Direct-to-consumer alcohol agreement misses mark for grocers
Canada’s new Direct-to-Consumer (DTC) Alcohol Sales Agreement may create new opportunities for wineries, breweries and distilleries, but grocers aren’t expecting it to change much at their checkouts.
In an effort to foster a more integrated economy and remove trade barriers cross-country, the premiers of nine provinces signed the agreement on July 21 allowing consumers to purchase wine, beer and spirits directly from producers in participating provinces. (Quebec, Yukon, Northwest Territories and Nunavut did not participate.)
While those in the grocery sector welcome this move by government as a step towards reducing interprovincial trade barriers, they say it’s unlikely to change how Canadians buy alcohol.
For most consumers, the convenience of being able to buy beer or wine while completing their weekly grocery shop will continue to outweigh the benefits of ordering directly from a producer, says Gary Sands, senior vice-president, Public Policy & Advocacy of the Canadian Federation of Independent Grocers (CFIG). While there will be some consumers looking for particular specialty products out of province who will order direct, he believes an “overwhelming number of people looking for beer and wine are still going to go to their grocery stores and I don’t see this cutting a huge dent in store sales for grocers in any province.”
Sylvain Charlebois, professor in food distribution policy and senior director of the Agri-Food Analytics Lab at Dalhousie University, also expects little impact on retailers—at least for now. Much will depend on how participating provinces implement the agreement, he says, and whether taxes and shipping costs make direct purchases attractive to consumers, he says. “One winery owner told me it’s still more attractive to sell to the U.S. than to other provinces—even with a 50% U.S. tariff on certain alcohol products set for August 19.”
Without changes to taxes and shipping costs, Charlebois believes this recent DTC announcement is “more noise than anything else.”
“If you're a big fan of a certain winery in B.C. and you’re in Ontario where the LCBO isn’t carrying the product… then absolutely this is really good news for you,” he says. “But I don’t think it’s actually going to move a lot of volume.” Quebec’s decision not to participate doesn’t surprise Charlebois either, given that the province already has a well-established retail alcohol market where grocery and convenience stores have been selling alcohol for decades.
David La Mantia, owner of La Mantia’s Country Market in Lindsay, Ontario, says the DTC agreement misses a key opportunity to create a more level playing field for grocery retailers in Canada. While consumers will gain access to a wider selection of products through direct purchases, many grocers remain limited to products available through their provincial wholesalers.
“They should allow me to buy that product as well and sell it to my customers,” he says. “Not everyone wants to buy a case of wine. Maybe they just want to buy a bottle.”
Lamantia believes grocery retailers could make those specialty products more accessible by purchasing in larger volumes and selling individually, while also giving Canadian alcohol producers another route to market. “I don’t have a problem with competition, but let me compete too,” he says.
READ: Breaking down interprovincial trade barriers—what's in it for the food sector?
Time to address barriers with bigger impact
If reducing trade barriers really is a priority, both Sands and La Mantia say governments should now turn their attention to broader barriers that have a much bigger impact.
“We welcome any move that’s going to reduce interprovincial trade barriers, but let’s start dealing with some of the others,” says Sands. He points to inconsistent trucking regulations and differing food inspection systems between provinces as examples of reforms that could deliver more meaningful benefits to businesses and consumers alike.
La Mantia agrees. “They keep bragging about the progress they’ve made,” he says, describing the progress to date as “glacial” at best. In his view, the new agreement is a step in the right direction, but it stops short of giving grocery retailers the same opportunities as consumers.
