SAQ WORKING TO REDUCE PRICES, CEO SAYS
Brunet discusses issues from big margins to ‘lowering the gap with our neighbours’
Alain Brunet’s career at the Société des alcools du Québec started in 1981, at age 20, when he worked part time at an outlet at Van Horne Ave. and Wilderton Aves. In 2013, his ascent up the corporate ladder landed him on its top rung when he was named president and CEO of Quebec’s liquor board.
I recently sat down with Brunet for a discussion about Quebec’s wine market, Canadian wine, wines prices and the future of the SAQ.
Q You took an unusual route to the top of the SAQ. A I was a history and geography student when I started at the SAQ. I never went to a fancy business school. I became a store manager at 25, which led to a job as regional manager, then sales director for all of the stores. In 2002, I was named VP of sales. I was 40. After that, I worked in a number of different departments, such as VP of commercialization and as chief operating officer, before being named president.
Q We have this impression that Quebec is a more evolved wine culture, but in reality, fine wine is still pretty new. Maybe the difference between us and other places in North America is that we always drank wine. It wasn’t very good, but we drank it nonetheless. A I think the love for wine was driven by our love for food, and that started with Expo 67. Montreal became much more multicultural, and it showed our collective openness. It took until the early 1990s for wine to really explode. That’s when specialty wines from around the world became more readily available. Before that, you could only find these wines at a couple of stores, like Les Maisons des Vins. Q Now we are seeing a complete fragmentation of the market. Go to any wine bar or fine restaurant, and the vast majority of wines on the list aren’t even available at the SAQ, only as private imports. I don’t even know most of these wines. A The private import market has really developed over the past five to 10 years. Over 70 per cent of the sales of private import wines are restaurants.
Q But that’s mostly due to restrictive policies that allow these wines to be purchased only by the case, which limits the individual consumer access to all this choice. A We know this is an important trend and it’s over a $125-million business. We aren’t trying to slow it down; in fact, we want to accelerate it. What has lacked is an effective way to distribute all these niche products. Now we have the technology, and within two years our goal is to have all wines available by the bottle on SAQ.com.
Q The motor for creating a market for all these new wines and wine styles are the wine agencies. They take the financial risk as the onus is on them to sell the wines. Is that fair? A That’s true, but we are trying to make it easier for them. We realize that for niche products, the agencies are well-suited to promote and sell these wines. What we can do is help them grow the category and continue to give them the freedom to do as they want. It’s important because private import wines are an incubator for the SAQ. We watch, and if a product or category does well, we will bring it into larger distribution.
Q I still dream of a marketplace where we can have the SAQ, as well as small specialty stores run by the agencies. A Can you name another market where there is this much choice? Would it be better, let’s say, if you lived in California?
Q Not necessarily. But I would most probably have small stores
that represent my tastes in wine and have greater expertise. A I think we can do that, be both generalists and specialists. Our strength is in our people. The market is an ecosystem and we have to be a part of it. We need to become closer to the client. That’s what we are doing right now. We are removing structures, making it less centralized, giving more power back to the individual stores.
Q The biggest criticism of the SAQ are the prices, specifically when compared to Ontario. What do you say to consumers here? A First of all, it’s a problem of perception. It happens all the time in retail. If you have a few products that are more expensive than a competitor, then people tend to think that everything is more expensive. We need to provide our customers with fair pricing and lower the gap with our neighbours.
Q The Liquor Control Board of Ontario is much less expensive in the lower-price categories. A In that category, yes. Over the full spectrum of products, the difference is around 1.3 per cent. Alcohol, for example, is less expensive in Quebec, as are wines over $40. But when someone sees a wine that’s $3 more here than somewhere else, then I agree it’s unacceptable.
We are a business, and like any business, we are still beholden to our shareholder, and that’s the government. Pricing comes down to good purchasing power and negotiating, the costs of running your business, and sales. If you do all three well, then you can reduce your prices and stay as profitable.
The SAQ has always had big margins, and we realize that it is no longer acceptable. That situation, by the way, is a problem facing every monopoly. I have been working hard over the last three years to reduce our costs, and now we can lower our margins and our prices. Since last fall we have completed three price reductions that represent a total reduction of $1.40 on 1,600 regular products, which represent 80 per cent of our sales volume.
Q Another complaint about the SAQ is the lack of Canadian wine available here — despite Bill C311, which makes it legal for alcohol to cross provincial borders. A Bill C311 took down the federal barrier to bringing alcohol across borders but alcohol sales remain provincial jurisdiction. Again, I’m not the government. But we have taken steps to make it easier for Quebecers to get Canadian wine. An agreement was made between B.C., Ontario and Quebec that will make it easier for wineries to sell their wines directly on the web.
If you look on SAQ.com under the Canada section, you will now find over 60 wines from Ontario, and 40 from B.C. And that number is going to grow.
Q So would the SAQ be able to survive against real competition? I’m torn; I know that the SAQ generates a ton of money for the government. A Over $1 billion in profit, and another billion in taxes.