B.C. wineries sour at Alberta government as dispute over corked direct sales ferments

Vintners, retailers frustrated as Alberta-BC cross-border trade dispute drags on.

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A feud between B.C. wineries and the Alberta government is fermenting as it reaches its fifth calendar month, affecting the bottom line for some vintners and retailers while limiting Albertans’ access to certain specialty products.

In January, Alberta Gaming, Liquor and Cannabis told B.C. wineries that its direct-to-consumer sales were voiding regular taxation channels and breaching provincial legislation. Wineries were told to put a cork on sales and shipments to Albertans’ doorsteps, or AGLC would deny wholesale shipments and stop stocking products for purchase by local retailers and restaurants.

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The bottleneck forced the hand of many producers, already struggling with a string of tough growing years, including the Summerland, B.C.-based Dirty Laundry Vineyard.

“Given everything else that’s going on in the industry this year — we’re really facing a zero crop — the industry is scrambling to try to figure out how we’re even going to stay in business,” said Paul Sawler, the winery’s vice-president of sales and marketing. “Adding something else like this . . . it’s just one more body blow in the boxing match.”

Sawler says Dirty Laundry’s direct sales are largely built on its wine club — a popular business model for small wineries — in which customers subscribe to receive shipments of small-batch, artisanal wines at regular intervals. Those who join the club are often tourists who found the winery while vacationing in the Okanagan, many of whom are from Alberta.

Dirty Laundry paused the program after AGLC’s ultimatum, but Sawler says direct sales to Albertans represent a sizable chunk of the vineyard’s business, and its approach may change if the issue drags on.

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“It’s a rather big impact on us,” said Sawler. “It has the potential to cost us almost a quarter of a million dollars in sales a year.”

The AGLC has said direct-to-consumer shipping has never been allowed in Alberta’s liquor model. 

Direct sales create ‘double standard’: retailer

A Calgary-based wine retailer says direct sales by B.C. wineries without taxation limit local in-store purchases, often with unmatchable prices. Skirting the “middleman” allows wineries to sell wines at lower prices than they’d be listed at local liquor stores, says Andrew Ferguson, owner of Kensington Wine Market.

“Consumers are able to purchase wine from B.C. wineries directly at about the same price that I get wholesale,” he said, adding that the issue has created “a bit of a double standard.”

“(Wineries) want to see their wines listed at restaurants, so they’re expecting importers to work hard and get them listed in restaurants, but then they’re taking away retail sales by basically shipping around them directly . . . we’re basically being bypassed.”

Ferguson says representations of the debacle as a full-on boycott by the Alberta government are inaccurate; his shop and others still stock several offerings from both smaller and larger B.C. wineries.

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“It’s not as simple as Alberta’s snubbing B.C.,” he said. “I think there are some questions of things like free trade between provinces, and fairness in terms of if B.C. wineries want to be able to ship here, what is B.C. going to do for Alberta businesses in return to level the playing field?”

Wineries ‘happy to collect and pay the tax’

Al Hudec, a lawyer working with the industry group Wine Growers of B.C., says the effect of direct sales on Alberta retailers is limited. If allowed to fully flourish, it’d account for only as much as three per cent of wine sales in the province, he said.

However, for low-volume, high-priced products, performing direct sales is the best business model for most wineries, Hudec said.

“The government wholesale warehouse doesn’t work well as a way of shipping those wines because they’re too specialized,” he said. “It’s inefficient to ship them through the government warehouse regime and through the retailing regime.”

B.C. wineries are open to paying Alberta tax on direct-to-consumer sales, but there’s currently no system in place to collect it. Sawler says the industry has been pushing the Alberta government to implement a taxing regime that allows for direct-to-consumer sales to no avail.

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“We’re more than happy to collect and pay the tax, but there’s no mechanism to do that,” he said.

Hudec pointed to the mandate letter of Service Alberta and Red Tape Reduction Minister Dale Nally, whose ministry oversees AGLC. The letter sets out priorities to increase government revenues from the AGLC and nix its bureaucratic hurdles — both of which Hudec says could be accomplished by taxing direct sales instead of forbidding them.

“Get rid of the red tape; put in a regime to collect the tax,” said Hudec. “(Nally’s) got the worst of both worlds right now because he’s not collecting any tax on the direct-to-consumer shipments but, also, by blockading the wholesale shipments, he’s losing tax revenue that he’d otherwise get.”

If the issue persists, Hudec said it may end up in court, noting the wine industry has a case for an injunction and judicial review of the AGLC’s decision.

“The same day that the wineries got the letter — without any details of what they’d infringed and with no chance to respond — they imposed this immediate sanction that they didn’t have the authority to impose,” he said. “We may have to go that way if we can’t get more traction on the political side.”

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Alberta and B.C. provincial governments still in talks

B.C. Public Safety Minister Mike Farnworth said Alberta’s measures have hindered the ability of Albertans to enjoy B.C. wine and he will continue “standing up for wine producers in our province.”

“I asked for (Nally’s) staff and our staff to sit down and find a way through this, and that is what I look forward to happening,” said Farnworth. “While we remain committed to safeguarding B.C.’s interests, our government has built constructive relationships with provinces and territories across the country. Our relationship with Alberta is important.”

The Alberta government says it’s working to improve the trade of alcohol products with its western neighbour.

“Alberta remains open to further discussions and is optimistic that we can find opportunities that benefit and work for both provinces,” Nally’s office said in a written statement.

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