Wine importers are upset that the British Columbia Liquor Distribution Branch (BCLDB) gives “cellared-in- Canada” wines, which are made from 100% foreign grape juice, what they say is preferential treatment over equivalent-grade imported wines.
Critics have eliminated some of the advantages of cellared-in-Canada (CIC) wines, but they remain angry about the controversial entry level products.
“Cellared-in-Canada wines are at a huge price advantage because they’re distributed as a domestic wine,” said Bacchus Group Inc. principal Jim Marion.
He said BCLDB regulations allow Mark AnthonyGroup, Constellation Brands Inc. (NYSE:STZ) subsidiary Vincor Canada and Andrew Peller Ltd.(TSX:ADW.b) to warehouse their CIC wines at their facilities. Imported wines must all go through what Marion calls his “forced distribution network,” which involves storing wine at a bonded warehouse such as Containerworld Forwarding Services Inc. facility.
“Cellared-in-Canada wines can avoid Containerworld,” he said. Marion sells the products from Containerworld to the BCLDB, which either draws on that supply for its stores or resells the product to private wine stores. Marion said CIC producers can avoid paperwork by shipping directly to stores.
“This disparity gets people drinking bad wine,” said Marquis Wine Cellars owner John Clerides. Clerides said the dollar or two in cost savings that CIC wine producers reap per bottle is significant given that the wines cost approximately $10 per bottle. “If someone only has a budget for a $10 wine, they’re forced to drink that [cellared-in- Canada] stuff,” Clerides said. “If the rules were different, they could afford a much better import wine for $10.”
CIC critics succeeded in getting Vincor Canada to stop using foreign juice in its Jackson Triggs Esprit brand, which also bore the Olympic rings and the Vancouver 2010 Games’ Inukshuk logo. They then got the BCLDB to remove all cellared-in- Canada wines from the B.C. section of liquor stores.
But Andrew Peller COO Anthony Bristow critics are now going too far. Unlike Mark Anthony Group, for example, Andrew Peller stores its CIC wine at Containerworld because Bristow believes it’s more affordable than leasing other Vancouver warehouse space.
He added that Canada has a more level playing field for imported wine than any other wine-producing country. That’s why 56% of the dollars spent on wine in BCLDB’s stores last year were for imported products. He said only 2% of his sales are exports because protectionist practices of other countries give their producers huge advantages.
Bristow pointed to two examples of cheap foreign wines that disguise their grape-juice origins. “If you go into a liquor store and buy a bottle of Barefoot Cellars you’ll see something that says, ‘For Canada only,’ Bristow said.
“It says California on the label. If it was produced and sold in California, it would have to be 100% California juice. But if it’s a product for sale in Canada, that juice can be mixed with less-costly ingredients and be sold with 75% California wine.”
In order for a producer to call a wine a product of Canada, it must have 100% Canadian juice. Federal regulations allow foreign wines to be labelled as a product of a country or a region where a minimum of 75% of the juice is sourced.
Bristow then picked up a bottle of Kressman-branded wine that was in his office. It’s commonly found in the French section at liquor stores.
The label notes that the wine is a product of France, but Bristow pointed out that the label also says it’s a “wine of the E.U.” He said that means as much as 25% of the wine’s juice could come from less prestigious winemaking countries in the E.U. Added Bristow: “Cellared-in- Canada products use local labour, local everything. They can have incredible value to the province and the country. A KPMG study found that Cellared-in-Canada wines have about 12 times the value of an import when it comes to the economic value to the country.”