WineLaw.ca

Three recent articles in the main stream media make it clear that the BC government may want to consider a wide ranging liquor policy review sooner rather than later. This Globe and Mail article, Vintners Raise Their Glasses to Dix\’s Push to Relax Liquor Laws, raises questions as to why the provincial government has not come out more strongly in favour of Bill C-311 when it is abundantly clear that the public wants this reform. In addition, this article from Whistler, Pride Week Organizers Soul-Searching at 20 Year Mark, asks why the provincial government is continuing with its outdated liquor licensing policies when those policies are actively shutting down economic activity in the tourism and hospitality sectors. Finally, Tim Pawsey reviews the continuing absurdity with our wholesale liquor distribution system in this article for the Courier: Overhauling Antiquated Liquor Laws Anything But Fluid. As I have said previously, I am hopeful that 2012 will finally be the year when BC decides to take a new more sensible approach to liquor policy and regulation.

Is it too much to hope that 2012 could finally be a year when some of BC\’s (and Canada\’s) outdated wine laws get reformed? Here are my picks for the top three issues that need modernization.

1. Wine Shipping Laws. On this issue, there has never been so much progress and good will. Bill C-311 was introduced into the House of Commons in 2011 to reform Canada\’s archaic 1928 federal prohibition on the transport of wine across provincial borders. The Bill has now passed second reading and is headed for the House of Commons Finance Committee for consideration. If it passes on third reading, hopefully sometime in the spring, it will create a national personal use exemption so that Canadians can direct order wine from other provinces in limited quantities for personal consumption. The Bill has received cross-party support as well as kudos from the public and media including today\’s Globe and Mail editorial: Let the Wine Flow.

2. Wholesale Pricing and Distribution. Vancouver food and wine writer, Tim Pawsey, nails a huge economic problem for BC when he describes problems related to both distribution and pricing in our outdated liquor wholesale system in this article: A Few Potable Predictions for 2012. The distribution absurdity is obvious when artisan spirits produced on Hornby Island have to make six ferry trips and travel almost 200 kilometres (nearly 400 round trip according to Google Maps) in order to be sold at the Hornby Island General Store, which is located about 300-500 metres from the distillery (according to Google Maps, about 3 km by road). Why? Because all spirits produced in BC are distributed by the monopoly BC Liquor Distribution Branch, which mandates that the product be routed through its wholesale distribution warehouse, located in Vancouver. As Tim points out, BC\’s wholesale liquor pricing system also needs to be fixed by introducing a normal wholesale pricing structure for wine and liquor. The current BC system \”works backwards\” from government mandated retail prices, effectively removing competition and putting most restaurants and private stores at a huge disadvantage by denying them proper wholesale prices (restaurants get ZERO discount off government retail, private stores mostly get 16% off). Wine consumers should care about this because it means that you will pay about $20 or more at retail and probably about $40 in a restaurant for a wine that wholesales for about $7: see these LDB markup calculators for the details.

3. End the Prohibition Era Mentality on Licensing. BC\’s liquor licensing laws received large amounts of negative press in 2011, mostly because they have not been properly updated for decades and because they still incorporate a prohibition era mentality in terms of enforcement. The problems are too many to exhaustively list but they include: hopelessly outdated restrictions on festival events (Whistler Jazz Fest denied a liquor license), no happy hours, no corkage in restaurants, caterers that can\’t pick up liquor, no alcohol in movie theatres, and many arcane rules that favour government liquor stores over private ones. See this article – BC\’s Five Looniest Liquor Laws for more info.

BC is already a fabulous food and wine destination … but to continue with that progress, we need to make sure that government policy encourages food and wine culture. My wish for 2012 is that government will wake up to the fact that our
outdated and archaic regulatory and distribution system is preventing the continued growth of our food and wine industries … and stifling
economic activity and job growth in the tourism and hospitality sectors. Happy New Year!

Bill C-311, an Act to Amend the Importation of Intoxicating Liquors Act, has now passed second reading in the House of Commons and has been referred to the House Finance Committee (you can read the Hansard debate here). This Act, if eventually passed at third reading, will amend the IILA to introduce a national personal use exemption to permit direct to consumer shipment of limited quantities of wine between provinces for personal use. The Act has gained support from all federal parties and continues to receive very positive media coverage and public support.

British Columbia\’s neighbouring jurisdictions, Alberta and Washington state, have both modernized their liquor and wine regulatory regimes to move away from the post-prohibition \”government control\” model. This leaves British Columbia seriously out of line with its neighbours in terms of the promotion of economic growth/jobs in the wine industry and within the broader hospitality and tourism sectors. See this article on FreeTheWine.ca for more detail: BC Falls Behind Neighbours On Wine Law Reform and this chart which compares major differences on liquor regulation between BC, AB and WA.

This article from the Economist (Behind the Zion curtain) also shows how out of date the BC system is. The Economist lauds Washington state for moving to a modern regulatory and distribution system while criticizing other \”control states\” for failing to update their post-prohibition mentality. Particularly, the Economist singles out Utah for its backward system. While Utah\’s system is worse than BC\’s in many respects, the Economist identifies an alarmingly high number of problems that are common to both jurisdictions: restricting the sale of alcohol to publicly owned stores (we have private stores as well but the prices are fixed by the government ones), a \”restrictive distribution system\”, enforcement of revenue splits between alcohol and food in restaurants, banning happy hours, imposing restrictions on the number of licenses (BC does that for retailers), and forcing restaurants and bars to pay the same \”markup for their booze as consumers do in state-run stores\” (BC\’s system is even worse than Utah\’s on taxation). To paraphrase the ending of the article, \”Eat, drink and be merry – tomorrow you may be in British Columbia\”.

I\’m working on some longer articles about Washington\’s successful privatization initiative and LCLB policy on internet marketing but in the interim … here\’s a grab bag of news:

BC Government Liquor Policy At Work: This Vancouver magazine article shows the absurdity of BC\’s current liquor policies which deny wholesale discounts on wine to restaurants: The Joie-O-Meter. The survey looked at the restaurant price for a bottle of Joie Rose, one of BC\’s nicer wines. It found that to get the best price, you would have to go to Chez Panisse, a restaurant in … Berkeley, California.

No Problems With Farmers\’ Market Tasting in Washington: This Seattle Times story once again shows that BC needs to put its post-prohibition approach to liquor regulation into the trash can. Washington state started a pilot program to permit tasting of wine and beer at farmers\’ markets and reports that there have been zero complaints so far and that the entire program is \”running smoothly\”.

Festivals and Conferences: The Vancouver Playhouse Wine Festival is set for the last week of February, 2012 with its theme country as Chile and varietal focus of Cabernets. Some tickets have already gone on sale with more in the coming weeks. A third annual wine law conference will also precede the festival on February 27th. Wineries should also consider attending the Direct to Consumer Wine Symposium in San Francisco, which will be held on January 19th.

The voters of Washington state approved Initiative 1183 yesterday by a wide margin. I-1183 will further privatize Washington\’s liquor distribution system and was backed primarily by Costco. The major changes will be that: a) the state\’s existing government liquor stores (which had a monopoly on the sale of spirits) will be closed or sold, b) the state\’s distribution warehouse will be closed, c) the state will license larger retailers to sell spirits (the sale of beer and wine is already mostly privatized in WA), d) state and local government revenue from liquor will rise due to the imposition of liquor taxes, e) the 3 tier system will be modified for wine and spirits such that retailers can buy direct from suppliers, and f) retail prices will likely decline for some products. The full stories are here: Voters Kick State Out of Liquor Business and Initiative 1183 – Thar She Blows, Captain Sinegal. This analysis also explains things in more detail: Citizens Guide to Initiative 1183.

In a move that was being fairly widely applauded by industry groups in California, the California Dept. of Alcoholic Beverage Control (ABC) has issued an advisory today that sets out plain language rules for wineries and retailers who wish to use third party marketing companies to help them sell their wine, particularly on the internet. This issue had become contentious and had caused a great deal of confusion after the ABC issued an earlier advisory that cast doubt on the legality of such marketing without providing firm guidelines. The new advisory confirms that this type of marketing is legal so long as it is properly structured with the major requirement being that the licensee must maintain control over the selection, pricing and sales transactions. The story is here: New Advisory Explains How Internet Businesses Can Properly Promote Alcoholic Beverage Sales. There is also a short legal commentary from Napa law firm, Dickenson Peatman & Fogarty here: California ABC Reverses Position on Third-Party Providers Following Industry Input. The actual advisory is here: Industry Advisory – Third Party Providers. This issue is directly relevant to wineries in British Columbia where the legal issues are very similar.

Wine Law reform efforts appear to be making progress in many places … except BC:

WA State Privatization: Another liquor privatization initiative is on the ballot in Washington state for the November 8th election. Once again, Costco is leading the \”Yes\” side\’s effort to reform the state distribution system while liquor wholesalers are financing the \”No\” side in favour of the status quo. There has been plenty of analysis (see both \”pro\” and \”con opinions from the Seattle Times) and here are a couple of other articles if you are interested: Citizen\’s Guide to Initiative 1183 and Liquor and Long Term Initiatives Leading in New Poll. Leading WA wine writer, Paul Gregutt, weighs in here (My Vote on Initiative 1183) with his support for the YES side.

Hong Kong Creates Wine Boom: In 2008, the Hong Kong government repealed its high (80%) import taxes on wine. The repeal of the taxes created a huge boom in the wine business and in three short years, HK has now established itself as \”Asia\’s prime wine trading hub\” according to Decanter magazine. HK\’s wine imports will likely exceed $1 billion this year.

Wine Shipping Reform Continues at Federal Level: Dan Albas\’ private member\’s bill (C-311) continues to work its way through the House of Commons at the federal level. If passed, the Bill will produce the first reform in almost 90 years of Canada\’s arcane prohibitions on the interprovincial shipment of wine. The conclusion of second reading debate on this Bill is set for December 8th, after which the Bill will go to the Finance Committee.

Unfortunately, here in BC, nothing has happened on the wine law reform front despite pleas from many groups (here are just two new examples: restaurants and movie theatres). Last year\’s trade practices reforms (announced over 15 months ago) have still not been implemented and we are still stuck with one of the most outdated wine regulatory systems in the western world. If the initial comments on the Vancouver Sun\’s movie theatre article (Arcane Liquor Laws Kill Rio Theatre\’s Business) are anything to go by, then most British Columbians are just as frustrated with the failure to modernize as I am!

Bill C-311, a private members\’ bill introduced by Dan Albas MP (Okanagan-Coquihalla), will receive 2nd reading in the House of Commons today. If passed, this Bill will reform the 1928 federal law which prohibits the inter-provincial shipment of wine by creating a national personal use exemption for wine shipped direct to consumers between provinces and in limited amounts for personal consumption. The Bill has received a considerable amount of very positive coverage in the media and is attracting support from all political parties.