IS THE WINE MONOPOLY IN QUEBEC UNDER THREAT?
By allowing wineries to expand distribution, government is flirting with trade challenge
You might have noticed more Quebec-made wine, cider and beer at your local grocery store. Bill 88, adopted as law last May, “authorizes small-scale production permit holders to sell and deliver alcoholic beverages they make, other than alcohol and spirits, to grocery permit holders.”
The law gives Quebec’s artisanal producers an opportunity to expand their sales distribution, previously limited to sales at the winery or cidrerie or the Société des alcools du Québec.
The bill also allows for the producers to bypass the SAQ mark-up, effectively giving them extra margin.
But by allowing Quebec wineries to expand their distribution, the government is flirting with a possible trade challenge from other wine-producing countries.
When the Canadian government signed NAFTA and other international trade agreements, like GATT, the provinces’ alcohol laws were grandfathered. In Quebec, that meant only international wines bottled in this province would continue to be sold in grocery stores.
It also meant only eight wines would be allowed to list the appellation and grape varieties on their labels — because when Canada signed the trade agreements, only eight supermarket wines had that information on their label.
However, if Quebec decides to alter the terms of alcohol distribution, it risks violating these trade agreements and it could be forced to open its market to any retailer that wants to set up shop in Quebec.
The province might also be compelled to allow international wineries to sell directly to grocery stores.
Hence, the SAQ would lose its monopoly over liquor sales.
Quebec is not the only province to relax its rules. British Columbia has given its wineries the option to sell to grocery stores. As a result, the United States launched an official complaint with the World Trade Organization, saying the “regulations discriminate against the sale of U.S. wine in grocery stores” by giving preferential treatment to B.C. wineries.
Since then, New Zealand and the European Union have joined the U.S. complaint in demanding that B.C. grant them access to this wider distribution.
So far, no formal complaint has been lodged against Quebec. However, as SAQ president Alain Brunet told me in a recent interview, “I guess there’s always a risk” when provincial distribution laws are altered.
Brunet underscored the issue is a legislative one and has nothing to do with the SAQ, which must work under rules imposed by the government.
Still, he said “the United States is studying what’s happening in Quebec, and the Wine Institute of California is pushing for a challenge.”
At the same time, Brunet noted Bill 88 contains careful language with regards to how wines and ciders are to be distributed, and this should offer a measure of protection.
“The law is very clear in that producers must deliver their products themselves to the retailer, and are not allowed to use third-party transport,” he said. “The goal is to support local producers by allowing them to bypass the SAQ and expand their distribution at a local level.”
Are the new rules fair? Brunet believes they are.
“Do you think that Quebec wines will be a threat to Californian wine? Quebec wines represent 0.3 per cent of the market. This is not wide-scale distribution. Do you really think that individual Californian wineries are going to drive here and sell their wines directly to grocery stores? You can’t sell any real volume doing direct deliveries.”
When asked if Ontario wineries could deliver directly to grocery stores, bypassing the SAQ, Brunet said the law “was written specifically for Quebec producers. Insofar as that question, it’s for legislators to debate.”
Whatever happens, the alcohol distribution landscape in Canada is changing. The federal government’s Bill C311, which became law in 2012, made it legal for free movement of alcohol across provincial borders, essentially retracting a law that had been on the books since 1928. On the other hand, because liquor distribution falls under provincial jurisdiction, there is still no free-flowing distribution of Canadian wine across the country.
That doesn’t mean the SAQ is not changing. In fact, it does have a plan to increase Quebecers’ access to Canadian wines. I’ll have more about this — and my interview with Brunet — in next week’s column.