BRIEFING NOTE QC FOP REGULATION ASSESSMENT Prepared by Association Canadienne des Vinificateurs Artisanaux (ACVA)

Transcription

1 BRIEFING NOTE QC FOP REGULATION ASSESSMENT Prepared by Association Canadienne des Vinificateurs Artisanaux (ACVA) 1. Background For the Survival of the Craft Wine Industry In Quebec The Canadian Craft Wine Association, formerly the ACCVM/CHWTA, has evolved into a business association representing all of the following stakeholders in our craft wine industry: manufacturers, distributors, retailers and suppliers. It has recently merged with the two key Provincial Retailer Associations (Fermenters Guild of Ontario and the ACVQ in Québec) to form a pan-canadian association representing the interests of our emerging business community from Coast to Coast. As is typical of such associations, we are striving to achieve common and universal provincial legislation and regulations across Canada that will serve the best interests of industry and consumers alike. We are pleased to report that we are making significant progress. Succinctly, our mission is to promote the growth and prosperity of Canada s consumer wine industry. Our principle undertakings to our members include: advocacy and regulatory interventions as well as market, retailer and infrastructure development. Currently, the association provides a broad range of services, in both official languages to its growing membership and includes: a state of the art web-site ( monthly newsletter; professional quarterly trade magazine; cross-canada marketing campaigns through radio, Facebook, Twitter and social media channels; and other beneficial services. 2. History of Craft Wine in Québec The industry of wine and beer kits sold at retail in Québec has existed for a long time although a more structured and professional industry has been established since the mid-90 s. Additionally, the legal status of both wholesalers and retailers has been recognized by the Québec government with the establishment of a "raw material and equipment sales permit" currently issued and controlled by the Régie des alcools, des courses et des jeux. In the last 10 years, the Québec market has seen the emergence of U-Vint operations, a.k.a. "Centres de Vinification". Such operations have been established in order to assist all customers that were unable, or did not want to make their wine directly in their home place and were reproducing similar types of operations currently existing in other markets across Canada at

2 that time. Despite the lack of clarity related to the legality of these operations, the industry and its members have developed and strongly supported a detailed self-regulation to provide a reliable framework to all current and new FOP operators in the province of Québec. Over the last 15 years, the local industry in partnership with the former CHWTA (Association Canadienne du Commerce des Vins Maison) has made several official representations to various ministries and boards of the Québec government, either at our industry level only (2001, 2007 and 2008) or in the course of a larger review of the Québec Alcoholic Beverages Industry (1998 and 2004). Although these representations have allowed our industry to position itself within the larger segment of the Alcoholic Beverages Industry, the magnitude of the requests along with their potential impacts on the overall Alcoholic Beverages Industry did not render any significant progress. While official legislation/regulations supporting the U-Vints operations were existing initially only in the provinces of Ontario and British-Columbia, a significant number of new regulations have been promulgated in the latter years, consequently adding more pressure on our Industry in the province of Québec. In essence, the current regulations are virtually killing the viability and growth of the craft wine industry in Quebec. It is estimated that since their inception in the province of Quebec, the approximative number of retailers/operators has been reduced from 168 to 146 stores/fop operations.this trend cannot continue and if left on its current course, Quebec will be deprived of jobs, revenue sources and a missed opportunity in terms of allowing entrepreneurial businesses and associated spirit to prosper. 3. Progress of Recent CCWA Representations Across Canada Our association has been extremely pleased with the acceptance and momentum achieved in a number of provincial jurisdictions in very recent years. From a base of only 2 Provinces (Ontario and British Columbia) that embraced FOP activities many years ago, Saskatchewan, Prince Edward Island, and New Brunswick have now all created new regulations specifically tailored to our industry within the last 2-3 years. It is worth noting that all 5 legislated and regulated provinces started with very similar backgrounds and concerns when their respective reviews commenced but were eventually all obviated through accurate and logical intervention. They all have acknowledged the reality that the Federal Government has already given clear recognition to our industry through their imposed requirement to apply for Excise permits and visitations by Excise inspectors. New Brunswick, a neighbouring jurisdiction to Québec, has been the most recent to modify its regulations to allow for accommodation of our industry within a legalized, responsible framework. We believe that creating new regulations similar to that done in New Brunswick is the preferred way to accommodate FOP operations.

3 Please note appendix (1) which outlines the New Brunswick regulation no that now enable FOP operations in that Province. In fact, all the recently regulated Provinces put strong emphasis on merely modifying regulations as opposed to entertaining the time-consuming and process-riddled task of overhauling their respective alcohol and liquor Acts as part of their eventual solution. The impact of two bordering provinces allowing FOP operations is demonstrated by many Quebec consumers making their craft wine within these adjacent provinces. Although the main impetus for change came from local retailers and other stakeholders in those Provinces, the CCWA was there to support and present an image of compliance and responsible regulation as well as supplying some compelling data. In appendices (2) and (3) to this report, we offer data which shows how commercial wine sales, in total, have generally increased in the provincial jurisdictions that allow ferment on premise operations. Of particular note is the fact that commercial wine growth has been specifically strong within the 3 most recent jurisdictions (Saskatchewan, Prince Edward Island and New Brunswick) during their incubation period between 2009 and Although the data is originating from various sources, it is interesting to note that this trend seems to point in the same direction. 4. Posture of CCWA Representation in All Deliberations with Governments Essentially, we support following the law and would prefer to work with all jurisdictions in support of less costly, self-regulation model within a progressive industry framework. It is our belief that there are many contemporary policy objectives that are well served through the acceptance of our industry: job creation; support for sustainable practices, and an increase in government revenue sources to name only a few. There are many, many examples where a form of industry was protected only to find out later that allowing a competitive form of it enhanced all of the objectives noted above. Perhaps the best example of this is the telecommunications industry where allowing additional service providers merely fostered more consumer choice while enhancing the size of the overall market.

4 5. Understanding of Government Issues & Concerns Over the years, it has been our belief that the major argument for denying an unfettered FOP industry in Quebec has been the potential loss of revenue through the reduction in traditional commercial wine sales within Quebec. The data provided here shows that in almost every jurisdictions wine sales have steadily increased, and particularly in the 3 jurisdictions that have recently allowed it since We offer the following as other areas where there may be concerns as expressed by Government officials: Potential impact on the control of the FOP operations, once legalized Public Health & Safety concerns Additional cost related to the development of a new regulation Additional cost related to licensing administration & control These are assumptions made at this time by CCWA/ACVA based on previous reviews and discussions outlined in Section 2 of this brief. At the same time, we are aware that Government priorities can shift and we are seeking affirmation that we have correctly identified the main issues to address in promoting a responsibly regulated craft wine industry in Quebec. 6. ACVA/CCWA Preliminary Response to These Concerns In the course of all past discussions and official representations, our Industry has always claimed that any legalization of the FOP operator status in Quebec would not hamper significantly the sales growth of the commercial wines industry the overall dividend paid to the Quebec government. In fact, current data available clearly demonstrates a strong growth of the commercial wine sales in Quebec over the last 5 years. It is interesting to note that despite perceived illegal actions pertaining to any specific regulation and the presence of close to fifty active FOP operations in QC, there was no significant impact on these sales results. The same observation is also pertinent to other jurisdictions that have endorsed a defined regulation in the last few years. As mentioned previously, the former ACVQ and the CCWA/ACVA have always strongly supported and promoted a responsible, self-regulated code of conduct to the benefit of all their members. It is likely that the controlling body being responsible for the administration and the control of such permits would use this as a basis for a more defined program. Such a program has always been strongly supported in all other provinces where a specific regulation was in place. In the context of public health, issues have been raised in the past related to the fact that wine made by non-controlled FOP operations may be detrimental in several ways to the health condition of consumers. From a quality perspective, all existing wine and beer kits producers have clear standards of quality control and are strictly complying with the Food and Drugs Act,

5 the Consumer Packaging and Labelling Act and the Canada Agricultural Products Act just to name few of these acts and regulations applicable to packaged foods. Additionally, when evaluating the potential risk attached to an excessive consumption of wine or beer directly related to our industry, there is no existing study to support this assertion. When evaluating the cost implication of developing a new regulation along with the necessary control tools, our industry has always believed that these costs would be largely countervailed by the additional revenues generated by our industry along with the additional fees related to the introduction of any specific permit. 7. Proposed Course of Action ACVA / CCWA and its Industry members propose the following actions: a. The Minister and his senior government officials review our concerns regarding the current status of the FOP operators in the province of Québec; b. The Minister establish a special review committee to address the inclusion of FOP operations as a legitimate consumer offering within the wine industry. The review committee could include members from the Ministry of Public Security, the Ministry of Finances, the SAQ, the Ministry of Economic Development and the RACJ. The review committee should consult with official representatives of our Industry and will complete an extended analysis of all current regulations existing in Canada to determine the relevancy of establishing such regulation in the province of Québec; c. In the course of such process, the Minister may want to consider deferring temporarily any legal decisions and/or actions that are currently pending or that may be considered at this point. In summary, the following succinct points should be paramount in considering the call to action noted above: 1. The current regulatory framework for the craft wine industry is stifling any potential future for its growth; 2. The main historical objection for allowing further growth with the craft wine industry has been concerns regarding negative impacts on the traditional commercial wine industry. The data in our report goes a long way to disproving that assumption; 3. Denial of this entrepreneurial sector and associated spirit will remove opportunities for job creation and new revenue sources for the Province of Quebec.