Making it even harder for Ontario's small wineries

If you've read more than one or two posts here, you'll know I'm not a fan of big government, especially when that government moves into areas far better served by private enterprise. Ontario's liquor laws are still just emerging from the Prohibition era, and are strongly tilted in favour of large conglomerates and against smaller producers (it's much easier for the government to oversee a few giants than to actively interfere with oversee dozens or hundreds of smaller firms).

In an ideal world, I'd prefer to see the government get out of the alcohol business altogether . . . but that's not likely to happen. In the real world, the Ontario government strictly limits how Ontario wineries are allowed to sell and market their wines. The vast majority of Ontario wine sold is through the LCBO/Vintages channel. The LCBO is the only way small wineries are allowed to sell their wines aside from direct sales at the winery itself (even the recent innovation allowing winery-to-home sales is tightly controlled).

Given all of this, you'd expect (if you don't live in Ontario, that is) that the LCBO would be actively assisting small wineries to increase their market share and to increase the LCBO's proportion of domestic sales. But that's not the way things are done. Michael Pinkus explains:

Early last week, a winemaker called me up to say that there was scuttlebutt in Niagara that the government "kickback" program, to help small wineries get their wines into the LCBO, is at risk of being axed. Known as the VQASP (VQA Support Program) it provided a 30% return to the wineries whose wines got into the LCBO and Vintages stores. This encouraged more wineries to submit wines to the LCBO (previously they were reluctant to put their wines into the provincial monopoly shops because there was no profit to be made, wineries realized more money by selling their wines out the cellar door, even if it was a slower process and to a smaller audience). This program subsidized the sale of these wines and allowed more Ontarians to see, and buy, a greater array of VQA Ontario wines from wineries they probably didn’t even know existed. (In the last three years of the program, the number of Ontario wineries in the LCBO rose from 15 to 50). It is because of this program that many small wineries saw light at the end of a long harsh tunnel; some wineries even increased production in the hopes of having enough wine to offer to the LCBO and get the exposure the shelves which they so desperately needed (in order to be listed the LCBO needs a minimum supply so that all their stores can get the required product). With the cancellation of the VQASP, those wineries are now at risk of being overstocked and putting themselves into a deeper financial hole then they were before. At a time when the government is ear-marking millions of dollars to bail out the car manufacturers, who are just trying to maintain the status quo — the government has decided to cancel help to an industry that is growing, creating jobs and brings tourism to this province. I have a colleague that calls Ontario "a have not province" and something we will not have is a wine industry if this continues to be the way wineries are treated. It seems that the current government is prepared to keep them down.

Yes ladies and gentlemen, this is your government hard at work. Do they not realize that the "O" in LCBO stands for Ontario? How quickly we forget that when we walk into the store and are faced with shelf after shelf of Chilean, Australian and South African wine. I have noticed that when I enter a US liquor store, I have to search high and low for the "foreign" wines, having to wade through row after row of California, Oregon and Washington State wine. In the LCBO it's the exact opposite — I wade through every other country before I find my country's/province's wines and who knows, maybe I'm still buying Chilean, Australian or South African afterall, if you don't examine the label with a magnifying glass, you could get stuck with a Cellared in Canada wine.

Again, I'd prefer the government got the heck out of the liquor retail/wholesale business altogether, but if they won't do that, they should at least try to make it a level playing field for both domestic and foreign products, and for both small wineries and large multinational conglomerates. I've written about this before.