Agriculture Committee on April 30th, 2013

[Blake Richards, Conservative, Wild Rose, AB]

To interrupt you there for a second, what are some of those target markets?

[Hillary Dawson]

Outside of Canada, I think the best target markets are in some of the biggest travelling countries, so Brazil, Mexico, and China, especially now that China's opened up to travel. It has made it a lot easier. Obviously, we market to the United States and to the U.K. Those are the primary target markets.

[Blake Richards, Conservative, Wild Rose, AB]

I'm going to interrupt you again.

You mentioned China, and it's obviously an increasing market. It is, after our Prime Minister gained approved destination status a few years back—

[Hillary Dawson]

That was very good.

[Blake Richards, Conservative, Wild Rose, AB]

—and that's been significant for tourism, I know. I represent a tourism area. But you've noticed a difference as far as wine-related tourism after approved destination status was gained by our government, is that right?

[Hillary Dawson]

Yes, absolutely.

China's been a place where particularly our ice wine products are very well regarded and sought after. So making that connection between the products and the experience has been very important and a lot of our wineries are gearing up to respond to that market, in particular, by offering tours in appropriate languages and in the way that those customers are expecting to be received.

[The Chair, Conservative, Merv Tweed]

I have to go to Mr. Valeriote.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you all for coming. I'm going to lay my four questions on the table, then you can all answer them. I'm going to start with Debbie.

Debbie, you don't mention business risk management at all in your presentation. Arthur Smith from the Ontario Fruit and Vegetable Growers' Association was here, either last week or the week before, and he was quite concerned about the $450 million to $470 million cut from business risk management and how volatile—really, the grape growers and other growers of vegetables and fruits, particularly in southwestern Ontario, I guess—this has been to variations in the market.

Everybody believes in innovation, of course, but do you have any concerns about the business risk management cuts of $450 million? If so, why? If not, why not?

Then I'm going to turn to Hillary. Debbie seems to have unravelled the issue of labelling quite well and layered it all. You mentioned labelling, so if she hasn't covered something about labelling that you feel should be a recommendation of this committee, then please say so.

As well, you talk about direct sales from the wine producer to the consumer, and I get that, but I think about our LCBOs and other management boards. Part of their function is to make sure that alcohol doesn't get into the hands of underage people and I could kind of see some kid out there ordering wine, underage, it being delivered to the house, and mom and dad saying, “LaVar, you've got a box downstairs from Canada Post, do you want to come down and get it?” And LaVar's only 16 years old. So how do you get around some of those issues?

My fourth quick question, and perhaps to Derek, is that we've heard about produce and meat processors and others having to buy shelf space at grocery stores. I'm simply wondering whether this happens in the alcohol or non-alcoholic beverage sector at all. Do you have to buy shelf space at grocery stores or elsewhere?

So go ahead, Debbie.

[Debbie Zimmerman]

Thank you very much. I'm glad Art was here representing the industry.

Of course, my focus today has been.... We do have concerns. I don't know whether I should repeat all of them but to be quite candid with you, we have had to take on a responsibility as an industry to assure ourselves that we would have a crop from year to year. The mitigating measures we've had to put in are called wind machines. We've invested heavily in that. I know the tender fruit industry is playing catch up, and it has to.

With the support of the wine industry, we have been very creative in how we've approached our business modelling when it comes to investing in the capital that is necessary to sustain our industry. Over the last few years the Ontario government supplied us with a business risk management program called the Ontario vineyard improvement program. It has sustained our industry and created one of the largest crops we've ever had.

Yes, I could spend all my time today talking about the loss of $425 million. What is critical to us is labelling and the fact that we need a bottle of wine that, when it says Canadian, is Canadian. It can't pretend to be Canadian because it has a label and a cork and glass. So to focus on anything else, I apologize, it would not be in the interest of my membership or of the country in general when it comes to Canadian wine.

[Frank Valeriote, Liberal, Guelph, ON]

But you support what he said last week.

[Debbie Zimmerman]

We certainly support what he has put forward on our behalf.

[Frank Valeriote, Liberal, Guelph, ON]

Okay.

Hillary.

[Hillary Dawson]

That's great.

With regard to your two questions, let me start with direct to consumer first, because I think that's a very quick question.

We ship to consumers now, and any shipping company that our wineries work with have to see proof of age when they make deliveries to the people named on the waybill. We're licensed to produce and sell alcohol, and it's a risk to our wineries, to their whole business, if they make that sale, so they're very careful. Canada Post and the courier companies we deal with that can make legal shipments to customers are very careful as well. Everyone takes that responsibility very seriously.

Yes, I did touch on labelling, and yes, it's very important to us.

My members are focused on making premium VQA wines: wines of appellation, wines where labelling matters, and wines where we know that the value of being Canadian matters. It is challenging for us when the customer realizes that some bottles labelled Canadian that are in a lot of liquor boards under a giant sign that says “Canada”, contain little to no Canadian content. That hurts our business because then they start to question what's on our labels.

What we've said consistently as the wine council is that we just want to be consistent with where everyone else is in the world. We've said the same thing to the CFIA. If it's a blended wine, make sure it's labelled with the content that's in it so the customer is very clear. We support putting in a minimum content, and if you want to have the privilege of using the word “Canadian”, that's very important to us. I think we're even at odds with the Canadian Vintners Association on that, because it is a point of differentiation with us and our strength of purpose on that issue.

[Derek Nighbor]

You want to talk about the shelf cost issue. Any time you have the relationship of a buyer and a seller, there's going to be negotiation and some tension, but depending on the retailer, there are promotional fees. Some have listing fees. You might pay a higher price to have the product positioned at a certain part of the store. Those are all arranged in contractual details between the trading partners.

There has been an effort within the rules of competition between the larger retailers and the smaller retailers on the grocery side and the manufacturers to ensure fair business practices, no unilateral changing of contracts, those kind of things. We're always going to have tensions when there's a trading relationship. But I will say there's a spirit of collaboration in the market to try to ensure that things are done within the rules of competition, that there's fairness in the marketplace, and that Canadians are being well served in the store.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Payne.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Chair, and thanks to all the witnesses for coming here today.

I want to make a comment that in terms of container sizes, the government will, in fact, be having in-depth consultations with manufacturers and producers to make sure that their issues and concerns are taken into account. So that will be an ongoing process.

Frank let the cat out of the bag, unfortunately, about me shipping wine. When I went to pick it up at the Canada Post depot, they actually made me produce ID and I thought it was nice to look like I'm 18 again. Anyway, I have Ontario wine shipped to my home even before Dan Albas' bill came into place. I continue to have some shipped here to Ottawa as well, from an Ontario winery, a very good wine.

In Alberta, of course, all stores are private, so there are some pretty good selections there. But I just wanted to ask you, Hillary and Debbie, about the interprovincial barriers that you are seeing. Are they creating a problem? We want to make sure that we do have a really good Canadian wine industry right across this country.

[Hillary Dawson]

I can take that.

The barriers are pretty simple. For the most part, we're dealing with a singular retailer in each province. They have very significant markup structures. There's no markup relief for Canadian wines that are not produced within the home province of those liquor boards. We don't have margin relief. We're on the same competitive footing as European wines, when we sell to the Manitoba Liquor Control Commission. So that's part one and that is making it cost prohibitive for a lot of people to even consider that marketplace.

Second was the issue of the cost of putting on a promotion. This is where we think Growing Forward 2 can actually be helpful in helping support initiatives around Canadian wine. The SAQ is probably the biggest retailer of wine on the planet, and 100% of Canadian wines are less than .5% of wine sales in that market because it is so cost prohibitive for our domestic wine industry to retail in that market.

Money talks when it comes to those retailers and both industry associations like mine and wineries on their own simply aren't resourced to take that on. Where we have been able to do promotions, like the ones we support in Manitoba, it has led to increased listings, bigger support in the marketplace, and all those things.

The other thing that is probably scaring off some of our wineries is this issue of labelling and signage in stores because for a 100% VQA product that we make in Ontario to be shelved in some liquor boards under a sign that says “Canada with blended wines”, which are sometimes half the price, that is giving the consumer the wrong impression of the price value of our products. For a lot of markets like that, our wineries bottom line is that unless we can be shelved as 100% Canadian, we're not even going to make the effort in the marketplace.

[LaVar Payne, Conservative, Medicine Hat, AB]

Do you have any comments, Debbie?

[Debbie Zimmerman]

I don't think I can add very much to what Hillary is suggesting, but I want to go back to the comment again. The $6.8 billion economic impact of the industry, just today, has the potential to double going forward. It really does talk about the collective approach of how we approach alcohol in this country.

We are still very much in a prohibition type of mentality in many ways. We have to embrace more of what the world looks like when it comes to alcohol, and we're not talking about a glass of wine for breakfast. We're talking about the opportunity to access the marketplace. Hillary, I think, summarized some of the challenges our wineries face.

[LaVar Payne, Conservative, Medicine Hat, AB]

Coming from Alberta, as I understand, the provincial government of Alberta doesn't want to allow that transfer to happen, which totally blows me away because of the fact that there are privatized stores available there.

The other thing I wanted to talk to Derek about was regarding the barriers of approvals, and also imports and regulations that he spoke of. Do you have some suggestions or changes that could be made on those issues and concerns? I know you did talk about some countries that maybe we could already recognize. Are there a whole list of those things? If you have that—I don't want to you to name them all off—could you provide it to the committee as well?

[Derek Nighbor]

I'd be happy to provide that in a follow-up. I'll maybe highlight a couple of things. We encouraged Health Canada to look to markets such as Australia and New Zealand.

We're not looking for what I would call just adopting science, because we might have unique Canadian circumstances or population health intake circumstances that could be a bit different. We're asking why build it from the ground up again, when we can maybe take some data and do a Canadian population health scan.

I think MP Davies will be interested in this. One of the additives that was delayed—it looks like it has been in the backlog—is a potassium-based alternative to sodium. On the one hand I'm battling with MP Davies in the media on the sodium issue, but on the other hand we're trying to innovate and we can't get approvals to get alternatives into the marketplace. When you're dealing with multinationals, they're asking why they would invest any money in R and D in Canada, when they have to wait five times longer than in other markets. Then you get this bit of a snowball effect.

The progress has been made there now, but it's going to need some time to work its way through the chain. I'd be happy to share examples of markets we look to as leaders and where we can work with them, and also some specific examples of additives and whatnot.

[The Chair, Conservative, Merv Tweed]

Please submit that through the chair, and we'll have it distributed.

I'm sorry, your time is up.

Speaking of provoking debate, Ms. Davies, welcome.

[Libby Davies, NDP, Vancouver East, BC]

Thank you very much, Chairperson.

I'm standing in for Mr. Allen. I didn't know you were going to be here. I hoped it wasn't a battle actually, but since you phrased it that way—

[Derek Nighbor]

I used a small b.

[Libby Davies, NDP, Vancouver East, BC]

I'm really glad you're here today. It has been a very interesting subject. I do want to focus on nutritional safety actually. I have a couple of questions.

You mentioned the new campaign you have, in which I think you're partnering with Health Canada. I think you said 34 companies were involved to sort of increase awareness about nutritional literacy, which of course is very important.

I wanted to get a sense of what component of the overall industry is involved. If it's 34 companies, do you know how many supermarkets? I haven't seen it. Are we talking about 5% because, of course, awareness is a critical thing? People are inundated with advertising, and so to try to counterbalance that with real nutritional literacy understanding is super important, but if it's at a very low level it's pretty hard to get that balance. Where does your campaign sit in that sort of balance?