WineLaw.ca

There is an interesting article in a recent edition of the trade newsletter, Shanken News Daily, which describes the approach to creating restaurant wine lists in the Michael Mina group of U.S. restaurants: Mina Group Wine Director Parr Thinks Nationally, Acts Locally. The article describes the philosophy of Rajat Parr, who is Mina\’s wine director, in creating unique wine lists for each restaurant ranging from 300 to 2500 selections including vintages of some famous wines going back decades or even hundreds of years as well as extensive by-the-glass programs offering 15 to 50 wines. The striking thing from reading this article is how difficult it is to replicate such a philosophy in BC. Why? Because BC has such outdated law and regulations that restaurant wine directors are faced with ridiculous hurdles in any quest to offer selection and value. Consider the following …

Restaurants Must Buy ONLY from the LDB. With the sole exception of purchasing from BC wineries, restaurants in BC are legally required to buy all their wine from the LDB, usually from a single designated government liquor store. They can\’t buy from private stores or direct from importers and they can\’t buy from individuals, all of which would be able to offer better selection, particularly for older vintages or rarer wines. If a restaurant buys any wine from a non-LDB source, it is considered to be \”illicit liquor\”.

Restaurants Have to Buy in Full Cases for Special Orders. If a restaurant selects only from the extremely limited selection at its designated government liquor store, its wine list will be sad indeed. Restaurants do have the option of special ordering products that are listed in the system (usually referred to as \”SPEC\” items). However, they can only order those products in FULL cases which for the most part is unworkable as it would tie up too much cash, particularly for rarer wines. They also have to get those products delivered by the LDB\’s slow distribution system which usually means waits of weeks, or often months, when re-ordering.

No Off-Site Storage. Restaurants are required to keep ALL of their wine stock within the licensed area of the restaurant. In most restaurants, space is at a premium, particularly in the Lower Mainland. This rule means that restaurants can\’t create better selection and manage their cellars and stock by keeping some wine nearby at a different site.

Can\’t Transfer Product Between Locations. Restaurants also can\’t transfer wine between locations so if they are out of stock of a particular wine in one restaurant, they can\’t move stock from another location. It doesn\’t matter that the taxes have been paid – it\’s illegal.

Zero Wholesale Discount. The worst problem is, of course, that unlike everywhere else in the civilized world, restaurants in BC get ZERO wholesale discount from the LDB (despite being some of their best customers). The LDB also forces BC wineries to give zero discounts. As a result, restaurants have to pay full RETAIL price just like you and me. This means that restaurant wine prices are much higher in BC than nearly everywhere else. A recent advisory from one government liquor store even told restaurants that they should not expect that their orders would be filled during peak hours … imagine if any other business treated its best customers this way!

In light of the above, kudos go out to all of the restaurant wine directors in BC who operate gallantly within a system which tries to make things as difficult as possible for them. It wouldn\’t be hard to fix these problems. Indeed, if the government did so, the entire hospitality community would be better off … and the government would make more tax revenue!

Following recent actions by Canada\’s liquor boards (likely prompted by Terry David Mulligan\’s cross-border wine action), I have just posted this Shipping Law Update August 2011 which explains recent moves by the LCBO and other liquor boards to okay the personal transport of wine (and other liquor) across provincial borders but to continue to prevent direct to consumer shipments. The update explains why I think it is difficult to make this distinction from a legal perspective.

The American Association of Wine Economists has released Andy Hira\’s study of the BC wine industry this morning which should make for interesting reading regardless of whether you agree with the conclusions: BC Wine Industry Study. There are a couple of references to this site in the study. I am particularly interested in Prof. Hira\’s conclusions regarding regulatory protectionism as I have previously advocated for systemic change in this area because, in my opinion, BC\’s current wine distribution system does not comply with BC\’s and Canada\’s obligations under our international trade agreements including GATT and NAFTA.

The LCBO has announced a \”policy\” that will permit consumers to personally transport alcohol into Ontario in limited quantities. The liquor board says that they will allow consumers to bring up to 3 L of spirits, 9 L of wine and 24.6 L of beer into the province so long as the alcohol is carried in \”on their person\” and is for personal consumption. The \”in person\” requirement will still prevent Canadian wineries from shipping direct to their customers in other provinces. I expect other provinces will follow along on this initiative as the liquor boards are trying to quell the public\’s distaste for Canada\’s 90 year old post-prohibition laws which prevent all inter-provincial movement of alcohol except to liquor boards. I\’ll provide further analysis and comment on this development shortly.

Prompted by environmental concerns, Summerhill Winery in Kelowna has decided to package some of its wine in bag-in-box packaging. However, the current regulations regarding eligibility for VQA status prevent VQA wine from being packaged in anything other than bottles. As a result, Summerhill\’s bag in box wine will not be eligible for VQA labeling. The story has received significant media attention: BC Vintner Loses VQA Designation and Vintner Can Teach Bureaucrats A Thing or Two About Wine. The loss of VQA status also means that this wine would not be eligible for the VQA rebates paid to wineries for sales in government liquor stores. As a result, Summerhill will likely only sell this wine to restaurants/hotels and private stores.

A potentially game changing development in the retail wine business in BC: the Everything Wine chain has been sold to the Pattison Group. EW currently has 3 large \”big box\” locations in North Vancouver, Langford (Victoria) and Surrey. This sale means that three of BC\’s largest retail wine stores will now be owned and operated by one of BC\’s most respected businessmen and retailers, Jim Pattison. The licenses held by EW are the original \”independent wine store\” licenses, which means that they receive a larger \”wholesale discount\” than most of the private liquor stores in BC.

The Globe and Mail has an interesting article today on the upcoming Ken Burns documentary covering America\’s (and Canada\’s) experiment with Prohibition. Apparently, Prohibition and that era is now a \”hot topic\” … mainly because the whole thing was such a failure … PBS describes it as follows:

Prohibition turned law-abiding citizens into criminals, made a mockery of the justice system, caused illicit drinking to seem glamorous and fun, encouraged neighbourhood gangs to become national crime syndicates, permitted government officials to bend and sometimes even break the law, and fostered cynicism and hypocrisy that corroded the social contract all across the country.

Unfortunately, in Canada today, we still need to get rid of the remnants of Prohibition-era thinking from our laws: the prime example is our out-dated law from 1928 which prohibits the inter-provincial shipment of wine direct to consumers.

Even though it\’s summer, here are some wine law developments:

Vintage Content to 85% in BC. BC\’s Wine of Marked Quality Regulation has been amended to reduce the content requirement for vintage labeled wine down from 95% of the vintage that is labeled to 85%.

NY Allows Off-Site Tasting Rooms. New York state has introduced a suite of wine law reforms designed to assist its wine industry. A major change permits wineries to open off-site tasting rooms, now classified as part of the licensed winery\’s operations. Custom crush operations are also encouraged.

WA Starts Farmers\’ Market Tastings. Washington state has started a pilot project which will permit wine tastings at farmers\’ markets.

Yesterday\’s news that the 2013 Wine Bloggers\’ Conference will be held in Penticton highlights the urgent need for the government to reform BC\’s arcane and outdated wine regulatory system. Under the current system, there will be major hurdles to holding the conference in Penticton, as well as major hassles for any of the participants who want to bring wine to the conference or hold tasting events at the conference. I hope that this will be the catalyst for a full scale review of the current system which will result in changes to bring our province into the modern era. A couple of recent blog posts also highlight the need for change: Jake Skakun\’s investigation (\”Planning the Implausible\”) of the difficulties in opening a retail wine store in Vancouver would be funny if it weren\’t so sad (and true) and John Clerides call (\”Let\’s Fix Our Dysfunctional System\”) for a wine visionary to lead us out of the dark ages is prescient.