Hicken explains BC wine distribution, part one: retail
The Province of British Columbia is in the process of reviewing and reforming its so-called “antiquated” laws surrounding the sale and distribution of liquor. We decided it would be timely to share archived posts by BC wine law expert Mark Hicken on how liquor is currently sold in British Columbia. Here is part one of two posts.
This is the first of two articles describing the wine distribution system in BC. This article describes the structure of the wine distribution system from the retail end. Part 2 describes the wine distribution system for restaurants and bars.
Government Monopoly System
As a result of institutional changes introduced following prohibition, almost all Canadian provinces have government control systems for liquor distribution. More detail on this is in my article on the History of BC Liquor Laws. British Columbia still maintains its government control system although private wine stores have been permitted to a limited extent as described below.
Government Control of Wholesale Operations
The BC provincial government still maintains absolute control of all wholesale distribution of liquor and wine within BC. The government body that is responsible for wholesale operations is the BC Liquor Distribution Branch which was created and is controlled by the BC Liquor Distribution Act . As a result, anyone hoping to import or distribute wine in BC has to do so through the BC LDB and has to be licensed by the BC Liquor Control and Licensing Branch (LCLB). This is true even if you are only distributing your product to private wine stores and/or restaurants/bars.
Retail Channels for Wine Distribution in BC
There is a confusing mix of retail distribution for wine in BC. Not that long ago, we only had grim government stores with a prohibition mentality. Happily, that has now changed: we now have modern BC government stores and a mix of private stores. Unhappily, the system imposes different rules on the various players, is not transparent to the consumer, and is subject to a panoply of hidden taxes and fees which boost retail prices to unreasonable levels.
1. Government Stores
The bulk of BC’s wine and liquor is still sold through the BC Liquor Distribution Branch’s retail arm, BC Liquor Stores. These stores are located throughout British Columbia. Some of them (particularly the Signature stores including the one at 39th & Cambie in Vancouver) have been modernized and boast a fairly impressive selection of products. Signature stores also often have staff who are knowledgeable about wine and can make useful recommendations. Prices are very high in BC Liquor Stores if they are compared with those in most other Western countries or those in Washington state or Alberta (see pricing discussion below). For example, a bottle of wine that might retail for $10 south of the border will often cost at least double that in a BC Liquor Store.
2. Original Private Stores
At one point, the BC LDB also issued private wine store licenses. Those licenses were issued on more favourable terms than the current private store licenses in that they get a 30% “wholesale discount” off the government store retail price (there is no proper wholesale price system in BC, everything is referenced to government store prices – see also Licensee Stores below). As a result, the original private stores are often able to sell their wine at prices close to (or the same as) those in government stores (which means the prices are still very high by world standards). They can also sell both imported and domestic wine. Some examples of original private stores are Marquis Wine Cellars and Liberty Wine Cellars in Vancouver. These stores typically have an excellent selection of products (often including wine not found in the goverment stores) and also boast extremely knowledgeable staff.
It is no longer possible to obtain one of the original private licenses. In fact, because the license terms are favourable, they are coveted. The Mark Anthony Group was a holder of some of these original licenses and recently sold them to Everything Wine who has now opened two huge new wine supermarkets, one in Vancouver and one in Victoria.
There used to be a tool on the BC LDB web site which helped you to locate one of the old regime LDB private liquor stores (the old link is: Find a Private Liquor Store ). However, this tool appears to have been disabled.
3. VQA Wine Stores
VQA Wine Store Licences have also been issued in the past. These licenses permit only the sale of British Columbia wine that is part of the VQA (Vintners Quality Alliance) system. There are a fair number of VQA wine stores around the province with a high number in the Lower Mainland. These licenses are also much more favourable than the current private store licenses (see Licensee Stores below). Prices in VQA stores are generally the same as those in government liquor stores. There is a moratorium on the issuance of new VQA store licenses.
You can find VQA wine stores at the VQA Wine Stores Page on the BC Wine Institute web site.
4. Winery Sales
Wineries can obtain a license to sell their products direct from the winery to consumers either at an on-site store or by shipping the wine directly to the consumer. Winery retail licenses also permit internet sales of the wine.
5. Licensee Retail Stores (LRS)
The most recent batch of private store licenses was issued for LCLB licensee private liquor stores. Most private stores have this type of license. These licenses were issued by the LCLB rather than the LDB. However, they were only issued to those who already held a liquor license for a bar or a pub [update: as of Dec 2, 2009, this requirement has been eliminated]. Strangely, although you had to originally own a bar or pub to get one of these licenses, you did not need to locate your store near the bar or pub (although some did). In addition, the terms of the license were much less favourable than the other licenses discussed above in that these stores only get a 16% discount off government liquor store retail prices when they buy their products wholesale from the LDB. This slim discount means that licensee private stores must sell their products at prices which are much higher than government stores in order to stay in business. As a result, prices in some of these stores are staggeringly high.
In addition, and as of December 2009, LRS stores have some other odd conditions which discourage competition. LRS stores must be located in a free-standing building which cannot be visibly associated with another business in the vicinity. These requirements were likely included to try and prevent supermarkets and other big box stores from obtaining liquor store licenses. LRS store licenses also have distance separation requirements: generally, LRS licenses cannot be issued if there is another LRS store within 1000 meters (now changed to 500 meters).
The terms of licensee store licenses are here .
Retail Pricing in BC
As noted above, wine prices in BC are very high compared to those in other Western countries. The high prices are caused primarily by hidden taxes. The federal government GST of 5% applies to all wine sales. The provincial government of BC also applies a 10% sales tax on wine and all alcohol (higher than the general 7% rate). However, the provincial government through the LDB also applies LDB “markup” and “fees” to all product that passes through the LDB system. These amounts are very high and are really hidden taxes since the excess amounts that are collected are sent directly into the government’s general revenue fund. If you want to see these amounts for any given bottle, check out my BC LDB Wine Markup Calculators on my companion site,winemarketing.ca .
You should note that the calculators are only designed to reflect prices in government liquor stores on imported wine. They will not work for prices on BC product in the VQA stores or winery stores which by and large avoid the BC LDB regime and its inherent markups and fees. They also won’t work as well for private store pricing.
As an example though, a bottle of Chateau St. Jean Chardonnay from California will cost you $24.78 in a BC Liquor Store. The wholesale cost on that bottle is probably about $9.95. The government takes about half of the retail price in taxes or hidden taxes (nearly all goes to the provincial government) so the real BC sales tax rate on the bottle is about 90%.
Available Retail Licenses
There are no retail wine store licenses available in BC at the present time. The only retail licenses that are currently being issued are winery store licenses.
Internet Wine Sales
Internet wine sales are now permitted in BC for retail stores although hardly any stores have actually implemented full e-commerce. Most stores require that consumers actually phone in an order if they want to order wine that they have seen on a store web site. It can then be delivered to the customer by the store.
Wineries with retail licenses can sell wine online and ship it to their customers.
Although it is technically possible for a resident of BC to import wine, it is generally not practical because the LDB will impose its excessive markup/fees on to any products ordered through the BC Liquor Stores. In addition, Canada Customs has an agreement with the LDB to also collect those markups/fees at the border if anyone tries to bring in wine above their duty free allowance. The imposition of these markups/fees means that any direct imported wine will become horrendously expensive. More on these topics is in my articles under theShipping Laws category.