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Pierre Ruiz, manager of Liberty Wine Merchants on Granville Island, inspects an international wine on January 27, 2015 in Vancouver, B.C.

Jimmy Jeong/The Globe and Mail

The provincial government has backed down from a new wholesale pricing structure for wine after merchants and industry experts noted the price of more expensive bottles would skyrocket.

Suzanne Anton, attorney general and minister of justice, made the announcement on Friday, admitting changes needed to be made "to better align the new wholesale prices with the prices the industry sees today."

Under the wholesale pricing model announced in November, a base mark-up of 89 per cent would have been applied to the first $11.75 per litre of wine and a second tier mark-up of 67 per cent would have been applied to the remainder.

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That means that a bottle of wine that currently retails for $30 would sell for anywhere from $33 to $40, depending on the profit margin, according to Mark Hicken, a Vancouver-based lawyer specializing in wine law. A bottle that retails for $60 would soar into the $73 to $88 range; a $100 bottle into the $125 to $151 range.

Under the update announced Friday, the second tier mark-up has been reduced to 27 per cent from 67 per cent.

"When I first looked at the old formula, within a minute or so, I could tell it wasn't going to work. The number was just way too high," Mr. Hicken said. "When I looked at the second version … my initial feeling was that that will work. I think it will keep prices relatively the same as they are today."

The new wholesale pricing system takes effect April 1.

The drawn-out liquor policy reform announcements have often received criticism. For example, the introduction of happy hour came with a new minimum pricing structure that meant some establishments had to raise the price of a 20-ounce pint to at least $5, and geographic restrictions governing a new "store-within-a-store" model mean only a couple of Vancouver grocery stores would be allowed to sell beer and wine.

Meanwhile, a U.S. wine industry group representing more than 1,000 California wineries and associated businesses says that a new policy allowing only B.C. Vintners Quality Alliance to be on regular shelves on grocery stores – imported wines would have to be elsewhere, in a store-within-a-store model – violates Canada's international trade obligations.

Mr. Hicken said he expects there will be tweaks and changes to the proposed policy regarding selling alcohol in grocery stores.

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"The experience on supermarket sales in other jurisdictions is that 65 to 70 per cent of all retail wine sales in that jurisdiction will occur within supermarkets," he said. "That's a staggeringly high percentage. The current proposed model is a relatively constrained model, with a relatively limited number of licenses, and it would only B.C. wines (allowed on regular grocery store shelves). My personal view is that it would be hard to maintain those constraints."

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