Is BC Stretching the Definition of ‘Canadian’ in Liquor Stores? - THE TYEE

Puerto Rican rum, Louisiana whiskey and a gin owned by a Texas-based drink empire. These are just a few products currently labelled Canadian in B.C.’s provincial liquor stores after the province said it would remove U.S. alcohol from the shelves last month to make way for local products. It should “enrage” British Columbians that the BC Liquor Distribution Branch, a Crown corporation responsible for distributing alcohol in the province, is misleading the public while making it difficult for small, local producers to sell their products in provincial liquor stores, an industry representative told The Tyee. “They’re maple leaf-washing foreign products,” Craft Distillers Guild of BC president Tyler Dyck said. “They’re trying to keep the revenue stream going, anything that they can even tenuously link to being Canadian, even if it’s just putting a sticker on it.” BC Liquor stores began labelling Canadian products with a maple leaf sticker last month after the province said it would remove U.S. products. The move was in response to U.S. President Donald Trump’s tariffs on Canadian goods. While the alcohol ban originally targeted products from “red states” — those supporting Trump’s Republican party — it was later expanded to include all U.S. liquor. “While some of us may be disappointed at not being able to access some of our favourites, this is an excellent opportunity to sample Canadian products,” B.C. Premier David Eby said in a March 10 news release, adding, “British Columbia distillers produce many distinguished spirits.” While provincial liquor stores may be clearing shelves of some U.S. products, the B.C. government has failed to remove long-standing barriers that make it difficult for craft distillers to sell in local liquor stores and expand their businesses, Dyck said. Dyck said he believes the BC Liquor Distribution Branch may be protecting its revenue stream, which contributes more than $1 billion to provincial coffers every year. He said big U.S. brands such as Jack Daniels, which is no longer in BC Liquor stores, provided a one-stop shop for a variety of products with high financial returns. Now, he believes the province is turning to other large distributors that it can “tenuously link to being Canadian” to fill that void. With more provincial support, Dyck said, B.C.’s 85 craft distilleries could grow to be a multibillion-dollar industry rivalling the province’s venerated wine industry. What qualifies as Canadian, and why In a statement to The Tyee, B.C.’s Ministry of Public Safety and Solicitor General, which oversees the Liquor and Cannabis Regulation Branch, said BC Liquor plans to add 90 new B.C.-made wines, craft beers and craft spirits to its selection. “The minister has directed the [BC Liquor Distribution Branch] to explore ways to reduce barriers for B.C. manufacturers to access empty shelf space at [BC Liquor] stores following the removal of U.S.-made products,” the ministry said. It added that the current ban on U.S. products “only applies to U.S. liquor products that are manufactured in the United States. It does not include U.S. brands that are produced domestically and support B.C. and Canadian manufacturers and jobs in local industries.” The BC Liquor Distribution Branch sent a similar response, saying it is “supporting Canadian manufacturing jobs.” It added that the Canadian Food Inspection Agency has “jurisdiction over the legal requirements with respect to country of origin on beverage alcohol labels, which are prescribed under federal legislation.” “Liquor suppliers who sell their products to the BC Liquor Distribution Branch for resale in B.C. are contractually responsible to ensure the accuracy of their product labels and the compliance of those labels with all applicable laws,” a spokesperson wrote.

But Dyck said the province is stretching the definitions of “manufactured” and “produced” as it continues to carry some U.S.-based liquor companies under the Canadian banner. For example, Southern Comfort, produced by Louisiana-based Sazerac Co., is made in the United States and shipped to Canada, where it is “blended and bottled,” according to the label. The brand is marked as Canadian in BC Liquor stores. Bacardi rum, described on the label as “a blend of Puerto Rican rum,” a reference to the U.S. territory where it is distilled, also bears a maple leaf because it’s bottled in Canada. Bacardi, headquartered in Bermuda, said a few years ago that it employs 55 people in Canada out of its global workforce of more than 7,000. Neither Sazerac Co. nor Bacardi responded to The Tyee’s request for comment. Even Empress 1908 gin, the iconic B.C. spirit produced by Victoria Distillers, was purchased by Texas-based Milestone Brands in 2022. “When you put a [maple leaf] sticker on Empress gin, the profits go to Texas,” Dyck said. Victoria Distillers senior marketing manager Meghan Rogers said in an email that the company is “proudly produced in British Columbia,” with a distillery located in Sidney and a packaging facility in Delta. It employs 55 people in the province, she said. Victoria Distillers is considered a commercial distillery because it uses neutral grain spirits, a pre-distilled product that can be sourced from anywhere. By comparison, B.C. craft distilleries are required to use only B.C. agricultural products, and the spirits must be fermented and distilled on-site using traditional distilling techniques. The distilling process uses a much greater volume of agricultural products from across the province per bottle compared with wineries, Dyck said, and grains are grown from the northeast to the Okanagan to Vancouver Island. But Dyck, who is also the CEO of Vernon-based craft distillery Okanagan Spirits, said the province has been slow to address long-standing issues that are holding the industry back. Make it VQA, but for spirits In its bid to add more B.C. products to liquor store shelves, the province recently issued a “listing invitation” to Canadian wineries, craft breweries and craft distilleries, it said, with “a preference given to B.C. craft.” The listing invitation closed in early April and responses are currently being reviewed by BC Liquor, the ministry said. But Dyck said this invitation feels “empty” until the ministry addresses issues that prevent craft distillers from selling in BC Liquor stores. He would like to see the province create an agreement with craft distilleries like the one it has with B.C. wineries. In 1990, BC VQA, or the Vintners Quality Alliance, set origin and quality standards for B.C. wines that require them to be “100 per cent grown and made in British Columbia.” VQA guarantees winemakers a better return on their product by using a significantly lower markup and offering a reimbursement to wineries, allowing them to compete against big multinational producers. That has allowed B.C. winemakers to grow to a nearly $4-billion industry attracting more than one million visitors every year and generating $600 million in spinoff revenue for the economy, according to the province.

While the selection of B.C. wines in local liquor stores is extensive, few craft distilleries can be found on the shelves. That’s because BC Liquor stores put a much higher markup on craft spirits. The graduated markup begins at 124 per cent for craft distilleries, compared with 89 per cent on B.C. wineries, which also get their VQA reimbursement. That means craft distillers pocket only about a third of the sticker price on their product while winemakers take home more than 80 per cent, Dyck said. In order to price their product for the market, craft distilleries selling at provincial liquor stores are doing so at a loss, he said. “If I put product in, I’m going to lose money,” he said. “We’ve been telling them for years, ‘You have a proven track record with wine. It’s grown from nothing to a $4-billion-a-year industry. Just treat us the same.’” The province’s criteria for craft distilleries also charges a steep markup on any product sold if the business exceeds 50,000 litres in a single year. (For reference, Dyck compares that volume to “45 minutes’ production at a big distillery like Jack Daniels.”) There is no similar cap for B.C. wineries or craft breweries. Okanagan Spirits has been at its production cap for a decade, Dyck said. “Imagine running a business where you should be able to expand, you win Distillery of the Year, and you can’t sell another bottle or else you’ll incur a $280,000 penalty,” Dyck said. “We’ve got the product. We can make product. But if we go over a production level, they put us out of business.” When pressed on whether the ministry would make the changes that could give craft distilleries more prominence in BC Liquor stores and expand production, the ministry said its liquor distribution branch “is looking at all options.” “The minister has asked the LDB to look at what, if any, changes could be made to support the industry. Until that review is completed, there isn’t much more we can say at this time,” a spokesperson wrote. Dyck fears the province is wasting an opportunity to put B.C. craft distilleries on the map. “You have the public demanding local. They want to support Canadian,” he said. “If you don’t [start] giving it shelf space so that Canadians can see it and can invest in it and help that grow, then we’re never going to be relevant. “Canadians and British Columbians just want to do the right thing, and they’re getting directed to the wrong thing.” In the meantime, consumers wanting to buy local spirits can purchase directly from B.C.’s craft distilleries, either in person or online, he said.