The Prime Minister has called the provincial and territorial Premiers to Montreal this Friday, December 7, 2018 for a First Ministers Meeting. Agenda topics will include addressing the barriers to internal trade in Canadian-produced beverage alcohol.

Free interprovincial trade in Canadian-made beverage alcohol – be it wine, beer, spirits or cider – should be the ultimate goal. The immediate outcome from this meeting should enable Canadian consumers to purchase directly from producers in other provinces. Not only is it overdue and appropriate, it could also be a lifeline for small and medium sized producers across the country.

At least it’s on the agenda

As noted here last year, the Canadian Free Trade Agreement yet again avoided addressing internal trade in liquor by sidelining it into a Working Group, which was due to report out in the fall of 2018. A quick glance at the website reveals… no information whatsoever, beyond a stakeholder engagement process over a year old. The big provinces – Ontario and Quebec, and their liquor boards – continue to resist calls by some other provinces – British Columbia, to its credit – to open their monopolies just a little to allow consumers in those provinces to order directly from wineries, breweries, craft distilleries and cideries based in other provinces.

Derailment?

We should not hold our collective breath that it will even get discussed this Friday. Despite the comprehensive agenda, some critical items are not under consideration (Alberta and Saskatchewan’s oil crisis as an item in its own right). At least four Premiers are openly challenging the federal government on its pan-Canadian climate plan (also not on the agenda). The mood is testy at best, and it will be a near-miracle if the meeting proceeds according to plan.

This would be a shame, as there is considerable alignment and will to eliminate barriers to interprovincial trade in Canadian beverage alcohol: among the industry bodies representing Canadian producers, e.g. the Canadian Vintners Association; among consumers via the #FreeMyGrapes movement; and among business associations like the Toronto Region Board of Trade, which last week called for an “icebreaker” deal on beverage alcohol to build momentum for wider cooperation to build business opportunities and consumer choice. Today, the Canadian Global Cities Council (Chambers and Boards of Trade of Canada’s big cities) reiterated that call.

Developments over the past year also means the pressure to address these barriers is higher in the political and legal realms:

  • Alberta recently (November 26, 2018) launched a trade challenge against Ontario for erecting unfair barriers to Alberta’s small liquor producers to sell in Ontario.
  • And late last year the “silver lining” finding of the Supreme Court of Canada’s Comeau decision that a province may not maintain a tariff or non-tariff trade barrier against the goods or services produced by another province with the principal purpose of protecting its own provincial industry.

How to do DTC in Canada

If the First Ministers Meeting makes it far enough through the agenda to tackle beverage alcohol, how should they go about it?

In Canada, a reasonable starting benchmark for Direct-to-Consumer (“DTC” as it’s known in the wine industry) would be to estimate less than two percent of a given province’s annual retail wine sales through its existing channels.  This is not an earth-shattering, or budget-shattering, adjustment to make, and would not make a substantial dent in liquor board revenue. By comparison, the DTC trade channel accounts for a small but rising proportion of domestic wine sales in the United States: ~15% annual growth in value and volume 2016-2017, and an overall increase from eight percent of retail in 2012 to about 10% in 2017, according to ShipCompliant’s annual DTC Report.

Full reciprocity among the four wine producing provinces (B.C., Ontario, Quebec and Nova Scotia) to open their markets so that their own consumers can directly order and take delivery of a small amount of wine from the other provinces for personal consumption could actually mean the difference between surviving and folding for many small to medium sized wineries – in every wine region in the country. The more robust the wineries of the Okanagan Valley, the Niagara Peninsula, the Eastern Townships and the Annapolis Valley, the more revenue generated for each provincial treasury.

What NOT to worry about

Guidance is offered by Federal Bill C-311, the 2013 legislation passed unanimously by the House of Commons to decriminalise the trans-provincial border shipment of small amounts of Canadian-made wine, beer or spirits for personal consumption. The regulations were initially set to allow no more than two cases of wine per person per year. The public safety rules and functions carried out by every provincial and territorial liquor authority in Canada would remain in full force and effect. A DTC regime should expressly permit shipment by couriers (who in some provinces still refuse to pick up as it’s not allowed everywhere in Canada) straight to the consumer’s preferred address, just as in-province DTC is conducted today – at least here in British Columbia.

Let’s hope that as the winter chill settles over the country – not to mention the state of relationships among our Prime Minister and some Premiers – there is indeed an icebreaker deal coming out of Friday’s First Ministers Meeting.

Santé/cheers to the prospect of raising a glass of Canadian wine this holiday season!

 

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