Quality_Control_5.jpg

Quality_Control_5.jpg

B.C.’s VQA program is a much-lauded effort to create 
standards for B.C.’s wine industry. But does VQA spell 
trouble for retailers?

This month, as B.C. entertains the thousands of international visitors who have come to watch and celebrate athletic achievement, many local businesses are strutting their stuff, showing the world what the province has to offer. On tables around town, B.C. wines are being uncorked with all the pride one would expect of a province home to one of the New World’s hottest wine regions: the Okanagan Valley.


Wines from the valley have been winning scores of international awards in recent years, and B.C. residents have been buying in, purchasing $165-million worth of wine bearing the Vintners Quality Alliance (VQA) seal last year alone – two per cent more than in 2008, even as the value of wine sales trended downward in the face of tight economic times. VQA wines, made from 100 per cent domestic fruit, have received an additional boost over the past year as an increasingly savvy consumer recoiled from “Cellared in Canada” wines: those sold in the local section of B.C.’s liquor stores made from a blend of domestic and imported juice. According to advocates of local product, the VQA seal is the best guarantee of wines made solely from the juice of B.C. grapes.


All of this has been good news for 
operators of B.C.’s 19 VQA wine stores, which the province began licensing in the late 1990s and whose collective mandate is to make B.C. wine available across the province, from Kelowna to the Kootenays. Consumers are buying more wine than ever before, according to Jeff Wong – owner of one of the newest VQA stores, Mud Bay Wines in White Rock – and B.C. wines are delivering flavour and quality rivalling many foreign wines.


“It’s just convincing them to drink B.C. wines as opposed to Australian, Californian, French or Italian wines,” he says. “It’s been great for business because you can tell consumers about these new wines.”


Unlike other store licences, licences for VQA stores are held not by the store owner but by a third party: the B.C. Wine Institute (BCWI). In exchange, store ­owners have access to a supply of product that wineries supply on consignment (reducing stores’ investment in inventory) and benefit from the marketing and promotion activities of the BCWI. The arrangement effectively gives store owners a leg up in the competitive retail sector, which is especially tough for shops specializing in a single kind of product. But while the principle behind the VQA stores is widely lauded, the practices of the VQA’s governing authority have proven highly contentious.


Legislative changes two years ago stripped the BCWI of most responsibilities save for promotion and marketing. Its new focus led to a revamping of relationships with store owners such as Jim Ruhland, former operator of Oliver’s Wine Country Welcome Centre in Oliver, B.C. The wine store closed at the end of May 2009 after the BCWI recalled its licence on the grounds that it wasn’t meeting the $600,000 annual sales target the BCWI required. While the original purpose of the VQA stores was to serve industry, Ruhland believes the BCWI has become more interested in using the stores as a profit centre than a promotional vehicle. He thinks that approach threatens the very mandate it seeks to fulfill.


“We are not supposed to be just a retail outlet; we are supposed to be an information centre,” he says. “Now it’s just about hard-core business numbers. They even raised the quota for all the stores right in the middle of a recession – it’s ridiculous.”



[pagebreak]Ruhland estimates that he sold more than $4.5 million in wine over six years between the Welcome Centre and the adjacent Toasted Oak Wine Bar & Grill. The sales figures are impressive for a community of 5,000 people that claims to be “the wine capital of Canada” but fell short of Ruhland’s contractual obligations. The BCWI wanted him to relocate, but he contends he wasn’t given enough time to make the appropriate arrangements. When the licence was pulled, he relaunched the Toasted Oak as the Firehall Bistro, but the store remains shuttered.


“They want the revenue from their stores, but they don’t want to behave like a big retailer should,” Ruhland says of the BCWI, expressing particular dissatisfaction with the institute’s top-down approach that he believes puts undue demands on store operators. “They’re basically making people take the risk for them, opening retail outlets. And if they don’t hit [the sales target], then they collapse them.”


Ironically, the bcwi’s policies reflect historical divisions regarding participation in the VQA program that the recent legislative changes aimed to resolve.


Created by the B.C. and Ontario wine industries in 1990 with provincial government support, the VQA program’s original aim was to assure consumers of the quality and origin of Canada’s fledgling vinifera wines as wineries went head-to-head with competitors from California and elsewhere post-NAFTA. Victoria established the BCWI to oversee B.C.’s program, marketing VQA wines and co-ordinating research initiatives on behalf of industry.


But the institute was also voluntary, and a handful of wineries chose not to join. Some simply wanted to fly solo; others voiced concern at the conflict inherent in industry both administering its own quality-assurance program and then marketing the wines whose quality it was adjudicating – especially when some members of the tasting panels were from the wineries participating in the program. In 2008, in an attempt to heal the rift, the government established the B.C. Wine Authority to administer a new set of production standards for B.C. wine and provide independent oversight of wine standards. 


Reduced to a marketing and lobbying role, the BCWI turned its attention to the VQA stores. A new contract was negotiated with – or, in the words of some, imposed on – store operators in late 2008 that set a $600,000 annual sales target, just as consumers were trading down on wine purchases. Stores that couldn’t meet the new targets faced the prospect of having their licences clawed back by the BCWI. Additionally, in February 2009 the BCWI implemented a levy on the handful of non-member wineries producing VQA wines and listing their products in VQA stores – reviving memories of the old divisions that had split wineries into two camps during the 1990s.


[pagebreak]The surcharge was slammed by non-member wineries as a mean-spirited penalty for not being a BCWI member. Langley’s Domaine de Chaberton Estate Winery and Okanagan Falls’ Blasted Church Vineyards were among the wineries hit with the higher costs. Blasted Church responded by pulling its product from B.C. VQA stores, while Domaine de Chaberton simply upped its price in a tit-for-tat measure to cover the inconvenience. Neither move helped the VQA stores: sales of Domaine de Chaberton’s wines slowed, while aficionados of Blasted Church went elsewhere. 


Store operators were left not only answering customers’ questions but asking some of their own. One of the most common was whether the BCWI should hold store licences at all. Ruhland, for one, doesn’t think so: “The BCWI needs to actually give these licences to the operators themselves so that they can actually operate like independent businesses.” 


But that’s not about to happen, according to Trudy Heiss, co-owner of Gray Monk Estate Winery in Okanagan Centre and a member of the BCWI committee that oversees the VQA stores: “The BCWI and the wineries that belong to that association would not give those up.” 

Mud Bay’s Jeff Wong acknowledges that the arrangement with the BCWI is not without its shortcomings but says the institute is more responsive than it was when he bought Mud Bay three years ago. 


“Orders were barked down from the chairman or the board of directors to the executive director, and the executive director was just a peon handing out orders. Nothing ever got addressed, so it was very frustrating,” he recalls. “They’ve come a long way. They’re actually listening now.” He’s also pleased with the lower overhead associated with the consignment arrangement. Still, Wong remains critical of the lack of a connection between participation in the VQA program and the retail outlets. “Wineries can be VQA but choose not to supply wine to our stores. And that’s a confusing message to the consumer,” he says. “Why aren’t they supplying us?” 


Wong, like the more vocal critics of the VQA store arrangements, believes operators should also have the freedom to stock other made-in-B.C. products, such as microbrews, fruit wines, ciders and spirits. “We get asked about fruit wines all the time,” Wong says, arguing that it’s a missed opportunity for the BCWI. “The wine institute would profit from it,” he says. Moreover, when B.C. grape wines are in short supply, as happened with the 2007 vintage, having the extra product would help store operators meet their sales targets and remain viable. “If they have to sacrifice some wine, at least they could make it up with micro-beer or ciders or fruit wines.”


That doesn’t sit well with Trudy Heiss, who says store operators shouldn’t try to bend the rules. “There are VQA rules and they have to abide by them if they want to have a licence,” she says. “There are different formats where they can look for different licences if they want, but if they want to run a VQA store, those are the rules.” She adds that store owners who survive the current transition period stand to benefit; a branding program, which Heiss expects to be launched in the not-so-​distant future, will standardize store signage, giving outlets a recognizable presence in the marketplace.


“It’s easy to walk away. But it’s sometimes harder to stick together and make this thing go,” she says. “Right now, I feel very positive that [these improvements] are going to go forward and it’s going to help everybody.”