Evidence of meeting #74 for Agriculture and Agri-Food in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
A recording is available from Parliament.
President and Chief Executive Officer, Canadian Vintners Association
There are some wines that may have less, and there are some that would have more, but the benefit would go towards those that have greater Canadian content.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
But I would think, and I'm guessing here—and you know the industry better than I—that they're blends because it's cheaper to blend. In other words, the unit cost per production for a Canadian international blend wine is less than a 100% Canadian-grape-based wine. Therefore, if the price were to drop noticeably on the blends—as taxes drop, the price drops—that in fact would undermine the 100% Canadian wine industry.
President and Chief Executive Officer, Canadian Vintners Association
No, it wouldn't undermine the 100%—
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Well, wouldn't consumers buy more Canadian international blend wines because they cost less? That's one of the complaints, isn't it? There's too much international visibility on wine and wine types of products in LCBOs. That's not federal, but I've been in the LCBO, and you have to look long and hard to see all the Canadian wines.
President and Chief Executive Officer, Canadian Vintners Association
There are two types of wines we're talking about. We have two categories of wine in Canada. One is the blended wines. One is the 100% Canadian VQA premium wines. They are two completely different categories attracting two completely different types of consumers. On the blended wines, you're right: they sell for less than $10 per bottle. The 100% premium wines sell for typically more than $10 but over $15 per bottle.
The vast majority of consumers in Canada are consuming blended wine and blended wine products. If we didn't support the blended wine industry, if we didn't have a blended wine industry, that 25% of total sales in Canada would disappear overnight. Producers around the world who are producing blended wines are producing wines in such large quantities that they can get their production costs down to very low levels to be able to capture that market.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
I'm not saying the Canadian international blended wine should be jettisoned. I'm just commenting on the different tax regimes and what the potential impact would be. That's all. I'm not saying they should be yanked; I'm not saying that industry should go away.
I did want to ask another question on container sizes. You made a comment about repealing container sizes. Could you elaborate on that and how that would be advantageous to the wine industry.
President and Chief Executive Officer, Canadian Vintners Association
It wouldn't be advantageous.
Conservative
President and Chief Executive Officer, Canadian Vintners Association
It would not be advantageous.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
I thought you were saying the wine industry would want to repeal the container size restrictions.
President and Chief Executive Officer, Canadian Vintners Association
No. The government announced in Budget 2012 that they were planning on repealing the container size regulations. Our view is that if that proceeds, the competitiveness of the Canadian wine industry has to be taken into account. A decision to repeal the container size regulations is for foods—food products, in general. Wine gets caught up in that even though we are a different product from your average food product. So the container size regulations that we have in place are extremely important to the Canadian wine industry's competitiveness.
We're not the only jurisdiction around the world that has container size regulations; the United States has them, the European Union has them. However, if they are repealed, we are very, very concerned, being a small wine-producing country, that larger producers can come in with large box-size formats, for example, with economies of scale and be able to undercut the Canadian wine industry.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Right, but if the consumer is seeking that out, wouldn't it be advantageous for our industry to be responsive to that need? For example, I was just in a liquor store within the last week and I noticed that there are now one litre...from Canadian companies. I believe they're one litre—not bottles, but what would you call them?
President and Chief Executive Officer, Canadian Vintners Association
Tetra Paks.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Yes, it's something along those lines. So there's some innovation going on in container sizes, and I would think our industry is fully capable of being competitive on that level. I don't know why our industry would shy away from that.
President and Chief Executive Officer, Canadian Vintners Association
You're absolutely correct. We have come up with new glass formats—
President and Chief Executive Officer, Canadian Vintners Association
We have come up with Tetra Paks, we have come up with bag-in-box.
President and Chief Executive Officer, Canadian Vintners Association
We now have aluminum formats. The issue is not the format: we have been competitive, we have come up with new innovations. The importers have come up with innovations that are all operating within the 12 container-size formats that we currently have, ranging from 50-millilitre bottles to a maximum of a 4-litre bottle. If you eliminate those 12 formats and open it up to any size format, we could have hundreds of different-sized wine bottles, and in an industry of our size it would be very challenging for us to be able to compete with a product that may be 15 millilitre less and five pennies less than another bottle—
Conservative
The Chair Conservative Merv Tweed
I have to stop you there. We're way past the time, sorry.
Mr. Valeriote.
Liberal
Frank Valeriote Liberal Guelph, ON
Pierre, I gather you're favouring the brown paper bag model, and it's interesting to hear your protectionist comments when you talk about the excise tax. I'd like to unpack that protectionist approach that Pierre is taking a bit here.
I'm looking at the first bullet point under tax and regulation of your presentation. It says that we should review the tax treatment of Canadian grape content in domestically produced blended wines. I heard you talk about imported blended wines and wanting, presumably, a tariff or excise tax reduction for the Canadian content in imported blended wines. Is that an issue at all?
President and Chief Executive Officer, Canadian Vintners Association
No. What we do in Canada is import foreign wines and we blend them with Canadian wines to be sold under a category known as international Canadian blends. Each bottle produced in Canada has Canadian content in those products. The Province of Ontario regulates that to have 30% Canadian content in that bottle. It's a requirement to bottle all those products in Canada.
What we're saying is that we have an excise exemption on the Canadian content in 100% Canadian wines. We also believe we should have some form of excise benefit for the Canadian content in Canadian blended wines produced in Canada. We aren't exporting any Canadian wines to a different country for blending to return back to Canada. So what we're looking for is the same treatment for the grape going into a VQA wine as the grape going into a blended wine, if that grape is grown in Canada.
Liberal
Frank Valeriote Liberal Guelph, ON
Is that the only area you speak about when you talk about taxes? That is the specific harm you'd like fixed, in essence.
President and Chief Executive Officer, Canadian Vintners Association
It's a critical one. When we got the excise benefit in 2006, the excise tax increased by 21% on all other wines. So between 2006 and 2012, blended wines have paid an extra $80 million in tax.
Liberal
Frank Valeriote Liberal Guelph, ON
I'd like to pick up on a theme that is pervasive throughout the document, where you talk about South Africa owning 100% of its market and Argentina 96% and then you encourage VIA and our airline industry to sell Canadian wine. Then you mentioned liquor control boards not stocking enough Canadian wines to choose from. I'm not in sales, but I can only imagine they stock what the consumers are buying.
Two questions arise. First, are you suggesting they stock more Canadian wines in the hope that Canadians will buy more Canadian wines? Can you unpack that a bit? I'm not certain what you're saying. Second, I can only imagine.... I know that Italians tend to drink only Italian wines and that comes from a sense of pride in an industry that's been around for thousands of years. Is it only pride in those countries that causes them to purchase their own wines, or alternatively, and I'm hoping you know this, are there tariff barriers in these other countries that encourage them to drink only their own wines and not to import Canadian wines?