This post arrives amid the ongoing saga in New York State, where Governor David Paterson is supporting a bill to join thirty-five other states and legalize wine retail in supermarkets. Motivated by New York’s giant budgetary deficit, Paterson hopes to raise money through franchise fees, taxes, and an increase in wine sales (an estimated 20%). The Governor even intends to tax soft drinks. With our own glooming budgetary situation in British Columbia, is it inconceivable that Premier Campbell and the Liberals would set their sights on slackening the liquor licensing to include grocery stores? This isn’t a completely fair parallel, as unlike New York, our government’s major qualm about dealing out licenses to grocers would be then having to compete with the new licensees for sales. Surely BC’s Finance Minister is sitting in a dark room somewhere, mulling over the numbers, and envisioning how much money they could save by ridding their hands of the great government liquor monopoly.
As a visitor to the US, I always marveled at the novelty of buying alcohol at grocery and corner stores. Why can’t it be like this back home? I’d ponder. Even after I had moved to San Francisco five months ago, I was still overwhelmed by the idea, but it didn’t take long for the reality to sink in. While a reasonable place to grab an occasional six-pack, I’ve yet to see a corner store with a good wine selection or prices I don’t cringe at. One of my nearest mom and pop stores sells Santa Margarita Pinot Grigio for $37. Thirty-seven dollars. Those sir, are strip club markups.
Photo taken from biritemarket.com
While grocery stores tend to be better in the pocket gouging category, the selections are often dismal. The large chains, Safeway for example, need to keep consistent products stocked from store to store and as such, fill the shelves with industrially produced garbage. The best I’ve seen in San Francisco is Bi-Rite Market in the Mission. Clearly their wine buyer is putting a lot of thought into what goes on the shelf, which must be an awesome job, as there is only one store to stock. Whole Foods is another grocer that handles wine sales much better than the rest, but I still have mixed feelings. Although much of their value selection is mass produced table wine and their markups err towards the high side, they do stock some interesting labels including some bio and organic wines. It’s rarely difficult for me to find a bottle of wine to have with dinner. However, as Alice Feiring brings up in her post A Commercial Break: Whole Foods and Australia, wouldn’t it be great if Whole Foods handled the wine aisle with the same respect as the produce department? Bi-Rite and Whole Foods are both the exceptions.
When looking for a good bottle, I still have to make the trek to a specialty wine shop just as I would in Vancouver. The major difference being that on route here, I pass twenty stores where I could have gotten a bottle of Barefoot Pinot Grigio instead. So in the end, would being able to toss a bottle of wine into the cart while grocery shopping be any benefit to British Columbian wine lovers other than convenience? I would imagine not, except the added competition may encourage existing wine shops to reevaluate what they choose to sell, the ones that survive anyways. It would be interesting to see what kind of selections retailers like Urban Fare, Choices, and Whole Foods would build and whose task that would be. In New York, the public seems to be in favour of the proposed bill. How many established, privately owned wine shops will get killed off? Likely plenty.
My latest grocery store buy was from Whole Foods. The Naia ’08 from Rueda DO, just northwest off the center of Spain and 100% Verdejo. Super fresh blend of tropical and citrus fruit on the nose… verging on being too candied, but the surprising kick of minerality on the palate made everything okay. Not bad at all and good value, even at Whole Food’s markups. $13.99.
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21 Responses:
March 11th, 2010 at 11:58 am
Interesting post, and I agree w/ the ridiculous markups being pretty off-putting. I probably bought wine in a grocery store once or twice when I was living in Berkeley, and usually for convenience. Not only are the markups higher, but, as you say, the selection generally sucks. I prefer to support small independent stores rather than giving giant corporations another revenue stream. Then again, are the majority of the private stores in Vancouver any different? Most sell crap at ridiculous markups. Perhaps at least the Grocery store chains would bring prices down and exert more pressure to reduce liquor taxes in the province – their lobby would be a lot more powerful than what exists right now.
I don’t think there is much overlap between the true niche specialty stores and the giant supermarkets. The specialty stores will still benefit from off the street buyers ‘for convenience’, but will also have their loyal clinetelle to keep the business going. Those people are the core of any good independent store anyway.
March 11th, 2010 at 1:00 pm
Yes, I think Supermarkets should be allowed to sell liquor. Yes the government needs to pair back its involvement in the industry. Some issues though: The finance minister knows they could make more money privatizing, but it’s not all about the money, equally important for them is keeping the Union happy. If the government privatizes, the unions go full out to prevent re-election. This is BC, the unions hold this province hostage sometimes. The Government knows very little of how the BCLDB operates, they know they make gobs of cash, that’s all they really want to know and that’s all the BCLDB tells them. Having wine in supermarkets would probably close some independent stores, but before that even remotely comes close to happening, we need to unify wholesaling pricing and licensing. Different licenses receive different purchasing discounts and some licenses can’t carry beer or spirits. We come up with a unified wholesale structure and equality in the products allowed to carry, ditch the spec program and put everybody on the same playing field…then let’s go for it and boot the governement out for their own good.
March 11th, 2010 at 6:09 pm
Naia at $13.99! Dear lord thats a bargain. Naia has been my favorite Verdejo that I have drank so far I recall lavender and a aussie $28 wholesale price point.
You raise a good point on the liquor retail storefront. I doubt supermarkets will ever be able to carry good stock due to most of their purchasing having to be made in large numbers. Right there that eliminates most wines of interest. In my old ‘hood Williamsburg there were 2 wine stores that I frequented and no major supermarkets in the whole neighbourhood. But most of their selections were probably under 1000 cases and obscure wine geek choices. In fact Williamsburg was so dire for produce that most of my produce shopping was done at the lower east side whole foods and taxi’d over the bridge.
March 12th, 2010 at 12:19 am
I appreciate the comments boys.
Shea, good point about grocery stores possibly bringing prices down. I question whether the government would budge on their 117% and whether they would have any reason to.
Paul, I’ve never thought about the unions, but you raise a good point. I also like the sounds of your overhaul agenda.
Travis, I think we’re in fairly similar boats. What’s going on with your neighbours in Quebec?? They seem to be having a great time, drinking all kinds of awesome wine over there. Aurelia is popping bottles of Arianna Occhipinti’s Frappato (http://busurleweb.com/2010/03/frappato-de-la-superbe-arianna-occhipinti/). I’d kill to get that in BC. Sometimes the grass is just clearly greener.
Miguel…ha ha thanks for putting things in perspective. It sounds like the Aussies pay for wine like British Columbians do.
March 12th, 2010 at 1:34 pm
Re. Quebec
That’s because the government allows them to act like Frenchmen. Vive la France!
March 12th, 2010 at 2:33 pm
All good points, there are several items which need to be factored in this discussion. We have non visionaries, gate keepers and relatives of Larry, Curly and Moe running the asylum. The governments get their advice from, liquor licensing and the LDB. That is like asking the fox to fix the chicken coup.
Last year, I forget the precise date, Gordon Campbell was in my shop. I asked him why we cannot sell to restaurants; he replied he did not know we could not sell to restaurants. I then wrote him a follow up letter asking him to sell to restaurants, pour wine at wine festivals, and store wine off site. A letter came back from Rich Coleman and the answer was no, no and no. Why? It will cost the government money for us to sell to restaurants, only agents can pour at wine tasting’s and the policing would cost too much to store wine off site. I can send you the letter if you want.
Remember the reply was from an ex RCMP, turned lawyer, turned politician, the mentality is enforcement, no forward thinking. This is what has got us into this mess in the first place; it certainly will not get us out of it.
As far as grocery stores selling wine is concerned, certainly this would make sense. Sitting from my end, I have spent 25 years slogging it out, working in this ludicrous system, trying to bring in great wine for my customers. Having grocery stores, who have a massive infrastructure versus mine, would have a massive advantage over the existing shops, while I can only have one store, hardly fair, but if it helps the consumer, then perhaps Marquis and other wine shops would have to be a sacrificial lamb, hardly fair but then what is in life.
I had a meeting with two fellows from the SAQ. One thing I learned is the SAQ is run by retailers, they have a board of directors and they are a separate business entity. They are not gate keepers like the BCLDB, truly a refreshing conversation indeed.
No one in any of the ministries has ever sat down and asked the question, what we can do to me BC a wine destination province, from retailing, auctions, and crafting the best wines possible, no bottled in BC stuff here. It is a labyrinth of rules and undocumented polices made by a litany of regulations forced on upon them by special interest groups.
If current or future governments are interested in developing small business, they need to take a hard look within themselves to make change, not at the existing people who guard them. Certainly their actions are against NAFTA & GATT rules, but no one yet has taken them to task. Are there are a sufficient number of truly angry people in our industry which will drive this from chat rooms to mainstream media to some type of revolt by our industry so they will finally take notice?
March 12th, 2010 at 4:18 pm
John, thanks for sharing your experiences and frustrations. The story about Gordo is crazy! It seems that Mr Coleman is directly responsible for many of our liquor licensing woes.
Why are you able to only operate one store, when other prominent Vancouver wine shops have multiple?
While having grocery stores sell wine may help with breaking some molds and dams that have remained in place, I would hope that the best shops in Vancouver, like Marquis or Kits, will still be supported by the true wine lovers. Safeway, for example, would be prevented from building a selection of interesting and low production wines by their size. Their customer service would likely be non-existant. Plus, by the time grocery stores are selling wine, you’d think that other laws would have changed, giving you small advantages. How about being able to charge for tastings?? San Francisco has a bigger population, but the specialty wine shops still seem to do well, even while competing with supermarkets. Yet, I’m sure the wholesale system down here makes it easier for all restaurants and retailers to make money than our 10% (or 30%) in Vancouver allows.
March 12th, 2010 at 8:10 pm
I run an LRS which is the 2nd tier retail outlet (and the majority class of retailers in BC) in a small community.
The first Paul has it right. before you can even contemplate Grocery Stores as a general outlet you need to level the wholesale playing field. Discounts need to be leveled across all tiers. i would love to be able to sell to my local restaurants and they would love to buy from me. I would also love to fulfill for local events requiring a sepcial occasion license (e.g. weddings held in public buildings) – this right the Government reserves for its own stores.
We need to abolish the inefficient monopoly warehousing system too. Has the Government not heard of the Bonded Warehouse concept!
But wine, beer and spirits are available in some grocery stores in BC. In communities where no Government store is located there is a system for franchising local grocery stores to carry these products. I’m located right next to one. Margins are less than ours so essentially it is viewed as a community service – and a great way to drive traffic to their store for high margin groceries – exactly how most US grocery stores treat their wine.
Lastly, to Shea’s point about ‘ridiculous’ mark ups – that’s an arguable point. Given the discount structure imposed the prices reflect the cost of staying in business. I sell at the same price as a Liberty or Marquis give/or take – so they make far more margin than I. Its the dysfunctional tax, license and distribution structure that creates the cost – not the retailer.
March 13th, 2010 at 2:31 pm
Paul R: That may be true for you, but most of the really bad stores downtown markup extraordinarily. Look at Viti’s beer markup vs. Brewery Creek for example. I realize the 16% forced discount is a problem, but I still think most private stores in BC suck. Economies of scale would bring prices down. Grocery stores could also negotiate better prices with agents, etc. Forward thinking grocers like WF would also support larger purchases of spec products, likely for lower agent markups on volume discounts.
I agree that wholesaling needs to be fixed.
John: Would a supermarket really put you out of business? As Jake said, in SF (and CA generally) small stores still do well even with grocery stores to compete with. But maybe Vancouver isn’t as sophisticated or large as SF? Not sure.
March 13th, 2010 at 4:14 pm
To all of the above. I can’t see grocery stores getting wine and and beer in their stores. Perhaps in a free standing building like Alberta. Over 42% of all grocery store clerks are students under 19 years of age. If liquor was sold within the stores we would see a massive layoff of our students working part time as they try to further their education.
As I own several LRS’s I am not opposed to competition. I welcome it. It makes us better. But people need to understand that when we buy product we pay full retail (like the consummer) less 16%. Government stores get it at cost.To put that into perspective when we sell a $23.00 bottle of vodka at GLS prices we make $3.80. When we sell that same bottle for the government they make $9.28 (as their 164% mark up on a 23.00 bottle of vodka is $12.37). They make more money when we sell product and didnt have to advertise, pay rent or store labour..Did you also know that all liquor is on consignment to the government until they draw it down into their warehouse.?
However, when a GLS sells that same bottle they only net 34.6% (by their own published statements) or $6.92. If we were to add the LDB reported labour cost to ship a case ($1.67) and add another $1.00 ($12.00 per cas) for various expenses at their end the government would still make $8.14 when a privatre store sells it as opposed to $6.92.
Please note that when a private retailer purchases product from the LDB they pay 3 days in advance. Ergo, the government has no receivables or losses due to theft or breakage. Thats our problem. I estimate that the LDB loses over $80,000,000.00 per year in external and internal theft and breakage. Where does it show up?In the opening gross profit. Its lower than it should be based upon their starting grosses (164% on spirits, 117% on wine and approximately 98.5% on beer (although thats more of a flat tax based upon production).
Did you know that the LDB doesnt even do independant inventories? It costs too much to do them so they were phased out to perform cyclical inventories (store staff counting random isles whol the product). There is no large retailer who would ever operate like this.
The system needs to be changed. I think the LDB should focus their efforts into wholesale as thats where the money is. Retailers like myself will either flourish or close depending on how good of a job (customer service, selelction, pricing, convenience etc..).we do. Also, increase the fines for privatre stores that dont do a good job as it pertains to enforcing ID.
Did you know that BCLCLB liquor inspectors have no jurisdiction or authority to issue any fines to any government store for non-compliance?
In this sense we should be no differentfrom any other retailer.
Lets be honest. Healthcare, education, transportation are CORE and essential services. Seling a bottle of vodka at retail is not.
You should see what the LDB spend annually (both internally and externally) in IT and data consultants. Its over $15,000,000.00 per year. Alas, as a user the system still doesnt work.
Should anyone like to see the hard data a web site will be posted in the near future. Its is fair and factual and provides solutions so we can have the best liquor model in Canada while maintaining labour peace.
We need to work together to fix these “cocktail” of outdated and silly procedures. Just because you’ve been doing it one way for years doesnt mean you’ve been doing it right.
Thanks
March 13th, 2010 at 8:15 pm
Lance. Those are all, of course, excellent points and things that should be fixed. I’m all aboard.
I’m not so sure about your student labour argument, though. There is no reason why those under 19 can’t sell alcohol. They sell cigarettes. There are plenty of under age clerks in the U.S. at grocery stores that sell booze. Not sure what the issue is here.
March 14th, 2010 at 10:18 pm
It is interesting to following the conversation and how it moves back and forth and this is how the government has kept doing what they have been doing – there is no unified voice on behalf of the industry – agents, retailers, sommeliers and restaurateurs. Each group has their own specific agenda. The powers that be know this and use it to their advantage to keep us disorganized and arguing amongst ourselves.
One must the discount aside, there is no way the government is going to give 600 LRS stores a 30% discount. If we go into any meaningful debate with this in mind then we can move forward.
Let’s look at California for a moment. My brother lives in San Francisco, in the 1960′s and early 1970′s, his father in law owned liquor stores, which also carried wine. At the time it was against the law to discount wine, all stores had to have a minimum margin. I believe when Ronald Regan was governor and abolished that regulation. What happened were many small stores closed down as they could not compete with the buying power of the large supermarkets. Also remember the fine wine business as we know today did not exist to the extent as it does today.
For many years there were few specialty wine shops, the grocery stores killed them You have to remember the American physce about purchasing wine, and yes it depends on the state, the purchase of wine, or beer is the same as purchasing pampers, Kleenex and dog food, throw in a couple bottles of wine while you are at the supermarket and your set for the week. Yes the wines are commodity wines but lets be real here that is 90% of the market. It is really only in the past 25 years wine has reached the level of awareness it has today.
Twenty three years or so ago the government experimented with selling Andres wines in London Drugs in North Vancouver. The experiment only for a short time, perhaps a month or so, but talking to the Andres rep at the time, it turned out to be Andre’s single largest account. So yes, the grocery stores would kill Marquis, Kits, Liberty etc. Can you imagine Jimmy Pattison getting wine in Save On, let’s not kid ourselves he would hammer us.
What we need to do is form a strong cohesive group with our goals clearly spelled out, know the issues inside and out. Stay focused, build a strong community base, and then go on the attack and showcase the stupidity of what they are doing and how they have treated our industry for the past 25 years. Let’s face it, if these rules were in place for the film, Bio-Tech or any other high profile value added industry it would be front news. Just look at what Gordon Hamilton achieved with his bottled in BC stories in the Vancouver Sun.
March 14th, 2010 at 11:36 pm
I noted on twitter earlier today that there is now no legal impediment to Grocery stores opening LRS stores in BC. The recent change in law removing the requirement to be owned by a Liquor Primary license means they could open up.
The current law requires that a liquor store must be in a stand-alone location i.e. segregated physically from a liquor-primary by walls/doors etc. LRS are also not allowed to sell (at least in material volumes) soft drinks, and explicitly, milk or other grocery store items.
However new LRS licenses under still not being issued, so a grocery store would have to find a willing seller to acquire a license. For instance, If Save On Foods in Park & Tilford (N. Van) could acquire the Gull LRS license it would have a ready-made store 2 units away from its grocery store. As would the Marine Drive location if they could acquire the LRS next door. Nothing I know of would stop them rebranding these stores as “Save On Booze” :OK they wouldn’t get away with quite that branding 
Of course the grocery store would have to put up with the low LRS margins and the host of petty regs we suffer from – but it would put a toe in the water for when things change and give them a voice in changing them.
March 15th, 2010 at 8:14 am
This has already been done by Liquor World & Liquor Depot, an income trust, which owns hundreds of stores in BC and Alberta, plus Kits and Dundarave Wine Cellars.
Paul touched on the point by saying that we suffer from petty regulations, these are the things we need to bring to the publics attention in a focused deliberate manner if we ever are going to elicit any change.
March 15th, 2010 at 12:57 pm
Lance, thanks for adding more points to the discussion. Figures anywhere close to the ones you mentioned for the LDB’s spending on loss/breakage and data/IT help reinforce the fact that private companies can operate so much more efficiently. I’ve held the difficult position of placing alcohol orders for restaurants through the LDB for the last 6 years, and I would agree that their system is, to put it mildly, frustrating. The staff who deal with licensees are obviously frustrated as well, which would explain their often disgruntled attitudes.
Interesting about Andre’s wines in London Drugs. I wonder what about the experiment was deemed a failure. Definitely not the sales figures on the retail side.
I agree that these issues need a way of being clearly communicated. It doesn’t help that it’s a complicated and confusing system and a cause isn’t easily labeled. Definitely not the same as denouncing the way Cellared in Canada wines are labeled and sold.
Mark Hicken’s Winelaw.ca is a great place to keep up on the issues, but it would great to take it further. Starting a group which represents retail/restaurant/public buyers’ interest against the government’s management of the laws behind importing, distribution, wholesale, & licensing of wine/beer would be a great start. A site which clearly spells out a set of goals (not sure how easily those would be agreed upon) and current news on the issues would at least give the media one easy place to point the public’s attention to. Anyone have a lot of spare time on their hands?
March 15th, 2010 at 3:45 pm
From the POV of a wine blogger, like myself, it’s hard to know how to help this discussion get into the mainstream or, at least, pass it on to the audience of our website, as simply voicing “things must change” may fall on deaf ears. Although, I completely agree that things must change.
In contrast to the “Cellared in Canada” issue where it was much clearer what needed to be changed, and was changed, this issue has a smoky grey hue rather than simply black or white.
I’m certainly looking to industry leaders like John from Marquis for guidance here as his 25 plus years experience is invaluable. Our site tries to remain nuetral about most political things and simply promotes interest in fine wines. However, we would be interested in helping this cause.
Personally, I’m eager to see the rules and regulations regarding wines sales (and related activities such as auctions and wine tastings) eased and deregulated (to a point), as I would love to see (and host) these events in Vancouver.
As a consumer, I would like to pay less tax on wine… but would settle for easier access.
I’m keen to help and pass on the word… I’m just not too sure what to pass on at this point.
I fear it is not as simple as requesting that people contact their local MLA and ask that Liquor laws be eased. But maybe it is… maybe we should simply start a campaign to get rid of the BCLDB?
Thoughts? Suggestions?
March 17th, 2010 at 10:26 am
Liam, like you mention, I think it starts with clearly defined goals so everyone knows what they’re campaigning for. A meeting to get the right people in a room together and start hammering out details.
March 17th, 2010 at 1:49 pm
Based on experience working with governments and large bureaucracies, I have found that the best way to encourage change is be realistic in your requests, present a solution that is well thought out, and ultimately make them think that they have come up with the idea. This takes clear direction with sound and irrefutable information. With this issue the biggest impetus that I see is that there is no incentive for the BCLDB or other jurisdictions to make change when they have such a huge revenue stream. If a group were to be put together a business case for change, it would have to be clearly laid out and highlight how the BCLDB benefits. As much as the consumer benefits from easier and more access at lower costs I think this group needs to ask itself what is in it for the Government especially when consumers are clearly willing to pay the prices (referring to the high taxation amounts on imports). If the group finds out how they can benefit from helping the government make more money and not hurt there revenue stream they will have something they could have a chance of getting legs. Obviously there are other benefits that could be gained by a more free enterprise business model (i.e. foreign investment, etc) but first things first, what realistically could be done? The little battles won end up raising other questions and get more introspection from the people you want to change. Oh yeah and persistence never hurts.
March 17th, 2010 at 8:54 pm
This has already been done in BC. And, it is already happening again. Hugh’s concerns have been addressed and tried in the past. The truth is, as John says, the industry needs to unify. And, secondly, more money needs to be put into organizing a push for reform, as doing it properly will take a tremendous amount of time, which is challenging for those of us with other (more than) full time jobs.
In my experience, the issue is that most people aren’t really committed enough. They talk, but they do not act. Action is what is needed.
Oh, and I’d also mention that the Liberals have a good chance of losing the next election, in which case the NDP will assuredly raise liquor taxes. Food for thought.
And, to all those private retailers, my ideal would be a system without large corporate interests, but only artisanal and small passionate business owners. We have to ask ourselves if this is realistic, however. And, if not, what is the best alternative.
March 20th, 2010 at 1:05 pm
Shea,
Artisanal and small passionate owners is the last thing you would get out of reforms! Actually the system as it works today delivers that better as it protects small licensees who want to deliver personal and enthusiastic service.
Liberalising distribution to include supermarkets only swaps large govt LDB stores for large corporate stores. Even the recent reforms on LRS ownership are accelerating the construction of larger entities.
That’s not to say that we will lose completely the small business owners, but I think the main way for most currently independent stores to survive in that world would be to adopt a franchise model so that as an owner you can take advantage of corporate efficiencies. but preferably one that allows for individual store initiative rather than the very disciplined/regimened McDonald’s type model . They’d look/feel/act more like the VQA stores – common branding/positioning/market support.
Two examples for you. EW is setting itself up to be able to compete in the ‘supermarket’ world and to be a replacement for big Govt stores if they went away. Liquor Depot/Barn appears to be moving in the direction of building a corporately owned chain of many smaller stores, but could if rules permitted, easily turn itself into a franchise.