Mind Your Own Business

The SAQ – Société des Alcools du Québec (it’s Québec’s equivalent of the LCBO) – has revealed that it’s going into the international liquor wholesale business. The idea is that the SAQ will increase its already significant buying power ($900-million annually) by acting as a wholesaler in liquor markets in other countries. As the buyer for both its customers in Québec and its new customers around the world, the SAQ will presumably get better prices all-around. The argument appears to be that huge buyers such as Costco (in the US), Tesco (in the UK) and emerging players in the BRIC countries are taking over the wholesale liquor business. It’s “go big or go home”.

Now, I believe, as a principle, that government has no place in running a business, either wholesale or retail. That includes the liquor business. I recognize that, in my grandfather’s day, many people viewed wine and spirits as the devil’s instruments. Yes, alcoholism can be a serious health issue. Alcohol also contributes significant health benefits. But there are ways for the government to play its role as protectors and promoters of public health without running everything from A to Z.

But, as we all know, principle is one thing. Practicality is something else. In Canada, liquor businesses run by the government have been a reality for generations now. Unwinding these operations, through privatization or deregulation, would be difficult and I haven’t yet come across a proposal that describes how government would accomplish this without significant disruption to the consumer. (Not saying government can’t do it, just haven’t seen the plan yet.) Not to mention that governments are addicted to the steady revenue stream from liquor and lotteries. That’s why every time that the Government of Ontario floats the idea of selling off the LCBO, it’s never too long before it quietly retreats.

We accept (grudgingly) the government’s current place in the liquor business within its jurisdiction. But it simply compounds a mistake when the SAQ – a government monopoly with all the benefits that bestows – moves beyond its borders and competes with private sector companies. Maybe the SAQ (and LCBO) should look at using Costco or Tesco as its wholesaler. I’m sure they’d like to get their hands on $900-million in business. In the meantime, SAQ, mind your own business!

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California Carnage

Great post by Alder Yarrow on the fallout from the recession on the California wine industry.  Lessons to be learned. 

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In the Year 2050...

Thanks to a lead in Decanter, I recently came across an absorbing forecast of what the world of wine could look like in 2050. The report was issued last September by a committee of French trade advisors, the Comité National des Conseillers du Commerce Extérieur de la France (CNCCEF). Entitled Wine in the World as We Approach 2050, the authors take an (unsurprisingly) French perspective but, as surely as the French continue to lose market share, they have the greatest need to address industry changes.

Broadly, the French see several important trends:

1. Wine production and consumption worldwide will continue to rise. What will change is where that production and consumption will be:  thanks to economic development and a young average age, there will be huge increases in what they call the “New New World” (primarily China and India, with Eastern Europe and Brazil as well); continuing increases throughout the “New World”; and stabilization in the “Old World” after a prolonged period of decline.
2. Consumers everywhere will approach wine primarily as a beverage for social occasions, rather than a beverage consumed with meals. (This approach overturns centuries of how French consumers viewed wine:  as a meal accompanyment.) “Brand” loyalty will be non-existent.
3. Public health authorities will develop a more enlightened view of wine as a benefit, rather than part of the alcoholic scourge.
4. Climate change will drive significant changes in production methods, growing areas, and varietals grown: all leading to a loss of typicity (see my earlier post). One of the best illustrations of the effect of climate change in France reads as follows:  The vines will also be adapted to each country’s new weather patterns. Already, Mourvedre grapes are now planted all through the Languedoc, whereas they used to be found only in the Bandol area. In the same way, Merlot - another variety - may possibly spread northward towards Germany. Syrah cultivation could spread to Burgundy and Champagne and replace Pinot Noir, Burgundian Pinot Noir could move to the lands of Lorraine, and one can imagine growing Chardonnay Champagne in Kent [England] chalk. 
5. As with other products, consumers will demand that wine producers disclose the size of their carbon footprint on bottles.
6. Pressure to use genetically modified varietals and even more synthetic yeasts will increase, subject to public concerns over such methods.
7. Similar to the beer industry, the bulk wine industry will become more concentrated with large international brands produced close to the consumer, a kind of Budweiser of wine, adjusted for local tastes.

Not surprisingly, the authors see opportunities for France across all wine offerings, from entry-level to premium, in both domestic and foreign markets.

Regular readers of this blog will know that changes in the traditional French way of life fascinate me. The report describes the radical changes in wine consumer behaviour in France in just one generation. Regular consumption of wine (consumers who drink wine with meals everyday) is rapidly disappearing, replaced by wine drinking only at festive and social occasions. Indeed, the report states that wine drinking with meals has virtually disappeared in the under-25 age group in France. Stunningly, the authors estimate that, by 2015, almost half of the eligible French population will be non-consumers of wine. Ever optimistic, they view this group as a target market (to be “conquered"), implying that the only reason that a French citizen would not drink wine is because the “right” wine hasn’t been offered.

BTW, Canada does get a mention in the report, noting that our consumption is growing three times faster than global demand. Good work, everyone!

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