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Bottle shops changing the landscape for restaurants and VQA wineries

By Rick VanSickle

It has the potential to be one of the most earth-shattering changes to one of the most antiquated alcohol retail system in the world — and this is not hyperbole.

Booze to go, in other words, the retailing of alcohol at restaurants and bars, was given the green light at the end of 2020 after allowing the practice as a temporary measure during the pandemic. Simply put, the Ontario government has made the selling of wine, beer, cider and spirits legal in restaurants and bars.

In making the announcement, Attorney General Doug Downey said the move is designed to help businesses that have been struggling in the midst of the pandemic, according to a report by Robert Benzie in the Toronto Star.

Niagara wine
A sign of the times at Toronto Chez Nous Wine Bar in Toronto.

“Ontario’s vibrant hospitality sector and its workers have been hard hit by COVID-19 in every community across our province,” said Downey. “We’re building on the actions we took early in the pandemic to support local restaurants, bars and other businesses by providing permanent help to workers and small businesses as they face these ongoing challenges,” he said.

The Star report called it “the most sweeping liberalization of Ontario’s liquor laws since Prohibition ended in 1927.” And the newspaper isn’t wrong. While there have been baby steps at the LCBO — grocery store wine, beer and cider sales being the biggest — it’s unfathomable how little has changed in nearly 100 years.

With restrictions being removed, it means alcohol can be delivered in food boxes and meal kits and it allows distillers, wineries, cider makers, and brewers to deliver their own products and charge fees to do so. You can also browse retail shelves (when it’s safe to do so again) at your favourite restaurant or bar and find wines, beer, cider etc. and purchase products you won’t find at the LCBO.

Already, the new rules are being embraced across the province as restaurants and bars seize on the moment to turn a portion of their business into mini boutique wine/beer/cider shops by selling booze directly to consumers who have been essentially held hostage by an iron-fisted liquor monopoly (LCBO) that has controlled every aspect of booze retail since 1927.

In Niagara, the new rules have the potential to forever change how restaurants and bars re-imagine their businesses. “Just like they are introducing their customers to new and exciting foods, they now have the ability to offer a wide selection of locally produced beverages to their already loyal customers,” says Marcel Morgenstern, above. “Restaurants can now combine the powerful “Go Local” movement with convenience.”

Morgenstern, who is sales director at PondView Estate Winery and Burnt Ship Bay Estate Winery, as well as the founder of the Facebook group Restaurants of Niagara, which focuses on members sharing their great food experiences in Niagara, believes this a unique opportunity for local restaurants to team up with local VQA wineries to enhance both bottom lines not only during the pandemic but going forward into the future.

While Morgenstern cites a few Niagara restaurants that have jumped on board the booze-to-go bandwagon, he says the ones that carefully plan and curate their alcohol offerings will be the most successful.

He has some interesting thoughts in this Q&A with Wines In Niagara.

Bottles for sale at Ruffino’s in Niagara-on-the-Lake.

Wines In Niagara: The pandemic has been tough on both restaurants and wineries in Niagara, but one area that benefits both is the government allowing alcohol sales permanently from restaurant kiosks. How important a step is this for both restaurants and VQA wineries in particular?

Marcel Morgenstern: “I believe this to be an important step in the short term, but even more so in the long term. We hear so much from our politicians (no matter which party) about supporting small businesses. As minor as it might seem right now, this actually is a step in the right direction if it is done right. The obvious benefit to the restaurants in the short term is to allow them to add extra dollars to each takeout order by offering the convenience of one-stop shopping.

“But, if taken a step further, the selection of beverages that a restaurant offers can become a drive for business in itself: At the moment, if you would like to get a mixed case of VQA wines that are not available in the LCBO you would have to buy directly from multiple wineries. This means that you have to either drive from winery to winery (or brewery, cidery, distillery) to shop in person or place multiple online orders with the producers, which usually means paying for shipping or placing a multi bottle order to get free shipping. None of those options are convenient!

All Ontario VQA wines for sale at Chez Nous in Toronto.

“Restaurants now have the chance to be the first businesses in the province to offer a selection of products that are not in the LCBO and can curate themed mixed packs of interesting beverages. Just like they are introducing their customers to new and exciting foods, they now have the ability to offer a wide selection of locally produced beverages to their already loyal customers. Restaurants can now combine the powerful “Go Local” movement with convenience. At the moment there is no competition for that. The LCBO does offer locally produced beverages, but they can only carry a fraction of the diverse selection that is actually available from our ever growing and maturing industry.

“For VQA wineries and other beverage producers, this new change in the law represents an opportunity to get exposure for products that would never see a retail shelf outside of their own store (which is usually far away from where the majority of customers reside!). In contrast to wholesaling to the LCBO, selling wine to a family-owned restaurant does not come with sales targets that you have to meet, expensive marketing programs that you have to purchase in order for your wine to stay on the shelves, and the roughly six months of wait times until a new product finally gets on a shelf. As a producer you can work with the restaurants to pick which products will work for that particular location and menu. If a particular wine doesn’t sell, the producer can take it back (without paying penalties and having your wine discounted on the shelves whether you want it to be or not). It gives the industry options to test the market with small production wines and to educate restaurant staff, who then become ambassadors for Ontario wines in general. Those business relationships are the core of supporting local business as both parties are heavily invested in making it work. Both restaurants and producers can work together to create a relationship that benefits the customer and is able to quickly respond to changes in the market.”

A new grocery shelf at Bolete in downtown St. Catharines includes bottles of wine for sale.

WIN: Do you see both sides, restaurants and wineries, embracing off-sales and capitalizing on a brand new niche for sales or is this simply a small measure to tide both over until it’s safe again to run restaurants at full capacity once everyone is vaccinated?

Morgenstern: “This really comes down to each individual restaurant and winery owner/manager. Depending on the vision for your business overall, this new way of selling wine/beer/cider/spirits might be just the right thing to add to your business or it might complicate things. If you are in a position where you have someone that can help manage this part of the business and is either familiar with local producers or is eager to learn, this really can be a great long term income booster. I think everyone should really take a close look at it before dismissing it. There is a reason why this model is being embraced in a lot of countries around the world. Especially in wine producing regions. People are looking for convenience and they like to have a drink with their meal. Don’t dismiss this before taking a closer look and talking to your customers and potential suppliers.

“At the same time, VQA wineries should fully embrace this and support their restaurant customers every step of the way on this for the same reasons. It is a great way of enhancing these business partnerships.”

Wine included in the grocery style up at Mathay Café in St. Catharines.

WIN: Many feel allowing restaurants to sell alcohol is the thin edge of the wedge that will lead to full or partial privatization. What do you feel will have to happen for that to become reality and how will that help both industries?

Morgenstern: “In the past I have been repeatedly told that things won’t change in regard to alcohol sales in Ontario. But as we all know, change is the only constant. The fact that we are seeing things changing tells me one thing: the consumer has changed, the producers have changed and developed, but our old system of liquor retail has not been able to keep up with the pace of change. Government owned stores are good at mass distribution and fulfil a lot of the consumer needs, the same way as a Costco does. I just don’t think anyone can argue with the fact that the shopping experience in small, intimate, well-curated establishments is much more satisfying.

“Once everyone gets used to the new normal, we will look back and ask ourselves, why hasn’t this happened sooner? Five years ago, people were debating non-stop about allowing alcoholic beverages to be sold in grocery stores and some interest groups predicted dark days ahead for our society in general. Turns out it’s not such a big deal. This acceptance in itself represents more opportunity for both industries to continue to grow and we can do it in a responsible manor as we have been doing for a long time.”

Beer for sale at Chez Nous.

WIN: What do restaurants and VQA wineries have to do to take full advantage of restaurant sales and push profits for both? What will successful bottle shops look like down the road? Is anyone doing great things in this new niche in Niagara? Where can people get help?

Morgenstern: “Just like with any new business venture, you must spend some time on this and invest a bit of money. But really, the upfront investment is mostly spent on inventory. I have already had quite a few exciting conversations with restaurant owners and I am sure that we will see a few new bottle shops popping up in Niagara in the very near future. I know that a handful of local restaurants jumped on this early on by adding a small grocery store to their takeout offerings (Bolete, Mahtay Café, Ruffino’s). The transition for a business such as Casa Toscana was a bit easier as they were already operating a gourmet grocery store alongside their restaurant in the same building.

“In my mind, a successful bottle shop will focus on wines that are not easily found in the marketplace and offer great value. Pricing is, of course, an important component. It goes without saying that two different price points have to be offered for dine-in or takeout. Everyone understands that a bottle of wine will cost more than at the winery as you are paying for convenience, but to be successful it must be reasonable.

“The most important aspect will be the customer experience: offering themed mixed packs of wine (BBQ wines, seafood wines, poolside wines, Sunday dinner wines …) is a great way educate customers on all the options that your bottle shop is offering. It’s all about new discoveries and finding new favourites.

“Down the road, you might want to offer the option to become a member of your Dine and Wine club? Invite the winery in to organize a tasting night with special pricing when your customers purchase dinner that night. There are so many ways you can give customers a wine shopping experience that they never had in Ontario up to now.

“In all of this, the most important part is the marketing. You have to be out there on social media to promote your new bottle shop. Wine drinkers reside on Facebook and Instagram. In this day and age you have to be there or nobody will know about all the great things you are doing. There is just no way around it.

“I took some time in December to write a “how to” manual for restaurants that are interested in exploring this opportunity further and welcome anyone interested to contact me. I would love to help grow the “go local” movement, especially if it involves strengthening someone’s business.”

About Marcel Morgenstern

After moving to Canada in 1999, Morgenstern started selling and promoting VQA wines as a tour guide for Hillebrand Estates. He was hooked immediately by this region and its growing wine industry. In 2001 Morgenstern was hired by Pillitteri Estates to start up their licensee sales department to facilitate sales to the hospitality industry.

“It was exciting to grow this sales channel from a one-man operation to having a sales team on the road,” he said “It was time to get more serious and I tasted and studied my way to becoming a certified Sommelier. I held the sales position for almost 10 years and met a lot of amazing people in the local and international wine industry during that time. Every year I got hooked more and soon realized that I will most likely always work in this industry. During this time I met Lou Puglisi, a well-known grape grower in Niagara and little did I know, that after one more career move I would be working together with my new friend.”

In 2009 Morgenstern took a position as Provincial Sales Manager with Diamond Estates and learned a lot about managing a larger sales force, budgeting and all the things that go along with a middle management position.

In 2013, after more in-depth discussions with Puglisi, Morgenstern decided that it was time to go back to a smaller, more hands-on operation and to expand the markets for the outstanding wines that Puglisi and his team produce. This was also the year that Puglisi and Morgenstern bought more acreage and started Burnt Ship Bay Estate Winery (semi-virtual with its own vineyards, manufacturing and retail license and equipment. But only available online, in restaurants and LCBO).

Morgenstern is excited to share his love for Niagara Wine Country and “growing-to-bottle” hand-crafted wines with his customers.

At the start of the pandemic lockdown in March 2020, Morgenstern started the Facebook group Restaurants of Niagara, which focuses on members sharing their great food experiences in Niagara. It encourages Niagara restaurants to post and promote their offerings (no charge) and to interact with potential new customers. Instead of charging membership fees or advertising fees Morgenstern raises money for Community Care through this project.