Private Wine Shops in Ontario? Let’s Talk About it.

David Lawrason

The Wine Council of Ontario has flipped the switch on a web site called www.mywineshop.ca that allows citizens to create their own virtual wine shop. It is a very bold and clever marketing/lobbying idea. And it is the first time an industry association has initiated a public campaign aimed at creating private wine stores in the province. Gutsy stuff.

In less than a week it has painted an appetite-whetting tapestry of what privatization might look like in Ontario, complete with store themes, stock selections and locations across the province as designed by its citizens. And it is giving the public a very direct way to lobby their local MPPs for change.

Last week WineAlign colleague John Szabo published a detailed and cogent backgrounder on the LCBO and the wine market in Ontario. It is a must read in terms of laying the groundwork and the reasoning behind the WCO campaign. And it rightly reminds all of us about the Beverage Alcohol System Review, commissioned by the then newly-elected premier Dalton McGuinty, an exhaustive study that recommended privatization in 2005. It was tabled and immediately shelved days before a threatened strike by the LCBO’s unionized workers in July of that year.

Why the Time is Right Now

Something fundamental has changed since then, giving the notion of private wine shops momentum that it has never had before. In a word, quality. Ontario wine has improved dramatically. One indicator is Ontario’s very strong showing at the 2012 Canadian Wine Awards with results just announced by Wine Access at www.wineaccess.ca/wine-awards. Tawse Estate Winery has clinched Winery of the Year honours for the third year in a row. Nine Ontario wineries have finished in the top 20, and 24 Ontario wines have taken gold medals (scoring over 90 pts).

The quality surge is creating consumer demand that the LCBO, in its role of being a singular government agency with finite shelf space, cannot possibly fulfill. Over half the brands produced in Ontario are not available at the LCBO. It must eventually concede to consumer demand, and at this time of political instability in Ontario, with an election almost certain in 2013, the WCO is sensing an opportunity. This issue affects Ontarians directly and tangibly; and it is winnable. More than 50% of Ontarians would like some form of privatization, as often quoted in major newspaper editorials.

Ontario and Imported Wine

But importantly, and very astutely, the WCO is not just proposing private wine shops for Ontario wine only. It wants private shops that sell international wines as well.

This is smart on several levels. First, it sends a signal that Ontario wine is confident; that it is ready to stand up and compete head to head. Until very recently the Ontario industry’s stance was; ‘we are local, therefore we are special, therefore you owe us your support’. It was the message they took to the public, to the media, and to the LCBO itself. And the general public response was, ‘stop whining, stand in line, and show me”.

But there is also a tactical reason for promoting private shops with both domestic and international wine. The Ontario government remains bound by the North American Free Trade Agreement (NAFTA) and European-based GATT agreements that prohibit the opening of new private shops selling only Ontario wine. At the time in the late ‘80s our foreign trade partners were demanding abolition of the LCBO, creation of an open market and removal of all advantages for domestic wine. Ontario negotiators dug in their heels and presented a compromise that it would not give domestic wine a competitive advantage by allowing more Ontario wine stores (existing licenses for large wineries, i.e. Wine Rack, were grandfathered).

So opening private wine shops that sell both domestic and imported wine neatly removes that objection. In fact it is the only way to legally make it happen.

Reaction to mywineshops.ca

It is obviously very early days for www.mywineshop.ca, and time will tell if it has the legs to make a real difference. The WCO is still in a phase of what it is calling a ‘soft launch’ to its member wineries and wine media. And certainly not all the stakeholders have yet responded. The LCBO and Wine Council are meeting Tuesday, so we may hear official responses from the LCBO and the union in the days ahead. And we will be listening.

As of Monday night, five days after the site went live, over two hundred people had created their own virtual wine shops. Hillary Dawson, president of the Wine Council of Ontario, said “I am really pleased with the response. We really didn’t know what to expect, but people are clearly getting the concept and the message. And most of the participants are clicking through to lobby their MPPs.”

Twitter has been alive with the topic, most of it pro-privatization. For example, from Toronto we had: “Other provinces have privately owned wine shops. Why not Ontario? Support the movement”.  From Hamilton: “Have you built your dream wine shop yet? It’s time for change!”  You can follow along with the Twitter tag #mywineshop.

I have also had email responses cross my desk; emails not intended for publication therefore I am not attributing them. But there are two telling themes.

One is that some people within the wine importing community want their trade organization called Drinks Ontario to get publicly on board. Again, this would be a smart move. The domestic and importing communities have not historically worked together, and as the Wine Council of Ontario has already demonstrated, it understands the logic and power of open competition.

The other theme is fear of LCBO retribution. (Talk about “the elephant in the room”). Even our braveheart John Szabo remarked at the end of his piece that “I hope I don’t get put on an (LCBO) interdiction list for writing this”. An importing agent replying to John’s article said he really wanted to talk about the issue ‘off the record’ as he was concerned that being put on an interdiction list would put him out of business.

This fear of the LCBO, whether justified or not, is another compelling reason to re-think the government monopoly. The fear shouldn’t exist within an otherwise free and democratic society; but it does. I have been writing on wine for over 25 years and during that time I have been involved in thousands of conversations with wineries, importers and consumers on shortcomings of the current system. Only once did an individual agree to be quoted.

Visions of a Privatized Landscape

There are as many possible models for privatization as there are vested interests and informed consumers. I can only say that I hope all the vested interests – whether the Wine Council of Ontario, Drinks Ontario, individual manufacturers, regulators, politicians and even the unions – stop to study what consumers want and need – not just what would be good for themselves. And www.mywineshop.ca provides, or will provide, a more thorough consumer-generated study manual that has not existed before.

The site provides options to “open” either local shops offering a grab-and-go selection, larger retail shops with a broad selection, or specialty shops with smaller selections of more limited availability wines. Already this seems a natural way to structure a private system, but I would personally add supermarket/grocery wine sales to the mix. Apparently wine is supposed to go with food, the cornerstone of moderate and responsible consumption of alcohol.

The website separately discusses “corner store” wine sales in an FAQ section. The Ontario Convenience Stores Association www.conveniencestores.ca has been actively promoting corner store sales, and political and media discussion around privatization has disproportionately and myopically focused on this. I personally would not rule out corner store sales, but it cannot be the only avenue.

The Wine Council puts it this way. “Just like you wouldn’t buy tires from a clothing store, your wine shouldn’t come from the same place you get a lottery ticket or a chocolate bar. Wine shops will be dedicated to offering Ontarians a vastly wider selection of wines while still offering greater convenience and responsibility.”

Ah, responsibility! This is the most frequently played card by advocates for keeping government in control of retailing. Another FAQ item asks “Won’t wine shops lead to more underage drinking?” The WCO’s response: “The simple answer is no. Wine shops will follow the same stringent government guidelines as bars and restaurants. Each wine shop will be licenced and inspected on a regular basis by the Alcohol and Gaming Commission of Ontario.”

I might add that there are already dozens of private shops operated by Ontario wineries that already existed before NAFTA. There are dozens of LCBO agency stores operated within grocery environments by private citizens. There are hundreds of make-your-own wine operations. Private wine shops as proposed here are not at all a radical or less safe idea.

Conclusion

This is a very welcome initiative and it just might have the legs. There has never been stronger public mood, or interest in wine. A Bank of Montreal report on the wine industry in Canada published Monday by Canadian Press said that consumers bought an average of 22 bottles of wine in 2011, up from 13 in 1995. And one third of the wine consumed is from domestic wineries.

But we need to be patient, thoughtful, calm and persistent. I have been advocating privatization since I began writing about wine in Ontario, first in Wine Tidings magazine almost 30 years ago, then in the Globe and Mail, then Wine Access. In the early 80s I predicted the LCBO would fall before the Berlin Wall. And yet here we are with the LCBO still firmly in place. Many in the trade foresee no change at all.

Over the years the LCBO has made many improvements designed to serve us well; and the level of dedication and wine “ability” of many of the LCBOs product consultants, buyers and senior administrators is now unquestioned.

But the LCBO remains morally out of place as a government instrument to regulate the sale of a legal substance. I am all for tight regulation and licensing, severe penalties and stringent product safety testing and controls. That is government’s role. But alcohol is legal, and so the citizens have every right to sell it themselves, and certainly to select which brands are available, and to shop for it when and where they chose.

Stay tuned.