Bullies in the playground - Selling wine in BC
Selling wine British Columbia - the harsh reality of it all.
This article was hatched out of two conversations I had a little while back, both related to business. The first dealt with a course on Japanese business practices and philosophy, while the other a conversation I had on the issues we have as an industry in the wine business. Both these conversations took places months apart but they are, at least in my opinion, related.
Unbeknownst to British Columbians, we are forced to drink swill or trade down in the quality of wine we purchase and consume. The main reason for this is the absurdly high taxes we are forced to pay on wine. For those of you unfamiliar with the BCLDB's tax on wine, it's 115%. This tax is applied after the importer puts on his costs and profit, so the mark-up is actually at least 147%.
Importers, consumers, and retailers are all looking for that exciting new discovery in the $9.99-$19.99 range. For all concerned these are the magic price points and where anything above that price point the sales (and interest) diminish. Most of us are painfully aware of some the great bottles of wine one can buy south of the border or in the UK for a very reasonable price. As an example, I was in a grocery store in McMinnville, Oregon not long and was wandering around the wine section. Not only could I buy wine in a grocery store, but the prices there were shockingly reasonable. Wines that sell here for $15 were available at $5.99-$7.99 a bottle. These sorts of sights always make me cringe, and that's even before I get to the beer section.
The question arises, why it's so difficult to find that fabulous new wine here in BC? As mentioned above we have this onerous tax of 117%. When I find a wine that I like and it meets all of my mental check marks all wines I import must pass (great flavour, great quality, farmed properly and with good packaging) I used to get really excited. But after years in the business I have learned to temper my enthusiasm. The first question I ask is "what's the price?" Quality European wines usually run in the 5 euro to 7 euro range, this translates to $26.00 to just a hair over $30.00 in BC, not exactly a sweet spot for an everyday wine. While an importer or retailer might still bring in a wine it would be at significantly less quantity.The distribution would then be restricted to a handful of restaurants, liquor stores, and if the monopoly buyer at the BCLDB might allow the importer to allocate the wine to a handful of private retailers.
Now just imagine for a second that our mark-ups were more reasonable, say 80%-90% (which is what most of the other Provincial monopolies charge) the same bottle of wine would retail for between $15-$20. Now you are getting a wine with flavour, style and distinction and at a price point which is consumer friendly and readily available.
Importers and retailers are forced to trade down when seeking out new wines, the end result is that consumers are forced to drink lower quality wine, thus a person whose budget dictates that they can only afford wines under $15 in BC will have little chance to experience a wine that is at all interesting. In most other jurisdictions in North American $14 can in fact get you a decent, interesting bottle of wine. So what does this have to do with a seminar on Japanese business philosophy. Allow me to explain.
I am always looking at ways to improve what we do at Marquis Wine Cellars, and a member of the business group I belong to invited me to a day long work shop at the Boeing plant in Everett on this very subject. After our seminar we had a tour of the Boeing airplane factory. Over the past several years they have implemented LEAN business principles in the assembly of their aircraft. It takes about a year or so for them to fly in, ship or build some of the six million parts that go into building a commercial passenger plane, but once they have all on site it takes them, depending on the size of the plane three to six days to assemble it. This statistic simply amazed me, the power of possibility. I began to think how this could be applied to our industry.
The first example that came to my mind was actual ordering of wine. We are only allowed to order wine once a week, Mondays for Thursday delivery, fair enough and this works alright for us. Within the context of our order are wines which are not carried in government stores (these wines are called speculative items, aka spec listing). The wines are stored in a bonded warehouse on Annacis Island and they have to be transferred to the LDB main warehouse and then loaded on a truck and delivered with our regular order. One would think we could get these wines by Thursday but they usually arrive on our next delivery two weeks after we placed the order. This led me to the conclusion that if the policy makers within our liquor system were responsible for building aircraft we'd all be stuck on the ground staring up at the sky.
I have a tendency to think about things for a long time, read, ask my peers in business and consult with my staff. I am always looking for different ways to improve the services that I offer to my customers and to be more productive and efficient while doing it. What does not work provides me with a body of knowledge to move forward and mitigate or minimize futures errors. There is only so much an individual can accomplish within the context of their own business. Improvements happen all they way down the supply chain with people understanding issues at hand and working towards a common goal. My/our biggest supplier and partner is the government (who is also the competition). I call them the billion dollar gorilla or bullies in the playground.
There is no doubt in my mind that within a billion dollar organization better delivery of services, cost savings and other efficiencies can be achieved. The arrogance which comes with being the biggest (and a monopoly at that) is frightening, just ask GM. I can only sit back and ponder what if? What if I could offer more quality wines at fair prices to my customers? What if I were actually allowed to sell to restaurants? And the biggest what if, what if the regulator for my business wasn't also my chief competitor? For my sake, and the sake of the wine enthusiasts of British Columbia, I would love to have those questions answered, or even better than answered, resolved.
This article was hatched out of two conversations I had a little while back, both related to business. The first dealt with a course on Japanese business practices and philosophy, while the other a conversation I had on the issues we have as an industry in the wine business. Both these conversations took places months apart but they are, at least in my opinion, related.
Unbeknownst to British Columbians, we are forced to drink swill or trade down in the quality of wine we purchase and consume. The main reason for this is the absurdly high taxes we are forced to pay on wine. For those of you unfamiliar with the BCLDB's tax on wine, it's 115%. This tax is applied after the importer puts on his costs and profit, so the mark-up is actually at least 147%.
Importers, consumers, and retailers are all looking for that exciting new discovery in the $9.99-$19.99 range. For all concerned these are the magic price points and where anything above that price point the sales (and interest) diminish. Most of us are painfully aware of some the great bottles of wine one can buy south of the border or in the UK for a very reasonable price. As an example, I was in a grocery store in McMinnville, Oregon not long and was wandering around the wine section. Not only could I buy wine in a grocery store, but the prices there were shockingly reasonable. Wines that sell here for $15 were available at $5.99-$7.99 a bottle. These sorts of sights always make me cringe, and that's even before I get to the beer section.
The question arises, why it's so difficult to find that fabulous new wine here in BC? As mentioned above we have this onerous tax of 117%. When I find a wine that I like and it meets all of my mental check marks all wines I import must pass (great flavour, great quality, farmed properly and with good packaging) I used to get really excited. But after years in the business I have learned to temper my enthusiasm. The first question I ask is "what's the price?" Quality European wines usually run in the 5 euro to 7 euro range, this translates to $26.00 to just a hair over $30.00 in BC, not exactly a sweet spot for an everyday wine. While an importer or retailer might still bring in a wine it would be at significantly less quantity.The distribution would then be restricted to a handful of restaurants, liquor stores, and if the monopoly buyer at the BCLDB might allow the importer to allocate the wine to a handful of private retailers.
Now just imagine for a second that our mark-ups were more reasonable, say 80%-90% (which is what most of the other Provincial monopolies charge) the same bottle of wine would retail for between $15-$20. Now you are getting a wine with flavour, style and distinction and at a price point which is consumer friendly and readily available.
Importers and retailers are forced to trade down when seeking out new wines, the end result is that consumers are forced to drink lower quality wine, thus a person whose budget dictates that they can only afford wines under $15 in BC will have little chance to experience a wine that is at all interesting. In most other jurisdictions in North American $14 can in fact get you a decent, interesting bottle of wine. So what does this have to do with a seminar on Japanese business philosophy. Allow me to explain.
I am always looking at ways to improve what we do at Marquis Wine Cellars, and a member of the business group I belong to invited me to a day long work shop at the Boeing plant in Everett on this very subject. After our seminar we had a tour of the Boeing airplane factory. Over the past several years they have implemented LEAN business principles in the assembly of their aircraft. It takes about a year or so for them to fly in, ship or build some of the six million parts that go into building a commercial passenger plane, but once they have all on site it takes them, depending on the size of the plane three to six days to assemble it. This statistic simply amazed me, the power of possibility. I began to think how this could be applied to our industry.
The first example that came to my mind was actual ordering of wine. We are only allowed to order wine once a week, Mondays for Thursday delivery, fair enough and this works alright for us. Within the context of our order are wines which are not carried in government stores (these wines are called speculative items, aka spec listing). The wines are stored in a bonded warehouse on Annacis Island and they have to be transferred to the LDB main warehouse and then loaded on a truck and delivered with our regular order. One would think we could get these wines by Thursday but they usually arrive on our next delivery two weeks after we placed the order. This led me to the conclusion that if the policy makers within our liquor system were responsible for building aircraft we'd all be stuck on the ground staring up at the sky.
I have a tendency to think about things for a long time, read, ask my peers in business and consult with my staff. I am always looking for different ways to improve the services that I offer to my customers and to be more productive and efficient while doing it. What does not work provides me with a body of knowledge to move forward and mitigate or minimize futures errors. There is only so much an individual can accomplish within the context of their own business. Improvements happen all they way down the supply chain with people understanding issues at hand and working towards a common goal. My/our biggest supplier and partner is the government (who is also the competition). I call them the billion dollar gorilla or bullies in the playground.
There is no doubt in my mind that within a billion dollar organization better delivery of services, cost savings and other efficiencies can be achieved. The arrogance which comes with being the biggest (and a monopoly at that) is frightening, just ask GM. I can only sit back and ponder what if? What if I could offer more quality wines at fair prices to my customers? What if I were actually allowed to sell to restaurants? And the biggest what if, what if the regulator for my business wasn't also my chief competitor? For my sake, and the sake of the wine enthusiasts of British Columbia, I would love to have those questions answered, or even better than answered, resolved.
posted by Marquis Wines at
1:06 PM
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