Postcard #2 From a Troubled Wine Region

Posted by | Posted in Wine Politics | Posted on 05-19-2011

Courtesy of Zelda Sydney

Greetings, again, from Vancouver, British Columbia (Canada), three hours’ drive from the Okanagan wine-producing region. I last offered Terroirist readers the gloomy portrait of BC’s wine industry as painted by a local university policy wonk. Now, more bad news:

Vivid pink Japanese cherry blossoms have just finished blooming here, announcing Springtime for the West Coast. But anyone in an alcohol-related business might be thinking less ‘Spring’ and more ‘Thanksgiving.’ Why? Because the government monopoly business/regulatory agency that controls all alcohol movement in the province often keeps orders under lockdown in a bonded warehouse for lengthy periods of time and without reason. Retailers and restaurants need to think months in advance to ensure that they’ll have inventory they ordered.

Being forced to think “Pinot Noir and roast turkey” when customers are gearing up for “chilled rosé under hot July sun” is one of many complaints that BC’s restaurant owners and sort-of-private alcohol retailers have against their overseer/regulator and direct competitor, the British Columbia Liquor Distribution Branch (BCLDB).

If George Orwell and the Three Stooges created a business model, the BCLDB could be the fruit of their partnership. If the BCLDB were a film, maybe a remake of ‘The Parallax View’ with an MW in Robert Redford’s role, and sinister Parallax Corporation trying to assassinate…BC’s budding wine culture.

The BCLDB regulates all alcohol; and operates liquor stores; and regulates and oversees and competes with the limited number of sort-of-private retailers that it allows exist. And it does so using a broad array of dizzying regulations. And it changes its rules at whim. And it answers to no one.

Consumers and retailers might wait months for that imported wine but have this BC wine in two days; they may serve it here but not there; they may host tastings in this manner but not that; they may order this wine but only in cases and not by single or several bottles; and caterers may serve this wine but not deliver it to their clients, because that’s defined as bootlegging and subject to a $100K fine.

No corkage is allowed here; no fine wine auctions; strict rules concerning off-site alcohol sales and tasting. And grapes aren’t the only things getting soaked here in wine country, since consumers pay a 123% government-imposed markup on all wine (domestic and imported). Incomprehensible bureaucratic regulations follow every aspect of alcohol, including its classification.

Wine is labeled ‘wholesale,’ ‘speculative,’ and ‘specialty,’ —  terms spring-loaded with arcane rules and regulations and subject to a moment’s change. And yet restaurant owners, for example, aren’t allowed real-world wholesale purchasing but are obliged to pay off-the-shelf retail. It’s a head-scratcher.

Confused? BC alcohol industry insiders are, too, which is why adjectives regularly used to describe the BCLDB include, “archaic,” “inefficient,” “where ideas come to die,” “labyrinthine,” “lunacy,” “stifling,” “baffling.” Even this BC wine lawyer , can’t ‘eschew the obfuscation’ that defines the BCLDB, whose rules even contravene international trade rules and Canada’s own constitution.

While the 1928 Canadian law prohibiting interprovincial alcohol sales is seeing some movement on PR and legislative fronts, other BC alcohol issues are a provincial matter, and no movement is apparent from the Legislative Assembly in Victoria, the province’s capital region.

Bureaucratic hoops might appear a mere irritant in an otherwise wine-friendly region, but in fact the hoops are walls and mazes, according to a local independent boutique wine retailer. John Clerides has owned Marquis Wine Cellars for over 20 years, and describes the business environment the BCLDB has created in a tone that drips of acid frustration and mineral determination.

“Imagine if Apple had to put every one of its orders through Microsoft,” he told me, using one of several analogies he repeats publicly often to describe the conflict-of-interest controls imposed by the government on his business. No hyperbole: He is, in fact, required by law to put his orders through his own direct competitor.

He also believes that the BIVB, Burgundy’s lobby around the globe, skipped a visit to Vancouver during a recent Canadian tour because of BC’s unfriendly atmosphere. Clerides is among a few local industry insiders regularly seen howling online with frustration about a system that simultaneously asphyxiates (BC’s still-nascent wine consumer culture) and resuscitates (tax support to the local wine industry) its own wine industry.

Mainstream, local wine writers have been less vocal than one would expect with a story as meaty as this. It has all the elements:  An opaque and menacing bureaucracy versus a friendly, fruity beverage. Apparently, a first-ever investigative piece in a downtown Vancouver weekly may be in the works; insiders hope for anything that might shake up the status quo in their industry.

But, benefit of the doubt for a moment to the BCLDB, since BC’s wine culture is, after all, a very recent development. As is the case in most New World wine regions, up until very recently “alcohol” meant beer and spirits, and these consumers didn’t constitute a sizable culture influencing tourism, agriculture and even education. Point for historical sensitivity.

Except that it’s astounding, given the speed with which bureaucracies generally move, how BCLDB’s regulations somehow evolve with lightening speed to curtail and control every aspect of current wine business and culture. The BCLDB clamped down hard on a wine shop operating a state-of-the-art Enomatic machine until local cries made the body pull back a bit.

What’s the BCLDB defense? Supporters generally argue on ideological grounds, since BCLDB runs some of its profits back into the greater good of BC’s public systems (schools, healthcare, infrastructure, etcetera). However, European wine-producing nations are, like Canada, social democracies with heavy social spending; so, why don’t they pay inflated prices for a bottle of wine or spirits? Why don’t their elected officials and powerful unions impose the same snakes-and-ladders rules and regulations on wine retailers and consumers?

Supporters also point to a necessary sin tax, a concept historically rooted in North America. Okay, but it needs to be noted that BC has an untapped source of revenue from a contraband product that dwarfs the paltry take of alcohol sales (estimated at $900M): the province has an illegal “grow-op” marijuana industry that even Forbes noticed and valued at $4B-7B annually.

If BC were genuinely looking for a sin-tax cash grab then it would decriminalize, regulate and control this black market, curtailing the deep and multi-faceted criminal elements and high social costs associated with it. A stretch? Think again. Outsiders might think from the wine-unfriendly bureaucracy that BC is protecting prevailing social conservatism. Wrong again. The region is forward thinking when it wants to be.

BC already operates a free, safe-injection clinic for heroin addicts; so beating on wine or artisan beer geeks isn’t about protecting ‘family values.’ Yes, the safe-injection issue is separate from wine culture; but, if a progressive-thinking province and its public service union were serious about tax revenue and public safety, then surely ending the illegal “grow-op” industry would only be beneficial, leaving the small-potatoes wine industry to thrive with fewer constraints.

Such a thing is unlikely to happen soon. Provincially elected officials (all of left and centre-left parties) hedge bets and pass bucks on the alcohol issue, hoping to appease both the BC public service union and the private sector. The wine industry has less ambivalent support from a recently reelected soft-conservative federal parliamentarian who represents some of the wine-producing region. This Member of Parliament has tabled a motion in Canada’s federal capital to amend interprovincial trade barrier legislation. It’s an important first step.

This is a tough subject to distill to blog-post proportions, and pro-and con-privatization arguments continue. In a broad sense, it would be hard to find another wine-producing nation in the world whose own government presents such an obstacle to its own wine industry. Yet another indication that the BC industry isn’t ready to sit with the big kids quite yet. Wait a few years and see.

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