Grocery store wine woes
Local wineries never wanted this
All has gone quiet on the grocery store front in B.C. Two stores are open and presumably the good people of Surrey are swimming in local wine. The rest of the province still awaits its opportunity to drop by their local grocery store and buy a loaf of bread, a piece of cheese and a bottle of wine — but don’t hold your breath.
The B.C. government’s proposal to roll out limited alcohol sales in supermarkets — one of the worst orchestrated plans in a long line of bad decisions regarding wine sales in this province — may be doomed by the most unlikely of sources: B.C. wineries.
As far as I can tell most B.C. producers never wanted to sell their wine in grocery stores, at least not in a real market scenario. They may have wanted more licensed VQA stores, the small chain of stores they own and operate on consignment with lessees, but grocery stores are a completely different ball game.
Competing for space (and paying for space) and all the rest of the demands required to get premium wine in a modern supermarket are far beyond the grasp of most small local wineries. Given the generous protection of being able to directly deliver to restaurants and consumers, as well as receiving rebates should they wish to venture into the taxable world of government stores, it’s hard to believe why any local producer would want to compete straight up with anyone in a grocery store. Most of them don’t. Grocery store sales were never on the agenda of B.C. wineries when government was modernizing the liquor laws. They were happy with access to farmer’s markets. Wine in grocery stores was a consumer agenda, and when they say wine they mean all wine, foreign and domestic. The fear now, shared by many local producers, is if the 45 licenses suggested to be up for grabs all end up in grocery stores in key locations across the province, it will have a negative impact on local wines sales.
Eventually grocery store wine sales are going to head south into the red ocean of price cuts and paid-for displays and constant discounting. One need only look to the manner government stores are retooling their wine mix, presumably to compete with grocery stores. The race to the bottom is already on.
Local producers who once had the world’s finest import wines to price themselves against are now in a battle with cheap commercial labels for shelf space, many of which will be selling for less than $15. And there will be fewer premium wine shops selling any wine over $25.
It’s going to be a bonanza for the large commercial wineries making cheap B.C. wines.
The next question is how many small private retail liquor stores will be able to compete on price with grocery stores. My guess is very few. They are already under assault from nearby government stores operating 24/7 and selling chilled beer and wine, so their modus operandi is going to be sell cheap wine, very cheap wine, and more beer and more spirits.
It gets worse. Private retailers are questioning the fairness of the grocery store model, including the wholesale pricing and consignment deal being provided to supermarkets. The VQA stores have historically received, and still receive, a 30 per cent discount from wineries, while private retailers have substantially lower retail profit margins under the new wholesale pricing system (in the 15 to 16 per cent region) and have to pay for stock up front.
To say it’s a mess is an understatement. But then liquor has always been a mess in B.C. The difference this time is the players are local, vocal, and they can vote.
It should be an interesting winter for Coralee Oakes, Minister of Small Business, Red Tape Reduction and Minister Responsible for the Liquor Distribution Branch and just maybe the future of B.C. wine.