British Columbia, Canada’s western-most province, boasts stunning shorelines and soaring mountains. Fresh seafood and an ethnically diverse population make for an exciting restaurant scene, especially in the densely populated city of Vancouver. And British Columbians like to drink wine. They are the second highest per capita purchasers in Canada after Québec.
Yet Canada’s third biggest wine market has a reputation for being complicated. Some of this comes from misconceptions.
It’s not a monopoly market
“There are a lot of uninformed producers who consider Canada the LCBO,” says Matt Thirlwell, managing partner of Vintage West Wine Marketing import company, who is referring to the province of Ontario’s Liquor Control Board. Instead, BC has its own autonomous government-run Liquor Distribution Branch (LDB). “Furthermore, BC is not a monopoly.”
While the LDB is the province’s sole wholesaler, the retail landscape is a hybrid of government-owned stores – BC Liquor Stores (BCLS) – and private retailers. With 197 outlets, BCLS represents 45% of BC’s annual wine sales, C$1.26bn ($960m) in 2019. “If you can get a wine listed with BCLS, it is the biggest chance to move significant volume,” says Peter Marshall, owner of import company Sur Lie. Listings are largely achieved through a tender process and importers submit applications to one of three category managers.
Listing opportunities outside formal tenders also exist. “If an agent offers me something cool, from an appellation that isn’t represented and there are accolades, of course I am going to look at it,” says Barbara Philip MW, responsible for wines of Europe, sparkling and fortified. Her colleague Stephen Schiedel oversees Wines of Canada - VQA, USA and South America. Ad hoc listings factor into his buying strategy less but when it comes to “great deals - we are always interested,” he says.
In the private sector, upwards of 700 retailers account for 34% of the sales volume (28% by value). These run the gamut from full selection liquor stores to fine wine-only boutiques; from large volume destination stores to small, neighbourhood shops. Private stores are not required to carry BCLS listed wines and at Liberty Wine Merchants, “the overlap is 1% to 2%,” says owner Robert Simpson. The largest privately-owned retail chain in the province, Everything Wine, carries most of BCLS’s top sellers. “It is important to have brands that people know but beyond this, we have another 2000-3000 SKUs,” says director of buying, David Smith.
To add to an already complex retail mix, a handful of grocery stores are licensed to sell wine. However, imports have only been authorized on grocery shelves since July 2019. “There are other regulatory obstacles so it isn’t going to blow the door open overnight,” says Marshall.
On-trade contributes 13% to volume wine sales. As licensed establishments do not receive wholesale prices, wine list prices are high – at least 100% above retail. As such, many restaurants prefer not to work with listed wines and, according to Marshall, top restaurant chains seek out exclusives. Chris Hoffmeister, CEO of Select Wines believes that much of the premium business is driven by restaurants. “With the low Canadian dollar, the hospitality industry has thrived,” he says. He also points to a progressive sommelier culture. “BC is a very good market to do business in because of the different channels.”
However, it requires an importer who understands these properly, is strategic about what to place where and, most importantly, has good relationships. “There are a lot of importers so buyers don’t have to do business with people they don’t enjoy working with,” says Marshall.
Price and promotions
A shift to a wholesale model in which all retailers, including BCLS, buy at the same wholesale price from the LDB has intensified competition – and demand for exclusive products. Many in the trade feel that this has driven the market down. To remain competitive with private stores, BCLS introduced its own category of exclusives called BCL Select. While importers need to come in at lower prices to compete in tenders, BCLS takes full responsibility for promotion of these. “There is no need for additional A&P support from the supplier or agent on BCL Selects,” says Thirlwell. Hoffmeister adds: “They are operating like a major grocery,” but explains that working with BCLS on these opens the door to listings of other products.
In a global context, wine prices in BC are not cheap. Before arriving at a wholesale price, the LDB applies an 89% markup after shipping, excise, duties and the importer’s markup are calculated. The retailer adds their mark-up and another 15% in provincial and federal taxes is slapped on at the till. Faced with an average shelf price of C$15, BC’s consumers are price – and above all – value-conscious.
Approximately 70% of wine sold is under C$20 retail (ex-cellar €3.5/$5 or less). “If you are looking at building a brand in the tens of thousands of cases, this is the price range you need to hit,” says Thirlwell. Category leaders such as J Lohr Cabernet Sauvignon (C$23.99) and Masi Campofiorin (C$22.99) are the exceptions. “They have enough brand equity to ride out more than a 10 year span and be elastic to price changes,” says Philip. Nevertheless, Thirlwell believes that brands are eroding as retailers scramble for products offering better margins. And Schiedel calls loyalty paper thin: “Brands that seemed rock solid yesterday, seem to be knocked over like a feather today.”
Ongoing promotions throughout the year are necessary for traction, especially for wine under C$25. Thirlwell says that participating in the LDB’s Wholesale Price Promotion (WPP) program can generate a 30-50% sales increase at BCLS during the month. He also uses the program to gain distribution at private stores. As the WPP is fully funded by the supplier and agent, “it requires having the right partner who is willing to invest and commit to the market,” he says.
In large-scale retail outlets, points are also helpful. Ninety-plus from Wine Advocate or Wine Spectator wields the most clout. “A neck tag increases sales by 10% to 15%,” says Carmen D’Onofrio, managing partner of Stile Brands, adding that points are more important than medals.
While the lowest price still rules from a volume perspective, Thirlwell says that consumers are willing to spend more for a wine that overdelivers, has strong packaging and a compelling story. It also depends on its provenance, according to Schiedel: “California has more customers at a higher price point than Chile.” In terms of French wine, Philip reports that the majority of sales and growth comes from the super-premium category.
The low-end of BC’s market is dominated by domestic products. This includes cask (two to four litre formats) and Bottled in BC wine (made from imported bulk and domestic wine) which typically sells for under C$10 per bottle. Speaking of European wine in particular, Philip says “there is really no room at the low-end,” which is the reason why Spain, which continually undercuts itself pricewise, is struggling.
Imported wines do well
Imports also have strong competition from BC’s VQA - quality designated wines made from 100% BC-grown grapes. Despite an average price of C$18, local wine is fiercely supported by consumers and trade. The domestic trio of VQA, cask and BIBC wines represents more than 50% market share. But Thirlwell is reassuring: “There is still enough business on the import side.” Like most of his colleagues, he believes that having a local wine growing region has had a positive impact on BC’s wine culture in general.
That being said, overall wine sales are currently flat, though categories like rosé and sparkling wine continue to grow. BC’s palate leans toward the New World with the US (dominated by California) being the largest import category. Schiedel reports that Cabernet Sauvignon is trending and in California is “taking back share from red blends”. Australia, which used to lead imports has been declining for a number of years. However, there is a glimmer of hope for wines over C$20. Kimberley Giesbrecht, category manager for Wines of Australia (as well as New Zealand, South Africa, All Country Wine Casks and BIBC) sees a move away from ultra-rich, generously oaked wines: “Consumers are looking for something a bit lighter and more vibrant.”
“Most European categories are outperforming the wine category in general,” says Philip. Italy is the second largest import category after the US. But the big surprise is Portugal. “Although a small category, it is showing one of the biggest growth percentages,” says Philip noting this applies to all styles except fortified wines.
Despite BC’s reputation as Canada’s greenest province, organic, biodynamic, vegan and carbon neutral wines are far from mainstream. “The explosion of organic food has yet to translate to wine,” says Marshall. However, buyers and importers recognize that these are points in a wine’s favour. And according to Smith, “it is much more important than it was a decade ago.”
In a market with so many nuances, a savvy importer is crucial. Philip directs prospective suppliers to the Import Vintners & Spirits Association. Most of BC’s serious importers are members. Hoffmeister recommends avoiding agents with too many brands of similar origin and price point. He also notes: “The strongest brands in Canada have a national importer behind them.” While this could be the right solution for a high-volume supplier, a small to mid-size producer might be better positioned with a Western Canadian or BC-only agent. Generally large retail buyers and importers looking to expand their portfolios head to shows like Vinitaly, Vinexpo and ProWein.
After entering the market, supplier visits are important but shouldn’t be too frequent, cautions D’Onofrio: “Every 12 to 16 months for two to three days is enough.” While he finds that solo visits make the most impact, participating in the
Vancouver International Wine Festival (VIWF), an eight-day consumer and trade event, is beneficial for brand exposure and creating sales momentum. But participation has its price – an estimated C$10,000. Alternatively, Top Drop is a smaller scale show with less cost commitment, greater emphasis on the trade and a focus on family-owned wineries.
The British Columbia market is as convoluted as it is dynamic. Those wanting to do business here shouldn’t be daunted. “Our wine scene, with all its challenges, is very strong,” says D’Onofrio. And by all accounts, establishing solid relationships has proven to be a successful strategy.
This article first appeared in Issue 1, 2020 of Meininger's Wine Business International magazine, available by subscription in print or digital.