Wine in British Columbia: A 25 Year Retrospective

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It is 1986. Expo is in town. Row upon row of Fosch vines blanket one of a handful of wineries in a small corner of the Okanagan Valley. Bars in Vancouver can only have tiny TVs and only a small handful of tiny wine stores, having bid for “independent liquor store” licenses, just opened this year selling only Mission Hill wines. Of these first independent stores was a small shop sitting flush at Davie and Burrard, started by an enterprising Greek restaurantuer and his son, John Clerides, who had been exposed to wine through his father’s restaurant business.

And Then Came NAFTA

In 1994, Canada and the United States ratified the North American Free Trade Agreement (NAFTA), which required that tariffs on a large number of goods be removed between the two countries. This meant that U.S. wines could now be sold in Canada and it meant that shoppers could bring back wine from the United States (back then British Columbians paid only a flat 15% duty on all wine brought across the border – this changed to the current 123% after lobbying by the Province’s biggest wine agencies (importers) who had a vested interest in preventing true free trade).

NAFTA brought with it stiff competition and serious challenge to B.C.’s wine industry, which had until then relied on protectionism to sell their decidedly very poor quality wines. Government sponsored replanting programs led to thousands upon thousands of old vines being ripped out and vineyards being replanted with today’s Vitis Vinifera varieties.

Along with the replanting of B.C.’s vineyards came government liberalization of the private sector, which could now sell international wines in their retail stores. Thus the original Independent Liquor Stores became bastions for bringing in challenging and high quality wine into the province. Perhaps the most important and innovative of these stores was Marquis Wine Cellars.

Back in the 1980’s and early 90’s, John Clerides at Marquis started bringing in classic wines from California, including some of the top Cabernet blends and the then yet undiscovered great valued Zinfandel wines. True to his Greek/Cypriot roots, John’s mantra has always been to overdeliver to his customers no matter what the price point is and back in the 80’s and 90’s Zinfandels sold for a tiny fraction of what they do today (as did some of the top wines from France’s Rhone Valley). The proximity to California made it easy to bring these wines into the province and so John did (along with Australian classics Peter Lehman and Penfolds), and in the process started building up not only clientele but also an important community of wine lovers in B.C. that would start spreading their influence across the province over the next two decades.

Growing and Building

As his business grew, John, a man with almost no formal wine training, took a course on how to detect flaws in wine. He now likens tasting wine to a top chef tasting ingredients. “You don’t try to sell rotten meat to Hawskworth” he told me, “so you better not try to sell me flawed wine”.

Over time, John expanded his reach, deciding to create shifts in the market rather than wait for them to happen. He began by first sending Michelle Bouffard (now of House Wine consulting) to Burgundy to taste and import some of the great wines of this region. Thus did John begin his stint as one of the top purveyors of Burgundy wines in British Columbia. This continued with trips to Bordeaux (John ships all his wines in separater refer containers from the government supply), the Rhone, Spain, and now the Loire, Oregon and New Zealand.

John, a Hockey fanatic, likens B.C.’s wine industry to the 1972 series between Canada and the U.S.S.R. Everyone thought Canada was the greatest hockey country in the world, and then they were annihilated by completely unknown players from the then Soviet Rupublic. This shook Canadian hockey to its core and sparked huge innovation and increased quality. B.C., says John, is just like Canada’s ill prepared gold medal team – we are comfortable where we are, but we have yet to confront what the world has to offer.

I find myself agreeing with John’s sentiment, particularly considering that it was NAFTA rather than any innovation in the B.C. industry that spurred the change that grew the Province’s wine industry into its now 200 wineries, many of which are producing exceptional quality wines compared to what was happening pre-NAFTA. The question is, will it take another external trauma to take our industry to the next level or will a true visionary emerge that can preempt the next great industry shock? These are the sorts of questions that define an industry, and we’re still waiting here in B.C. for our visionary.

Retailing Wine in 2011

Today, the legacy of the original Independent Liquor Store licensees is the life blood of the private retail market in Vancouver: Marquis Wine Cellars, Kitsilano and Dundarive Wine Cellars (now unfortunately owned by Liquor Stores GP income fund), Broadway Wine Cellars, Everything Wine, and Liberty Wine Merchants. These licensees were given the capability of placing “special orders” for their store (which none of the modern Liquor Retails Store (LRS) licensees can do), meaning that they can source unique wines and order them directly to the store without needing listing approval from the BCLDB and are given a 30% discount off of the BCLDB retail price (LRS’s have 16%). This is the basic reason why these stores have greater selection and better prices. In other words, it was the more liberal and business friendly policies that led to the greatest innovation in the Province’s wine industry. It was, in fact, the bar lobby, who benefited from “off-sales” (i.e. the right to sell liquor to patrons to take-away when the government liquor stores were closed) that prevented the continued issuance of independent liquor store licenses.

The lessons are clear: if we want to grow ourselves into a wine destination, it is time we trust passion over apathy and big business. It is not a question of private vs. public (as it is obvious vested interests in the private sector have impacted the regulatory regime more than any bureaucrat); rather, it is a question of finding the visionaries and the industrious passionistas amongst the banal and profit-driven. Regulate fairly, but let the industry discover itself and innovate. This will only create greater diversity of jobs and a much higher proportion of higher quality wine sales.

Are we ready to convert from Kokanee to small producer wine just as in a country like France? Even the U.S. is rapidly converting into a country of wine drinkers as France, which has seen pressure from various puritanical anti-alcohol groups, is retracting into hard liquor and cheap beer. I don’t think we need statistics to tell us which one of these demographics is about intoxication and which is about community.

Importing Wine in 2011

It is not only the retail sector that has seen change, but also the import sector (Tied House laws prevent retailers from importing wine – unless they can special order through their ILS license – and vice versa). In the past 15 years, the number of agents has exploded from a handful to literally hundreds upon hundreds. It is often the little guys, who start out of passion rather than to make money, who bring in many of the more interesting wines. Yet it is often the little guys who fail and have almost no impact on buying patterns in the Province.

This is a Province dominated by big business interests. The top 5% of importers make 90% of the profits. Most liquor stores, including the government stores and the majority of LRS stores are beholden to these importers and what they bring in, accepting the simple high volume sales mentality that now dominates B.C.’s liquor industry: yellow tail, oyster bay, etc. etc. These are wines that you can sell at massive volumes. And you need massive volumes in order to make the profits to sustain your business (at 16% discount) and repay the cost of your license.

Several years ago the government put a moratorium on new retail licenses. The result? These licenses are now traded for astronomical prices, often in the range from $500,000 to $1,000,000, simply for the right to sell someone a bottle of wine. Thus today’s industry is predominated by stores that sell mass produced high volume wine. Do I blame them? Not really, they have no other option if they want to make a profit.

The Tremors of Change

Even successful independent stores like John Clerides’ Marquis Wine Cellars fight for mainstream recognition. John, an avid user of social media, says that it is hard to get the word out about his store. Sure the industry types and hardcore wine geeks know about his store, but the average person is consistently unaware that his store exists. John puts some of the blame on the media, which simply do not review his wines. Why not? Because there is a strange attitude that media must review what is widely available to people in the government and mass-product liquor stores. Of course, this mentality means that those stores will never stock anything interesting or other than what they are already stocking. The result? A classic race to the bottom. John puts it well when he says “Walmart success is not the success of a city. It is the small businesses that give a city its culture and make it what it is.”

Luckily social media is starting to change this dynamic. Since twitter came on the scene, more and more wine lovers are connecting with each other and with industry types. More and more vision is developing as is more and more solidarity. One need only look at the recent openings of restaurants like l’Abbatoir and Hawksworth to see how the wine scene is maturing. The increasing discussion of liquor reform is also a sign of promise. Yet, it will still take a few visionaries to push the industry to the next level, forcing the bovine BCLDB to adapt to changing circumstances instead of waiting for them to act – an eventuality as likely as the second coming.

Today’s Challenges

So what are the challenges today. Today, very few retailers bother to send employees to travel and taste. Why? because they cannot import wines themselves anyway. The result is a depressingly uneducated retail sector.

What about the customer? As John noted to me, customers have not been taught that wine is about culture and food rather than inebriation. There is a culture shift waiting to happen, but until it does we remain stuck.

Media? The LDB provides sponsorship dollars to certain media and most are poorly paid. As I discussed with John, it is easy in the wine and food industry to give up ethics for free stuff. Journalistic ethics flow easy compared to reporting on politics or business. But there is no valid reason for this to be true. John was particularly unimpressed with the Georgia Straight calling his store “elite”. Anyone who has actually spent any time in Marquis knows that it is not about elitism, but about providing the customer with great value and quality – just like a great butcher would never sell the kind of meat that you can buy at Safeway.

The Future

So how do we move forward?

Embarrass the government. When Jancis Robinson and the Economist lambasted B.C. as a nanny state for allowing Cellared in Canada wine to be sold as B.C. wine, the government moved and made a change. Christy Clark’s government is clearly of this ilk. Embarrass and they shall come.

Cataclysmic failure of the B.C. wine industry. No one wants this to happen. But if it did? Well it would prompt a serious rethinking. If product remained unsold because of the failure to diversify. If GATT rules or a NAFTA challenge required B.C. and the other provinces to eliminate their illegal alcohol markups on foreign grapes, then B.C. wines would not be able to compete for price. This would require a dramatic refocus for both the industry and the regulators.

Consumer revolt. Similar to embarrassing the government, a consumer revolt would force the government’s hand. As an example, there is no reason right now that corkage is illegal except for the fact that restaurants rather than consumers have the ear of the government. These are the things it is time to change. If we do? Well, then the private sector and the government will start listening.

The Final Thought

We have come a long way in 25 years. The question is: are we up to making the next quarter century a cornerstone of Canada’s growth into an internationally respected wine culture? I’ll get back to you in 2036.

Comments

  1. Trevor
    July 30, 2011

    “These licensees were given the capability of placing “special orders” for their store (which none of the modern Liquor Retails Store (LRS) licensees can do), meaning that they can source unique wines and order them directly to the store without needing listing approval from the BCLDB and are given a 30% discount off of the BCLDB retail price (LRS’s have 16%).”

    Can these stores order beer, spirits, etc., under the same rules?

  2. Shea
    July 30, 2011

    As far as I know,no, they cannot. The special order system for these licensees is restricted to wine. But, there could be a loophole I have not investigated. Most of these stores do not sell beer or spirits. Only Liberty sells beer and only at a couple stores, so I imagine there are license restrictions.

  3. alestok
    August 2, 2011

    Shea, thanks for your blog.
    I’m business student analyzing the wine industry in BC, could you mention the sources of your information?
    Any advice on where I can find further information will be greatly appreciated.
    Obviously I’ll be happy to share my work once I’m done.
    Alex

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