Policy & Positions Manual
Provincial Issues - Public Safety and Solicitor General
Liquor Distribution Branch Changes to Support Industry Choice for British Columbia (2010)
The licensing for all liquor providers is mandated by the Liquor Distribution Branch (LDB) in the Province of British Columbia. When comparing the regulations that govern breweries, wineries and distilleries, the inequities of the LDB regulations become more apparent and are somewhat disabling to particular industries. These regulatory imbalances are industry specific, meaning the regulations are not standardized across each facet of the industry.
The Chamber believes that the all sectors of this critical industry should have the opportunity to compete on an open basis, to allow for fair and equitable opportunities to sell and distribute their products under similar regulations granted to other sectors which are not impeded by the current regulatory environment, such as the BC wine industry.
The Chamber believes that a particularly pertinent example of the negative impact the current system has on new growth sectors of the economy is that of artisan distillers, a relatively small sector which is unable to reach its full potential given the current regulatory system.
Background
British Columbia has all of the necessary resources to become the premier artisan distilling region in Canada. At the current time, there are Artisan Distillers located in Vernon, Penticton, Hornby Island, Cobble Hill, Victoria and Oyster River on Vancouver Island. Clean air and water, diversity of agricultural products and a skilled workforce are all necessary components which BC has in abundance.
Craft spirits are handmade in pot stills, requiring continuous input from a master distiller. Although BC is the Canadian leader in artisan distilling in at present, the distillers are fighting an uphill battle due to the LDB’s distribution and mark-up policies for spirits in general.
Current Regulation for the sector
The licensing for distillers in British Columbia is mandated by the Liquor Distribution Branch. Both Winery Licenses and Distiller Licenses are controlled by the LDB, which has set separate yet very specific guidelines for each of these industries. Referencing the BC Ministry documents, Winery Licenses-Terms and Conditions and Brewer, Distiller and Agent Licenses-Terms and Conditions, the Distillers of BC are only permitted to sell their products off-site to LDB stores and any other retail stores designated by the LDB, provided they have an Agent’s License. Additionally, Distillers can set aside an area within their respective manufacturing facility as a sampling room, where free samples can be served to the public, as well as operate one on-site retail store, provided they have an on-site operating agreement with the LDB.
Distillers under the current LDB regulations are:
- Not permitted to sell directly to the food and beverage industry;
- Not permitted to charge a fee for samples provided during tastings;
- Not permitted to hosts events at the manufacturing facility;
- Not permitted to set aside an outdoor area on their property to host patrons for outdoor picnic events; and
- Not permitted to operate a lounge.
Why this Agricultural Industry should be developed
Distillers provide an opportunity to develop a new green, sustainable industry providing new jobs, enhanced agri-tourism and culinary tourism, while producing a product that is desired throughout world markets. Artisan distilleries are striving to achieve a high end culinary delight from agricultural side products that otherwise are not marketable. Growers have very few secondary markets where they can direct product that would otherwise be considered a profit loss or waste. As a result, the goods produced by Artisan distilleries provide an avenue where BC raw materials and/or waste agricultural products can be processed to top shelf merchandise, thus producing a value-added industry contributing to the BC economy.
Research by the Canadian Tourism Commission and the International Tourism Association show, that culinary tourism is the fastest growing sector in the tourism industry. In fact, the BC Tourism Ministry is in the process of facilitating the formation of the Food and Beverage Alliance of BC which would complement the BC Artisan Distillers Guild. British Columbia Distillers will help to provide new destinations as their craft, and the equipment they use, is not only extremely attractive, but also provides the patrons with a unique environment where emotional bonds to a region are developed through the expertise exhibited through traditional craftsmanship. Visitors and locals alike can witness how agricultural goods are being turned into top shelf products that are being recognized internationally. Additionally, farmers and First Nations groups who harvest wild fruit would benefit immediately.
Providing product directly to the customer
The LCB and its internal structure create difficulties in how the ‘small niche’ producers of distilled products deliver their products to market. This results in extremely long delivery times for customers. For example: If a local liquor store in the Okanagan orders a case of a registered product from one of the Okanagan distilleries, the following steps must occur for a legal sales transaction to take place:
- The order will have to be placed with the LDB in Vancouver
- The LDB orders the one (1) case from the distillery in the Okanagan
- The distillery has to physically ship the one (1) case to Vancouver to the LDB Warehouse
- From the Warehouse, the one (1) case will be shipped back to the Okanagan to the liquor store that ordered the product.
This results in a 900km plus journey with a turnaround time of between four and nineteen weeks. This reduces the choice available to the consumer, the ability of businesses to get their product to receptive markets and unnecessarily and arbitrarily imposes punitive costs on the producer. This is particularly concerning given that this situation and process must be followed even when the liquor store ordering product is in the same community.
Keeping Local Industry Local
Keeping the opportunity for green business initiatives in communities throughout BC is of paramount importance at a time when the local economies are only starting to emerge from the global economic crisis. One BC distiller derives 65% of their products sales from their storefront location. In order to create a financially viable operation, this distiller will either need to expand its wholesale operation or relocate into a more densely populated centre to increase sales volumes. Such moves may cause artisan distillers to relocate away from the smaller communities, which will be problematic for many of these communities who are looking to continue to diversify for future economic stability in their regions.
Conclusion
The BC wine industry was virtually non-existent, before the current distribution policies were introduced that now support and enable BC wineries to thrive. Today, the wine industry has the privilege of marketing its products via 60-70% of the available floor space in a BC Liquor Store. In speaking with managers of BC Liquor stores, this is a dramatic shift from 20 years ago when the LDB regulations were changed for the wine industry.
A strong artisan distilling industry is the next obvious step and would be a fitting compliment to the very successful, internationally recognized wine sector. However, the current LDB regulations are restrictive and debilitating to the growth of the artisan distilleries and a range of other producers in our province. Although Artisan Distilleries in BC are in their infancy, as noted previously, the quality of distilled products has already been recognized with numerous gold medals at international and North American competitions. In addition, the production of 149 million litres of spirits in Canada in 2009 clearly indicates there is an industry with which to work from.
THE CHAMBER RECOMMENDS
That the Provincial Government review the legislative and regulatory structure with respect to alcoholic beverage manufacture, distribution and sale in BC to ensure fairness and balance among components of the industry, including the Artisan Distillers.
