BC - Market and Pricing analysis
British Columbia
Government owned retailer, domestic wine industry, semi- privatized and back again.... BC feels like the most complex and sophisticated market in Canada.
The main channels are:
BCLDB - 196 retail stores located throughout the province under the brand BC Liquor Stores and is one of the largest retailers in British Columbia. BC Liquor Stores serve more than 36 million retail customers every year.
LRS - Licensee Rural Store - run by the BCLDB, these stores are in 'remote rural' areas and managers have more decision making power on how they run their floor space and inventory.
Privately owned stores- grandfathered in from privatized era, there are 12 privately owned shops that used to benefit from a 30% discount from the BCLDB warehouse on imported and domestic products. A few prominent chain owners have started to corner the business in this channel and are competitively priced vis-a-vis the BCLDB stores while often asking for exclusive products.
VQA - focused on domestic wineries and featuring a consignment based business model.
Licensee - in the past, a reduced margin was offered to licensees to help reduce the retail/winelist price however this has changed since 2015.
Prior to 2015, retailers (LRS, Privates, Rural) and licensees could purchase wine from the BCLDB whether imported or domestic. The price they were charged was determined from the RSP, less a channel specific discount and then taxes were applied (HST and GST). In April 2015, the BCLDB moved to a new distribution system folding wholesale into their pricing structure. Instead of the FOB laid in + margin + discount+ taxes all liquor retailers now purchase their product from the LDB at a common wholesale price (see below for calculations).
One debatable and interesting fact about the BC wine business is that domestic wineries benefit from several direct to market channels; cellar door (commonplace with most wine producing countries), a direct delivery channel to retailers and licensees, and a consignment program with VQA stores. There is a new channel to market with a partnership of several grocery store chains to promote and sell domestic wines only which has seen tremendous success and sales for participating wineries. See above where I said a retailer COULD purchase from the BCLDB - well in the case of domestic suppliers, they could also go direct. These direct to market channels effect pricing - avoiding the BCLDB wholesale markup and exempt from customs/duties that a imported wine would have represent a considerable pricing advantage.
Did I say complicated? To summarize a long story short, domestic wineries have 4 direct routes to market (DTC, direct delivery, VQA stores, and embedded VQA within grocery stores), are subsidized for pricing discounts on COGs and have the same wholesale pricing structure as imported wines with the LDB.
The wholesale pricing at the BCLDB is at least consistent for both imported and domestic wineries. From the landed cost of the wine where commissions/margins and relevant taxes are included - on the first $11.75 cost per liter of wine, a mark up of 89% is charged, on the remainder cost a 27% mark up is applied. Plus HST GST taxes and this is the end wholesale price.
In bond cost per case + duty /excise > duty paid cost per case + markup (89% on $11.75 and 29% on $11.76 +) + container recycling fee = Wholesale price
One can see how margins are thin and difficult to manage.
For domestic wineries, there are 5 types of buys from the BCLDB alone ( on-going, ad hoc, seasonal, monthly, and exclusives). For imported, there are typically 2 types of buys (listed and speculative). LTOs are rampant with listed products where pricing is competitive. Speculatives (Specs) are driven by your distribution partner and is a hard working channel where a products success is linked directly to the effort put in and at times can be an inventory nightmare as the supply chain is complex.
In addition to the above, BC represents a very sophisticated wine market with world class professionals at every level in the product chain. When visiting, brush up on your knowledge about your product and know your competition. Is your brand statement polished? Consumers and industry will want to know what separates you from the pack. Your partner will be your advocate and voice in the market and so 'fit' is very important. Good luck!
