Sunday, February 10, 2013

Tied House rule untied and other good news.

Photo: Carbrea Vineyard's Stephen Bishop

Last week was a good week for Stephen Bishop, the owner of Carbrea Vineyard and Winery on Hornby Island as well as the owner of another island business, Sea Breeze Lodge.

Long overdue changes in B.C. liquor regulations, announced last Friday, mean that Bishop will be able to serve his wine in his lodge, effective March 1, for the first time since Carbrea opened in 2006. The government has finally abolished the so-called tied house rule.

It was also a good week for the craft distillers in British Columbia, who got what they have long sought: the ability to sell directly to consumers (like wineries) without paying the government’s punishing markups on those sales. That should mean a significant improvement to craft distiller, hitherto a marginal business. The little bit of revenue the government gives up will more than be offset the taxes it collects from an industry that is poised for expansion.

And it was a good week as well for breweries which will be allowed to have on-site tasting rooms and lounges.

And it was a good week for wineries trying to ship directly to consumers in other provinces, some of which still maintain barriers in spite of last year’s federal legislation to open the provincial borders. The B.C. government has appointed a “wine envoy” to facilitate the opening of the domestic market. He is Herb LeRoy, the former executive director of the lieutenant governor’s office and a very able and diplomatic administrator.

These changes are part of a general liquor law overhaul that seems to be underway to eliminate rules that made no sense but were still enforced in the spirit of the late Col. McGugan, the longtime liquor czar who once said the legislation was all about control.

The tied house rule, in fact, predates McGugan, who called the shots from the 1920s to 1969. The rule said that a liquor manufacturer could not sell its products in any hotel or restaurant it might own. Apparently, this originated more than a century ago when it was thought necessary to stop brewers from owning hotels and thereby creating monopolies for their own beers.

The ban has been pointless for decades. Almost no liquor manufacturer had the least interest in owning a hotel. I am aware of only three examples during the past 15 years that even triggered the tied house prohibition.

Wineries have been allowed to operate restaurants since 1995, but only when the restaurants were on the same property as the winery. Burrowing Owl, Tinhorn Creek and Hester Creek, for example, all have top-rated winery restaurants but they would not have been allowed to operate restaurants elsewhere in the Okanagan (not that they would want to) and sell their wines there.

When Larry Page opened Saturna Island Family Estate Winery, he also owned a rustic lodge on the other side of Saturna Island, four kilometres from the winery. He was told he could not have his wine on the wine list at the lodge. He pushed back by hiring a high-powered lawyer – and the regulators threatened to pull the winery license. Ultimately, he sold the lodge. He does have a bistro at the winery, however.

In 2003, Michael Marley opened Marley Farm Winery on the Saanich Peninsula. Getting the license was a major challenge because he owned two pubs and a golf course. Marley, who was delayed at least a year by the hassle, had to provide the government with notarized statements from his entire family, his Arizona business partners and even the landlords from whom the pubs are leased, that he would not sell Marley Farm wines in his pubs.

Marley Farm, a charming winery, unfortunately closed a few years ago. You have to wonder whether pub sales might have made a difference.

The tied house rule has been a significant business impediment to Steve Bishop at Carbrea. In 2007, he had extensive meetings and correspondence with the provincial government to get the rule lifted, and actually had the impression that legislation would be forthcoming in 2008.
In one letter in 2007 to the late Stan Hagen, the cabinet minister who was also his Member of the Legislature, Bishop argued: “Creating and sustaining a living on Hornby Island is already difficult, given its short tourism season, ferry prices and the tied house rule is an added economic detriment, not only to Carbrea but local businesses also. My primary objective is to merely market and distribute Carbrea wines in an open and transparent manner, alongside other products at our family operated, 15 cottage resort, Sea Breeze Lodge.” [Emphasis in the original.]
Consider how ridiculous the tied house rule was in the case of the Sea Breeze Lodge. Bishop could have offered his guests products from the other two wineries and the meadery on Hornby Island but, until now, not from his own winery.
Now, more than five years later, Rich Coleman, the minister responsible for liquor, has finally pushed his regulators to be flexible. Bishop, and any other liquor maker with an off-site restaurant, will now be able to sell his wine there, as long as the wine list also includes the products of competitors.
Should that change have taken 15 years?


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