Simon Somogyi is the Arrell Chair in the Business of Food, Gordon S. Lang School of Business & Economics, University of Guelph.
I feel sorry for Canadian wineries. The various provincial governments allow them to sell a part of their wine at their own tasting rooms, but if they wish to sell larger volumes they must export overseas or attempt to sell their products at a provincially run liquor store.
Most have the charm and character of a pharmacy: sterile environments; little customer advice. Our wine producers’ bottles sit on the shelves getting light and heat in a place that is too warm and too bright. Not a good way to build wine brands or a wine culture and not a good way to develop a wine industry.
I also feel sorry for Canadian restaurants that want to sell wine. While regulations differ from province to province, they generally have to order their liquor through a provincially run distributor that makes ordering complicated, limits assortment of products and causes costs to mount quickly.
For example, say I own a restaurant in Toronto and I visit France and find some wine that I would like to sell to my customers. It’s from a small French winery and it doesn’t have a wine importer, or agent, in Ontario from whom I could purchase. But my restaurant customers like specialty wines and I’m willing to do whatever it takes to get those bottles.
The provincially run distributor (the Liquor Control Board of Ontario, or LCBO) is unlikely to stock the wine on their shelves so I need to find an agent who will do a private order for me. The agent will have to deal with the French winery and the LCBO, taking numerous months of logistical delays, including lab analysis to determine whether it’s safe for consumption, just to get the product to the restaurant. After all the time and expense, few restaurants will bother and will instead serve up the stuff you usually get at a provincially run store. The agent, who lives at the mercy of the liquor commission, will have to buy dozens of cases to reduce logistics costs and will make very little in return on my transaction.
But in Ontario, changes are coming. The Ford government has recently commissioned a report examining liquor sales, focusing on how other provinces such as British Columbia, Alberta and Quebec allow private companies more of a role in liquor sales. The Ford government is also looking at allowing wine and beer to be sold in corner stores and in preparation for this move has tabled legislation to end its monopoly contract with the Beer Store.
This will allow for better access to wine for consumers but will do little to develop wine brands. The prestige and mystique of wine is sort of lost on the shelves of a store where you buy milk and bread.
Privatization of the LCBO is off the table and some talk has centred on changes at the distribution-wholesale level which couldn’t come early enough. But privatizing liquor distribution has a greater impact than just better consumer choice, service and potentially lower prices, but also the development of the wine industry.
Research shows that wine companies have found success in export markets first by developing their domestic markets. Wine producers in countries such as Australia, New Zealand and South Africa have developed their brands and businesses by increasing sales in their own countries, then taking those profits and using them to expand their operations and develop exports markets.
Wine is a complex product in terms of taste, grape variety and wine region of origin, and many Canadian provincially run liquor stores lack knowledgeable staff who can adequately explain the nuances of wine. In Ontario, privately owned stores can now sell cannabis, and customers also receive product advice, which, in turn, helps the cannabis industry to grow.
Strange to think that wine has been legal in Canada for almost 100 years and its producers and restaurants have been treated so poorly. Privately owned high-end wine stores in Ontario that are supplied from private distributors are a must to help the wine sector grow.
Helping the Canadian wine sector increase domestic sales helps the sector build for success in export markets. Our federal government is focused on expanding agri-food export markets to $85-billion in sales by 2025 and in Ontario, Canada’s largest liquor market, the Ford government’s mantra of “open for business” needs to run true, not just for business operating in that province but for those wanting to be open for business overseas. The imminent changes to beer distribution are a step in the right direction, but now it’s time for action on wine.
Andrew Nixon, a PhD student at the Gordon S. Lang School of Business & Economics, University of Guelph, also contributed to this article.