Ontario will have an election in October. The date was set when the current government took office so there is a clear path towards the event which means campaigning has been underway for several months.
This campaign activity has been direct, complete with attack ads, and indirect, where the current government announces new programs and awards capital funds to projects across a number of sectors, across the province.
The opposition party, the Progressive Conservatives, is led by Tim Hudak, a young man from the Niagara region. Mr. Hudak holds a graduate degree in economics and he seems to know a thing or two about the subject. Since he represents a riding in wine country there is also a chance he may show some interest in the welfare of the wine industry.
On this point I am surprised Mr. Hudak hasn’t been more outspoken on wine industry matters while in opposition. The industry faces many needs – most of them economic in nature – that can only be addressed by leadership from the government. These needs include improved distribution of VQA wines, enhanced labeling of wines made in Ontario from imported juice, relaxation of cross-provincial border shipping restrictions and more LCBO shelf space for VQA wines.
My suggestion isn’t that the provincial government increase the burdens on the already overly-regulated wines and spirits industry. I think the province should step in to reduce the restrictions on growers and winemakers and level the playing field between the small and medium-sized producers and the very large, pre-1993/pre-NAFTA producers.
These seem to be themes echoed by Tim Hudak as he stepped up his campaign activities in the late spring. If Hudak means what he says, I hope we have a man who can keep his promise. In his campaigning Mr. Hudak has shown the first concrete, assertive leadership on issues hindering the progress of a fragmented and struggling industry since the vine pull up program was put in place at the time NAFTA was put in place.
I am skeptical of campaign promises, especially those that cost money or are aimed at specific interest groups without consideration of the effects those promises may have on other powerful and influential stakeholders. Talk is cheap: it’s the actions that count. On the issue of leveling the playing field for the small producers there are at least two main groups who will have words on the matter: the members of the Winery and Grower Alliance of Ontario (WGA) and the state of California.
The WGA is a group of very large Ontario wine producers, including Andrew Peller Estates, Vincor International, Colio Estate Wines, Kittling Ridge Wine and Spirits and others, including properties owned by the larger makers which still operate under their own labels (e.g. Thirty Bench Wine Makers, Hillebrand Estates, etc.). These makers are a huge centre of influence in the Ontario wine industry. These firms buy over 70% of all fruit produced by Ontario growers. They produce approximately 90 % of the wines made (or assembled) in Ontario. They control a direct wine retail distribution system of just less than 300 stores.
Perhaps, most importantly, these firms were previously members of the Wine Council of Ontario, the trade body responsible for brand development and marketing of Ontario wines. The Winery and Grower Alliance was formed in mid-2010 after the province of Ontario announced a phase-out period for wines made from imported juice and the levy of an additional tax on these wines sold in stores controlled by the per-1993 makers. Another way of saying this: the pre-1993 firms resigned as members of the Wine Council of Ontario, taking their annual dues with them.
And the point – of this short lesson in recent history – is?
The long term interests of the Ontario wine industry as a whole must be carefully thought through before knee-jerk policy changes are made to address the interests of one sub-group. The effect of fragmentation of this small industry is to weaken the industry as a whole and divert energies to fight internal political battles that should be reserved to build the industry.
One suggestion made by Mr. Hudak bears such careful consideration before policy changes are adopted. This is the proposal to open across the province a network of Ontario VQA-only retail stores, similar to the system in place in British Columbia. This concept has been made to work in BC where 20 VQA stores now operate in several locations throughout the province. The stores are franchised by the BC Wine Institute, the BC equivalent of the Wine Council of Ontario. The wines are held on consignment in the stores and sell at prices controlled by the BC Liquor Distribution Board. In other words, the tax revenues are the same whether the wine is sold in a provincial store, in a VQA store, or in a privately-owned wine store (remember BC is a hybrid province for the sale of wine).
This system works. Not all wineries are members of the BC VQA system, but for those who are members they can submit wines for distribution in some or all of the VQA stores. For consumers, the selection is outstanding. Big and small wineries are represented. Wines are offered across all price bands and the VQA store sales staff members are knowledgeable and friendly. Due to small production volumes for many wines only a small fraction of all the wines made in the province are available in these stores but as long as you are close to one of the 20 store locations, you may never have to go to the Okanagan Valley or any of the other BC wine regions to get some of the best wines made in the province. This system will provide a proven template should the Ontario government decide to advance the interests of consumers and wineries, both, with such a distribution model.
Already there has been a shot across the bow from California. The Wine Institute, a lobby organization representing the wineries of California, has stated it will lodge a complaint under the provisions of NAFTA if such a VQA store suggestion were to become a reality. Similarly we can expect the Winery and Grower Alliance to seek something in return for a broadening of the Ontario wine distribution system. And, of course, the LCBO would have an interest in any proposition which would reduce its sales volumes, assuming this would be the result…
Consider the following statistics: Ontario wines represent 44% of all the value of all wines sold in Ontario. Australian wines represent 90% of wine sales in that country. New Zealand wines represent 57% of all sales in that country. Consider also that the Ontario data includes sales of wines made with imported juice, as well as sales of VQA wines (the value of VQA sales are 32% of total Ontario-made wine sales).
Should the LCBO wish to have a voice on this matter the monopoly should be invited to develop a plan to improve its performance not only in Ontario wine sales volume but in expanded shelf space for wines made by all Ontario producers.
The issues facing the Ontario wine industry are diverse and complex. I would hope to see an expanded system of wine distribution introduced during my lifetime. But I would want it done in a way that strengthened the overall industry and not simply cater to one segment and, in the process, further divide the playing field into competing sub groups.
I expect there will be more to come on this issue, especially if the political pundits and the opinion polls are to be relied upon…
Copyright© W. John Switzer 2003 – 2011.