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Latest News

Important Policy Changes for BC Liquor Industry

Some recent significant developments in the BC liquor industry …

Firstly, the BC Government has made wholesale (i.e. normal) pricing for the hospitality industry permanent. This measure was introduced in July of last year on a temporary basis to assist the struggling industry and was set to expire at the end of March. However, the change has now been made permanent. This is a policy reform that the restaurant/bar/hotel industry has been requesting for decades. It was a recommendation of the original BTAP Report and was the subject of continued consultation of the BTAP group and Government.

The policy change means that BC now has a normal pricing system for liquor in the hospitality business under which the industry can purchase liquor at the regular registered wholesale price (this happens almost everywhere else in the world). Prior to this, and for the most part, industry purchased at full retail price (although land-based wineries in BC had some flexibility on this). While this change will be universally welcomed by the hospitality sector, it will create a financial hit for any manufacturers that were previously selling to hospitality customers for prices greater than the registered wholesale price as these manufacturers would have been able to pocket the increased margin. The policy rationale for making this change was that the hospitality sector needs this assistance as a result of the pandemic. News release here: Permanent wholesale pricing will help hospitality sector recover.

Secondly, Government has also re-introduced the ability of local manufacturers to deliver direct to consumer from secondary storage locations. This measure was also introduced on a temporary basis last year and expired on October 31. It has now been re-introduced with a current expiry date of December 31, 2021. This measure was also the subject of continued consultation between the BTAP group and Government. I note that this also places BC manufacturers on an equal footing to their competitors in neighboring jurisdictions. All of the west coast jurisdictions currently permit this. LCRB Policy change is here: DTC Off-site Storage Permitted.

Finally, Government has also made permanent the ability for hospitality licensees to sell alcohol products for take-out with a meal. This measure was introduced as a temporary Covid-relief measure last year but is now permanent. Again, the policy rationale for this change was to provide assistance to the sector as a result of the pandemic. This policy is also common in other jurisdictions and may create greater sales of local product in this channel as well as potentially opening up some new business models. LCRB Policy change is here: Permanent Sale and Delivery of Liquor for Off-Site Consumption

Categories
CFIA Compliance

Traceability Regulations for Wineries

This discussion summarizes the compliance issues and considerations related to the federal Safe Food for Canadians Regulations which area administered by the Canadian Food Inspection Agency. Significant topics covered include:

  • SFCR Rules & Requirements for Wineries 
  • Timelines
Categories
Licensing Compliance

Starting a Winery in BC

This discussion summarizes the issues related to starting and operating a winery in BC. Significant topics that are covered and which may affect business plans include:

  • Provincial licensing rules governed by the LCRB (Liquor Control & Licensing Act)
  • Provincial rules administered by the BC LDB (Winery categorization as land-based or commercial) 
  • Provincial rules governed by the Agricultural Land Commission (applicable to any wineries located in the Agricultural Land Reserve)
  • BC Wine Authority (VQA) rules 
  • Summary of Additional Federal rules (Excise Tax Act) and Municipal rules
Categories
Marketing

Sales & Marketing

This discussion summarizes the compliance issues and considerations related to sales and marketing for BC wineries. Significant topics covered include:

  • Retail Sales – Permissible Locations, Processes and Fulfillment
  • Wholesale Sales – Permissible Locations, Processes and Fulfillment 
  • Advertising – Marketing Rules for Alcoholic Beverages
  • Web Sites
  • Use of Social Media
Categories
LDB Compliance & Pricing

Wholesale Pricing for BC Wineries

This discussion summarizes the rules related to wholesale pricing in the various distribution channels for BC wineries (both land-based and commercial). Significant topics covered include:

  • Pricing in the Direct Delivery Channel for Private Retailers
  • Pricing in the Direct Delivery Channel for Restaurants/Bars/Hotels (Hospitality Licensees)
  • Pricing in the BCLS Retail Channel (Government Liquor Stores)
  • Markup and pricing differences
Categories
Firm

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Categories
COVID19 Industry Info

COVID19: Implications and Predictions (Free Access)

This is an updated and more detailed version of an earlier post on our sister site, winelaw.ca. As noted previously, these predictions are obviously speculative.

Current Restrictions

As discussed previously, the current societal restrictions (lock-downs, business closures, social distancing, event size limits) have produced dramatic effects for the wine industry:

  • A collapse in sales to restaurants/bars/hotels, which entire sector is bearing the full brunt of the fight against the pandemic.
  • An increase in sales to the retail sector due to consumers switching to wine consumption at home.
  • An increase in online (direct to consumer) sales due to consumer preferences for product delivered to homes.
  • The closure of winery tasting rooms, although many on-site stores are still operating for online sales and \”curb-side\” pickup.
  • The closure of restaurants located at wineries.
  • A severe reduction in tourism and travel (including the closure of international borders) which has reduced or eliminated wine tourism activity. 
  • The cancellation of traditional promotional events such as winemaker dinners and larger tasting events, both in respect of trade and consumer events.
  • The cancellation of on-site winery events including consumer-focused ones (such as wine club release parties) and social events (such as weddings).

The Future of the Restrictions

The strategy of most governments is to control the number of infections (and hospitalizations) through the use of the restrictions such that the medical care system is not overwhelmed (i.e. \’flattening the curve\’). As noted previously, in China it took 3 months of very significant restrictions to \’turn things around\’ (or \’flatten the curve\’ sufficiently to ease the restrictions). Indeed, the Canadian Prime Minister, Justin Trudeau, stated today that Canada\’s restrictions would last \”a few months, probably\” (see Globe article: Return to Work Will be Graduated and Likely Months Off). Update (April 9th): Trudeau stated that restrictions would likely continue until a vaccine is ready … 12-18 months.

The long term goal is a gradual easing of the restrictions in North America, including BC. Scientists are warning that the relaxation of restrictions too quickly, could cause a \’second wave\’ of infections and problems creating a recurring cycle of problems and re-imposed restrictions. Media is already reporting on the efforts to slowly relax the restrictions in certain countries (see NY Times article: Some of Europe Will Loosen Coronavirus Restrictions). As such, and barring a miracle cure/vaccine, it appears that the most likely outcome is a continuance of some level of restrictions for at least 2-3 months, with a possible gradual easing over a longer number of months (Bill Gates has predicted a shutdown of 6-10 weeks).

The implications of this for the wine sector will likely depend upon the extent of the ongoing restrictions. In an attempt to gauge the consequences of this, I have made some comments (and guesses) in the tables below and categorized them according to the level of restriction.

Continuation of Strong (Current) Restrictions. Seems Likely for 2-3 Months. Could Repeat with Second Wave.

Current Restriction Impact on Wine Industry
Restaurants Restricted to Take-out; Bars Closed Continued Severe Decline in Sales to Hospitality Sector
Winery Tasting Rooms Closed Loss of Tasting Room Sales and Tourist Season
Winery Restaurants Closed Loss of Sales and Restaurant Revenue
Travel Restricted (Borders Closed) Loss of Tourist Season
Restrictions on Event Size (currently less than 50)

Not possible to hold traditional promotional events such as regional promotional tasting events and winemaker dinners. Loss of on-site winery events such as wine club parties and social events like weddings. 

 

Under this scenario, sales to the retail sector would likely stay strong, although the surge may level off somewhat or even decline if consumer confidence wanes. Online DTC sales may be somewhat stronger than traditional retail sales due to consumer preferences for delivery.

Medium Restrictions (if Progress Made). Could Possibly Extend Through the Summer or longer.

Restriction Example Impact on Wine Industry
Restaurant, Bar, Hotel Operations Restricted with Ongoing Distancing Measures Continued Weakness in Sales to Hospitality Sector
Winery Tasting Room Operations Restricted (e.g. appointment only or distancing measures) Decline in Tasting Room Sales and Revenue from Tourist Season, Tasting Room capacity likely to be way down. Winery tour bus model unlikely.
Winery Restaurant Operations Restricted Lower Sales and Restaurant Revenue
Travel Reduced. Borders Restricted. Lower Revenue from Tourist Season.
Restrictions on Event Size Moved Up (e.g. 200)

Likely still not possible to hold most traditional promotional events such as regional promotional tasting events or on-site winery events such as wine club parties and social events like weddings. 

 

Under this scenario, sales to the retail sector would likely level off, although there could be a decline if consumer confidence wanes. Online DTC sales may remain stronger than traditional retail sales due to consumer preferences for delivery.

Lesser Restrictions (if significant progress made). Could Possibly Extend For 12-18 months (until vaccine produced).

Restriction Example Impact on Wine Industry
Restaurant, Bar, Hotel Operations Resume, possibly with some distance restrictions Sales to hospitality sector unlikely to bounce back to normal but may recover somewhat
Winery Tasting Room Operations Resume, possibly with some distance restrictions Slow Recovery for Tasting Room Sales and Revenue from Tourist Season
Winery Restaurant Operations Resume, possibly with some distance restrictions Slow Recovery for Sales and Restaurant Revenue
Travel Resumes. Borders Reopen. Likely still a decline in tourist revenue as consumer confidence and economic capacity will be lower.
Restrictions on Event Size Moved Up (e.g. 500)

Likely still not possible to hold traditional promotional events such as regional promotional tasting events. Possible resumption of winemaker dinners or on-site winery events such as wine club parties and social events like weddings. 

 

Under this scenario, sales to the retail sector would likely return to traditional levels, although there could be a decline if consumer confidence wanes. Online DTC sales may remain stronger than traditional retail sales due to consumer preferences for delivery.

As a result, even the best of these scenarios will likely have some significant consequences for the wine sector. As discussed below, wineries may need to take immediate actions in an attempt to deal with the effects.

In addition, the long term scenarios are concerning. A continuation of the restrictions beyond 2-3 months could cause significant disruption to existing winery business models, particularly in respect of hospitality industry sales and DTC tasting room channels. To date, governments do not seem to have articulated a long term strategy, which is worrying both for the wine sector and for society generally. This NY Times article provides a useful discussion of the issues: Lockdown Can\’t Last Forever. Here\’s How to Lift It.

An alternative potentially more optimistic scenario, is that mass testing and increased protection of vulnerable groups (following a successful effort to \’flatten the curve\’) results in better and more targeted management of any ongoing cases and outbreaks. This strategy seems to have worked in some other countries, such as South Korea and Singapore, which have not had to impose such significant broad societal restrictions. Nevertheless, these countries have relied on monitoring and compliance programs which are more intrusive than anything seen to date in North America (e.g. GPS or technology based location reporting to enforce self-isolation or quarantine). This approach could conceivably allow for a faster relaxation of the restrictions – and a faster return to \’normality\’.

Your Sales Channel Mix

Wineries may need to review their past sales channel mix and actively re-calibrate it. If a high percentage of sales was to the hospitality sector (including an on-site restaurant), you may need to find other channels for most of this wine. Similarly, if a high percentage of sales came from \”walk-in\” tasting room traffic, you may need to re-think. This is of obvious concern if the restrictions continue into the summer tasting-room \’high season\’.

Planning Ahead

Here are a few ideas:

  • Treat your existing customer lists as the \”holy grail\” (you were doing this before, right?). You may be able to increase sales to your loyal clientele through promotions and/or effective direct marketing. For example, one winery that I visited recently sent me both a hand-written thank you note and a corkscrew in the mail a few weeks after I visited.
  • If you don\’t have a wine club, think about starting one.
  • Upgrade your DTC capabilities. If necessary, re-vamp your web site and online sales processes. If you haven\’t added free shipping, do so now.
  • Create a \’Plan B\’ for your tasting room. If it can re-open, could you do \’appointment only\’? Could you make it work with restricted numbers?
  • Create a \’Plan B\’ if you have a restaurant. If it can re-open, could you do \’take-out only\’? Could you do \’picnic packs\’?
  • Think about what alternate marketing you would do if dinners and tasting events do not resume. Can you work with your existing retailers? Can you ramp up online marketing? Think about wine clubs. Think about joint marketing initiatives.
  • Think about re-scheduling winery events. Adopt a flexible cancellation policy.
  • Review your production targets and plans for the current vintage. If your sales are down or likely to be down, you may need to \”carry-over\” inventory to future years.
  • Cross your fingers … and hope that things get under control sooner rather than later. 

Further Reading

Informative general discussion about public health policy approaches to the pandemic: Coronavirus: the Hammer and the Dance

Stat Article (Health Policy website): When Can We Let Up? Strategies to Relax the Lockdowns

Stat Article (Health Policy website): What We\’ve Learned About the Coronavirus and What We Still Need to Know

If you find this information useful, you may wish to support us by subscribing to our annual Essential BC Winery Compliance subscription which provides vital regulatory and business information to the wine industry on an annual basis with email updates on important developments. Topics covered include licensing/compliance information, interprovincial shipping analysis, agricultural land commission rules and COVID19 impacts.

Categories
Licensing Compliance

Contract Manufacturing for Wineries

This discussion summarizes the compliance issues for a licensed BC winery (manufacturer) as they relate to contract manufacturing. Significant topics covered include:

  • Contract manufacturing where a winery produces or processes wine or grapes for another licensed winery
  • Contract manufacturing where a winery produces wine for an unlicensed brand owner
Categories
COVID19 Industry Info

COVID19 Restrictions Affecting the BC Wine Industry (Free Access)

This article lists the most prominent COVID19 related BC restrictions and policy changes that affect the BC wine industry.

Current Restrictions

Restriction Source Expiry Date Industry Consequences
Order for Liquor Licensees Governing Operations (Now Requires That All Customers Be Seated) Prov. Health Officer No expiry date Effective July 23rd
Order Allowing All Licensees to Open (with physical distancing rules) and Removing 50% Occupancy Limit Prov. Health Officer Replaced Effective June 10th
Order Allowing Reopening (with restrictions) Prov. Health Officer Replaced Effective Tuesday, May 19th
Order Requiring All Employers to Create a Covid-19 Workplace Safety Plan Prov. Health Officer No expiry date  
PHO Prohibits Gatherings of 50+ Prov. Health Officer Order 2020-05-30, if not extended No gatherings of more than 50 people at a winery
PHO Closes Bars & Manufacturer Tasting Rooms, Restricts LP & FP Licensees to Take-out Prov. Health Officer Order 2020-05-30, if not extended (Replaced) Closes winery tasting rooms and lounges. Permits winery retail to continue subject to certain restrictions. Restaurants located at a winery restricted to take-out.
PHO Food & Beverage Sector Recommendations Prov. Health Officer Guidelines   Explains above orders and issues additional advice.

 

Policy Changes

Policy Change Source Expiry Date Industry Consequences
Temporary Permission for LP & FP Licensees to Deliver Alcohol with Take-out Meals

LCRB Policy 20-05

2020-07-15 May allow some continued sale of wine from wineries to restaurants that are now restricted to take-out service under the PHO order.

Temporary Extended Opening of Retail Liquor/Wine Stores

LCRB Policy 20-11 2020-07-15 Increases permissible opening hours of retail stores selling wine, including manufacturer on-site stores.
       

 

If you find this information useful, you may wish to support us by subscribing to our annual Essential BC Winery Compliance subscription which provides vital regulatory and business information to the wine industry on an annual basis with email updates on important developments. Topics covered include licensing/compliance information, interprovincial shipping analysis, agricultural land commission rules and COVID19 impacts.

 

Categories
COVID19 Industry Info

COVID19 Statistics: Comparison to Other Jurisdictions (Free Access)

The following information is intended to be of assistance to members of the wine industry in terms of judging how the battle against COVID19 is playing out, particularly in respect of how West Coast wine producing jurisdictions are faring as compared to other places in the world. Please note that these are simple \”raw\” statistics gathered on the date(s) indicated. Direct comparisons are difficult because the stage of the pandemic may be different in each place and (crucially) we simply don\’t reliably know how many people have been infected in each place. The statistics will be updated periodically as the fight against COVID19 continues. This article provides useful background on the various public health policy approaches to fighting the pandemic: Coronavirus – The Hammer and the Dance.

You will notice the wide disparity in death rates from this disease between various jurisdictions. While comparisons are very difficult \”mid-way\” through the pandemic, it is already apparent that the cruel impact of this disease will obviously vary widely from place to place. In an effort to provide additional context, there is a listing of media articles at the bottom of the page, which describe how some of these other jurisdictions have approached the problem from a policy perspective.

(Country Data Gathered from Worldometer Coronavirus Tracker, Province/State Data from the NY Times and BC PHO)

 

Deaths Per 1 mil. population as of date indicated.

 

April 9, 2020

May 1, 2020

May 29, 2020

June 26, 2020

July 24, 2020

August 7, 2020

Canada

 13  90  188  225  235  237

USA

 50  199  318  383  446  495

BC

 10  22  33  35  38  39

WA

 60  109  147  171  204  226

OR

 10  25  36  47  66  82

CA

 10  54  105  147  207  254

 

           

France

 187  377  441  456  462  464

Italy

 302  467  551  574  581  582

UK

 118  405  566  637  673  685

Germany

 31  80  103  108  110  110

Sweden

 79  263  435  523  562  570

 

           

South Korea

 4  5  5  6  6  6

Japan

 0.7  4  7  8  8  8

Hong Kong

 0.5  0.5  0.5  0.9  2  6

Taiwan

 0.2  0.3  0.3  0.3  0.3  0.3

Further Reading on What Other Countries Are Doing:

Germany: NY Times Article on Germany & COVID19

Taiwan & Singapore: National Post Article on Taiwan & Singapore

General Info: Coronavirus – The Hammer and the Dance

Death Rates: The Stark Difference in Countries\’ Coronavirus Death Rates, Explained

Our World in Data: Global Covid19 Death Rates

Sign Up for More Detailed Info …

If you find this information useful, you may wish to support us by subscribing to our annual Essential BC Winery Compliance subscription which provides vital regulatory and business information to the wine industry on an annual basis with email updates on important developments. Topics covered include licensing/compliance information, interprovincial shipping analysis, agricultural land commission rules and COVID19 impacts.