Finance Committee on March 27th, 2012

[Rowland Dunning]

You'd be bypassing the system.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

So that's what we're going to be able to do now.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Jean.

We'll go to Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

We should note that Mr. Jean may be the first Alberta MP to speak of liquor and bondage at committee.

Mr. Dunning, you say that Bill C-311 could hurt the Canadian wine industry. Is there anyone on your board who runs a winery?

[Rowland Dunning]

On the board of...?

[Scott Brison, Liberal, Kings—Hants, NS]

Your association.

[Rowland Dunning]

The board of my association comprises CEOs of all the liquor boards.

[Scott Brison, Liberal, Kings—Hants, NS]

Okay, just a.... Have you ever run a winery?

[Rowland Dunning]

No, I have not.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. McWatters and Mr. Stutz have run wineries, and Ms. Ruddock's and Mr. Paszkowski's organizations represent wineries, and they are incredibly supportive of this piece of legislation. Why do you think you know what's best for them when they have experience actually running wineries and building businesses? I'm just asking the question.

[Rowland Dunning]

In response, all I can say is that we're responsible for ensuring the trade agreements are upheld at the retail level, and they're not. Back in the eighties, the wineries were also pushing to maintain discriminatory practices that were flying in the face of our trade agreements, and they lost.

For example, in Ontario many, many wineries were in the process of getting off-site winery stores, and as a result of the trade agreements the only wineries that were able to keep them were the ones that already had them in operation. Wineries that had applications on the table and had agreements with landlords to open off-site wine stores were not allowed to go ahead. The wineries lost in that. We're feeling that they could lose again.

[Scott Brison, Liberal, Kings—Hants, NS]

My point is that these are fairly sophisticated business people who have put their own skin in the game and invested their life savings, in many cases, in these wineries. They're represented by smart organizations that presumably know the interests of their members, and they are incredibly supportive of this legislation. I'm just saying they're fairly intelligent, and I suspect they're thinking ahead about these potential trade challenges as well.

I'd like to ask a question to Mr. Stutz. First of all, I want to tell the committee how absolutely proud we are of the growth in the Nova Scotia wine industry. Hanspeter Stutz has been a pioneer in the wine industry in Nova Scotia and has helped build it, and we're very proud of him. Do you see potential for e-commerce in terms of growth in demand and the capacity for you to advertise your wines, for you to ship your wines, for people in other provinces to consume your wines? Do you see a potential in e-commerce to grow your industry within Canada, and for other Canadian wine industries in other areas?

I'd appreciate hearing from the organizations of Ms. Ruddock or Mr. Paszkowski as well.

[Hanspeter Stutz]

Absolutely. I think what we forget today is really the whole tourism aspect. What we're doing in the industry in general in Canada, really.... We noticed that experiential tourism is a very big trend. We can go around the world where wineries are, and it's a huge impact.

On the other hand, I have a little problem with Mr. Dunning if we talk about losing money for a province or losing money for a liquor commission. I see this on the other side, as better profit for wineries. If a winery has a better profit, then the winery has, at the end of the year, a better statement, and this winery can invest; if a winery can invest and expand, they'll hire more people.

[Scott Brison, Liberal, Kings—Hants, NS]

You pay taxes, don't you?

[Hanspeter Stutz]

For me, it's not an excuse to lose money on the liquor commission side for the province. We gain this money on the business side from each winery. I think that's really an economic impact for all wineries that can do this.

[Scott Brison, Liberal, Kings—Hants, NS]

What does the growth in e-commerce provide as a potential for Canadian wines if we unfetter them from these archaic regulations?

[Dan Paszkowski]

I think there are huge opportunities. You only have to look south of the border to our counterparts in the United States, who make significant use of Twitter, Facebook, and all forms of social media, because wine is about a story. Wine is different from other products in that tourism drives the wine industry; when people come to your winery, they want to buy your wine.

Liquor boards are producing apps for iPhones to attract customers to their retail stores, yet our investment in any form of social media is restricted to the population we have within our provincial borders. There is a restriction there. The benefit this will provide is that any sales will deliver tax revenues to all provincial governments.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Brison.

We'll go to Mr. Van Kesteren, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm from southwestern Ontario, and of course we have Point Pelee wine over there. If we're going to do any bragging about wines, if you haven't tasted our whites and our reds from Point Pelee, you really haven't....

The point is this. I just came back from the States—I wasn't born with this tan; I picked it up last week—where I went to a Costco store, and they have a better wine selection than any liquor control board store I've seen in all of Canada.

On the one hand, we want to expand our winery industry here in Canada. Are we afraid to move beyond Canada? We're talking about interprovincial. Why don't I see these great wines in Florida? What's going on? Are we afraid to make that move? Can we compete with the rest of the world, and as Mr. Jean was saying, free the bondage we've inflicted on wineries? It sounds almost Biblical.

I'll just open it up.

[Hanspeter Stutz]

It's very easy. We have, worldwide, an overproduction of wine, as we notice.

You can buy wine from Argentina for 62¢ a litre, but we also have a problem here: we have a very strong currency. If you import American wine to Canada, I think it is 11% or 12% more, because of this currency. There is sometimes a 25% higher Canadian dollar.

Now, to export in a very competitive market, as the wine market is worldwide, is a very tough sell. It's 25% more expensive. We're not talking here about icewine, which is, in general, much more expensive; we're talking about high-end good wine. That's one of the problems. That's one reason I say that if we have this strong Canadian currency, we can be proud of it, but we have a problem.

Why is it not better to open the domestic market and not talk first about exporting? It's good to go to Europe. If the euro is still weak, as it is now, it's okay, but we should first open the Canadian domestic market. That, for me, is so logical. Why are we building these barriers?

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Just to follow up on that, you are saying the bill itself, then, is a step in the right direction.

Take it a step further. I understand what you're saying about the strong dollar, and those are considerations that obviously make a whole lot of sense.

Somebody mentioned a little while ago that transportation is a huge factor. I'm not talking about transporting our Point Pelee wine to B.C.; we're a day's drive from 200 million people. Are we not able to expand that market? Can somebody answer that question?

[Harry McWatters]

I can answer that question for you.

I have dealt with U.S. importers. For them to do any kind of a marketing program for a single SKU, they want 5,000 cases of that single SKU in year one. I can tell you that in British Columbia, if you drew a line of the 200 wineries that produce more than 5,000 cases of wine in total, well over 50% of those wineries would fall off the table. We're a country of basically small family producers. Having that critical mass is a challenge.

Last year, by accumulating juice from other wineries, I packaged 8,000 cases and shipped to one chain in China. Those opportunities are there, but they're not huge, because it's challenging to do that.

This is a small step towards being able to grow the industry a little greater so that we may have those opportunities. We continue to garner huge recognition in competition for the quality of our wines, but we haven't had the commercial quantities in these regions to fulfill those markets in a meaningful manner.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

This is my final question.

Are we doomed to be submitted to the application we've chosen in this country, which is strictly liquor control boards and smaller vintages, or is there an opportunity to become a major wine exporter?

[Harry McWatters]

There is an opportunity, but it's a little challenging. If you have a group of really small producers, how do you go to the market with a large quantity to fulfill, such as the American market, where they have 10 times our Canadian population? You have to take niche markets, which is difficult to do.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Van Kesteren.

We'll go to Mr. Chisholm, please.