Wine & Liquor Sales Down in BC (and Bordeaux)
mhicken May 11th, 2009
A couple of interesting news items this morning …
The Vancouver Sun is reporting that liquor sales in BC are down by 7.2% by volume and 4.9% by value for the first 3 months of 2009 as compared to the same period in 2008. The article speculates that the drop could have been caused by “bad weather”. However, personally I doubt that is the cause. The weather is generally not good in the first 3 months of any year and the Weather Network confirmed that the weather was really no worse this year than last. An obvious culprit is the economy but historically liquor sales tend not to drop dramatically during economic slumps. Perhaps, the BC government and liquor board may wish to consider another explanation … taxes (and therefore prices) are too high. It’s my belief that prices in BC have simply become uncompetitive and unrealistic. When a consumer knows that the same product can be purchased for half the price south of the border and only slightly more than that in Alberta, you have a problem. Consumers feel (rightly) that they are being gouged and will likely either limit consumption or attempt to source product from elsewhere. The BC government needs to have a serious look at the pricing structure in this province if it wants to address this issue.
And in France … the economic slump has seriously affected the sales of high end Bordeaux wines which, as you might expect, are more susceptible to economic circumstances than lower priced products. In response, the Bordelais have slashed prices for their futures sales. However, this has created cascading problems for the entire industry because the 2008 wines are now generally much cheaper than the 2007s. The latter was an inferior vintage and retailers and distributors are now stuck with 2007 product which they cannot sell … some are reacting by slashing prices on those wines and taking a loss. In Canada, it will be interesting to see how the liquor boards react. The LCBO and BC LDB are big buyers of Bordeaux futures and, as a result, a lot of 2007 wines will be heading here for release next year. Consumers are unlikely to want to purchase those wines at the prices that the boards paid, particularly once they have been marked up with all of the hidden fees/markups/taxes. Will the liquor boards take a loss and slash prices? If so, how will that affect private retailers who are also trying to sell these wines? Looks like there is a headache brewing.
