peller admitted that 60% of his company's revenue comes from CIC wines. Considering that CIC wines are the least expensive segment, that would mean that by volume, probably 70% or more of sales are CIC.