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California wants to take on the Ontario wine industry? What a pile of hooey

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More shocking news from Old Media this week in the form of taunts from the California wine industry and a good-news, bad-news report from economists at the Bank of Montreal.

Let’s deal with California first.

In a Globe and Mail story the San Francisco-based California Wine Institute, which represents 1,000 wineries in that state, and offices all over the world including here in Ontario, served notice to this province that if Niagara MPP Tim Hudak, who is the leader of the provincial Tories and could very well by our next premier after elections this fall, delivers on his promise to revamp liquor laws in this province, with possible VQA only stores, it would have no choice but challenge that under North American Free Trade deal.

Quoting Hudak, the Globe story said:

I do think we need more options. More opportunities for consumers to get access to wine, beer, liquor,” Hudak said. “Coming from the Niagara area, our wineries are limited in what they can sell to. You get your own shop at the winery and hope and pray to the LCBO gods that you get some space on the shelves … We need to have choice alongside the LCBO.

A trade consultant for the Wine Institute, however, told the Star that introducing Ontario VQA-only stores would breach NAFTA rules because they would give preference to local producers. (The only exceptions are off-site winery outlets, such the Wine Rack, which were grandfathered under the agreement.)

What a pile of hooey.

Seriously.

California has had a sweet deal here in Ontario, selling gobs of California wines for decades to a monopoly that just loves them. Page after page of California wines grace the LCBO’s various glossy publications and tout the wines of California as if this was California. Our shelves are full of California wines and, every year, the California Wine Institute holds a love-in in downtown Toronto at the California Wine Fair where it boasts about market share and always gets a fairly large pat on the back about the great partnership from LCBO brass at the luncheon. I’ve seen it close up.

What I haven’t seen is the same kind of love fest for Ontario wineries.

1337467_300Don’t get me wrong here, I love California wines. And I think the California wine folks, led by Rick Slomka in Canada, are really nice people and just doing their job.

My own cellar includes a lot of California wines. I have been to Napa, Sonoma, Paso Robles, Santa Barbara and other wine destinations in California, sometimes as a media guest of the California Wine Institute (I suppose those invites will dry up now!), a few times as a consultant and sometimes just to travel on my own and enjoy the great wines made in that state. It’s beautiful there.

And when I go, I love shopping in the California wine stores, packed to the rafters with mostly great Cali wine. I always bring some home for the cellar and to share with friends.

I go there expecting to see California wines well stocked in the private stores. In Napa, I’m looking for Napa wines. I don’t expect Rhone, Italy, Australia or Canadian wines (as if!) when I go there. And I am not disappointed. They can sell whatever they want, of course, and obviously that’s a boatload of Cali wine. They are private stores and can do what they want.

We do not have that luxury in Ontario. We have a monopoly system run by the government under the name Liquor Control Board of Ontario.

It is a warehouse for everything that NAFTA guidelines dictate. A space for all comers, no advantage to anyone unless you pay promotional dollars to have your wines displayed front and centre.

California does all right at the LCBO and Vintages, and the Wine Institute knows this because each year at the annual lunch they tell us so and the LCBO gives them a big hug and drools over the profits it brings to the monopoly. All is good.

So, why in the world would the wine institute care if Ontario opened up a few VQA stores? Why would a wine state the size of California, where one winery alone there, Gallo, produces 75 million cases per year (Ontario in total makes 1.86 million cases of VQA wine, by comparison) care. It just doesn’t make sense.

lcbo_storeIf they really cared that much, they should have challenged B.C., which now has 21 VQA only stores (see story here) and many more private stores as that province is finally modernizing its antiquated liquor law that were at one time similar to the stone age laws of Ontario.

I am told constantly that it’s because B.C. suddenly “found” 20 old grandfathered licences that pre-date NAFTA that allowed the VQA stores to flourish. I think we all know that’s a pile of BS. Harry McWatter found one licence that started ball rolling and the rest, well, the rest is the rest.

The California Wine Institute is challenging Ontario because it has a pretty good ally in the LCBO. The LCBO does not want Ontario to have VQA only stores. They would be a direct competitor for the mega-monopoly, and the first breach in the fortress that is the LCBO.

VQA-only stores is the beginning of the end for one of the last liquor monopolies on earth. Just like B.C. is headed down that road, just like Alberta has already gone down that road, just like all other Western provinces are travelling down that road, so, too, will the LCBO. It’s inevitable. It’s going to happen.

The California Wine Institute should think twice about challenging NAFTA. The backlash from consumers, proud Canadian consumers, might just not be worth the effort.

California has had a pretty good ride here, and will continue to do so, but many Ontario wine consumers, who appreciate the good, hard work of our Canadian farmers and winemakers, and the livelihoods of the people who work in the industry, won’t think too kindly of a foreign industry group taking advantage of our pathetic liquor laws in Ontario.

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A VQA-only wine shop in B.C. There are 21 one of them there.

We are not on an even playing field. We have but one retailer, one that’s bound and determined to hold on to power for as long as it can. To be fair, the LCBO is trying to appease the growing masses of Ontario wine lovers with more local wines than ever at the government store. But, by its own design, it cannot and never will be able to offer a system that is fair to all Ontario wineries. It does not have the space nor do the wineries have the capacity to feed such a large network of stores.

In my opinion, California would be advised to live and let live, NAFTA be damned on this issue, and stand down on your threat to challenge VQA-only stores.

On the other issue, a report on the Ontario wine industry published in the Toronto Star suggests that Canada’s wine industry is growing strongly, but losing market share at home and abroad, according to a new report from economists at the Bank of Montreal.

Canadian wine production has grown by 7.6 per cent a year since 1998, compared to just one per cent for the overall beverage sector, the report says.

But market share for Canadian wineries slipped to about one-third of the domestic market in 2010 because of intense pressure from imports, the report said in the Star, adding that’s largely due to the higher Canadian dollar.

Canadian winemakers are facing pressure from traditional wine powers such as France and the U.S., but also newcomers such as Australia and Argentina, the Star story says.

The report, like many before it, suggests a way to stave off market penetration from foreign countries is to offer wine sales through private retailers, as well as the LCBO.

Well, fancy that. Privatization, or at least partial privatization.

I think we have a starting point here. Now we need someone with the balls to deliver what so many of us want.

Here are some suggestions for changing our barbaric liquor laws.

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Fancy that, a VQA store at the Kelowna airport. We can dream, right?

• Better access to local wines. Plain and simple. The white elephant in the room is the LCBO and the restrictions it places on local wineries being able to sell their wines at government, monopoly stores. We need to dismantle the monopoly, slowly if you like, but we need to chip away at it just like every province in this country is doing. We should start with private VQA wines stores. But, to make it easier, let’s license a few private stores and place some conditions on them — like a policy to allow a large percentage of space to be devoted to those Ontario wineries who want to sell their wines. A Beer Store model has been bandied about (see this post). There are ideas out there. Let’s start exploring them.

• Knowledge. This government just doesn’t get what’s going or understand the concerns of Ontario wineries or the consumers who drink their wines. Get some help from people who get it. Know the frustrations of the people who work in the industry, who shop in woefully inadequate LCBO stores, who care about local wines. With knowledge comes change.

• Work with the federal government to get rid of equally antiquated laws that prohibit the sale of Canadian wines across provincial borders. Is this ridiculous? That’s a redundant question. Of course it is. We need your help, Dalton.

• Ontarians who care about the wine industry are fed up with banging their heads against the wall. We need progress, not government press releases touting monumental changes and the “modernizing” of liquor laws in Ontario. It’s just not true. Let’s talk, let’s make a plan and let’s really start kicking this thing into gear. Election or no election, the time is now.