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Déjà vu for Ontario’s finance minister

for Ontario’s finance minister


April 18, 2008
By Jim Meyers

Topics

Back in the late 1980s, when wine
coolers were all the rage, Ontario’s short-lived Liberal government
campaigned for the sale of wine and beer in corner stores.

Grape board, new winery group hope network review will expand VQA sales

Back in the late 1980s, when wine coolers were all the rage, Ontario’s short-lived Liberal government campaigned for the sale of wine and beer in corner stores. It was seen as a way to increase tax revenue and boost the bottom line of what was then just a handful of Ontario wineries.

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It didn’t happen.

Now, 20 years later, the current Liberal government, through the Ministry of Finance, is revisiting the Beverage Sales Act. They plan to review the methods of distribution for distilled spirits, beer and wine, in order to upgrade service and value for consumers, again with an eye to increasing sales and tax revenue. A three-member panel appointed in mid-January and chaired by former LCBO vice-chairman John Lacy is expected to make its report in June.

Finance minister Greg Sorbara must have a feeling of déjà vu. In 1990, just before the David Peterson government was defeated by the NDP, he was the consumer minister who expanded wine sales in Ontario by permitting credit card sales and Sunday winery openings.

The Grape Growers of Ontario (GGO) look at the review as a window of opportunity to increase the sale of VQA (Vintner’s Quality Alliance) wine, made 100 per cent from Ontario-grown varietal grapes, as well as an opportunity to strengthen the wine content rules in order to get more Ontario grapes (tax revenue) in blended wines made by Ontario wineries.

Another organization interested in opening up the distribution system is the fledgling Ontario Wine Producers’ Association, formed in mid-March as a breakaway group from the 60-member Wine Council of Ontario. Eight Niagara wineries were at that meeting and since then, it has grown to more than 20 members.

Start-up winery consultant Peter Gamble, formerly with VQA Canada, speaks for the association, saying its two major concerns are the same as the GGO – the promotion of wine made entirely from Ontario grapes and the honest labelling of wines that are cellared in Ontario primarily using off-shore bulk wine but then sold as Ontario wines.

He said the group may come late into the review of Ontario’s alcohol distribution system, but they hoped to make a presentation to the review panel by the end of May.

GGO executive director Debbie Zimmerman said there is a need for what she calls “an expanded distribution option” to increase the market penetration of smaller wineries.

“There are now only two retail channels in the province to sell wine and that’s through the LCBO and the winery retail store system either on-site (the winery) or off-site.

“Two industrial wineries have clogged the system with their product,” she added, referring to the two largest wineries – Vincor and Andres – which have the most shelf space in provincial LCBO liquor stores and 265 of the total 290 off-site retail licences that were grandfathered in the Canada-U.S. free trade agreement in 1989. “The government needs to look at that system and it’s made it clear that it will.”

A private members bill by past Consumer and Business Services minister Tim Hudak, now going through the provincial Legislature would permit wineries to group together and sell directly to outlets selling only VQA wines. The Erie-Lincoln MPP is lobbying other MPPs for support of the initiative that will no doubt be reviewed by the panel.

Hudak has said the need for VQA-only stores is driven home by the fact only 10 of 49 Ontario wines that were nominated for the industry’s Cuvee Awards this year are available at LCBO stores. Otherwise, wine aficionados have to purchase them at the wineries or at the outlets of the few wineries with off-site licences.

There would be a major hurdle to overcome if these proposed VQA-only outlets are deemed to be in contravention of the now North American free trade agreement and the federal government gets involved.

Many of these off-site outlets are kiosks in grocery stores. Based on that logic, it’s a short leap on to grocery store shelves like in the United States. And while the idea of grocery stores selling wine has merit with Ontario’s grape growers as long as it’s Ontario VQA wine; it has no cachet with the Wine Council of Ontario and it’s member wineries.

Wine council president Linda Franklin has said that small wineries couldn’t survive in the low-margin, cutthroat grocery store retail environment that’s best suited for high volume wineries like Vincor and Andres.

“It doesn’t give more smaller producers access to the marketplace at margins they can afford,” she said about the idea of grocery store sales falling short of the 60-member WCO’s goal of helping its smaller craft winery members. Besides, she believes that selling booze in grocery stores is a no-brainer from the get-go because no company selling alcoholic products in Ontario supports the idea.

The sale of Ontario wine is best left with the LCBO, which has been a strong partner to Ontario’s wine industry over the years, she has said. “Things can be improved at the liquor board but we’re not looking to replace the LCBO. In addition, we need to be looking at opportunities for smaller wineries to gain access to the market with smaller lots of wine and better margins.”

The WCO would like to see additional channels of distribution such as LCBO franchised outlets or independents that would not be restricted to VQA wines. “Let the retailer choose their product mix and assure that there be a percentage of Ontario wines and allow Ontario wineries to direct deliver (like they do now to restaurants) to increase their profit margins,” Franklin said.


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