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February 2015 Wines&Vines 19 wine industry news S eattle, Wash.—Good fences make good neighbors, goes the old saying, but regula- tions governing the British Colum- bia wine trade make for barbed wire when it comes to wines from Washington state. British Columbia should be a logical market for Washington state wineries, which are within hours of both Vancouver—west- ern Canada's most cosmopolitan and populous city—and the Okan- agan Valley, which is contiguous with Washington's own grape- growing regions. But while proximity make the markets natural destinations for wineries on both sides of the bor- der, entry hasn't been so easy for Washington state wineries eyeing the B.C. market. The latest obstacle is a shake- up in B.C. liquor regulation that will see a new markup structure kick in April 1. The new markup structure will establish a single wholesale price for all retailers and see the per- liter markup shift to 89% on the first $11.75 of value and 67% on any additional value. (Previously the markup was 117% on the first $10.25, plus 51% for additional value and a 30% discount to es- tablish the wholesale price for private wine stores.) A liter of wine that enters the province valued at $24 currently costs the retailer $30.10, a 30% discount from the government retail price of $43. The new markup structure will boost the private retailer's cost to $42.66 prior to the store's own mark up. That concerns Steve Warner, president and CEO of the Wash- ington State Wine Commission. "Our wineries are concerned and looking to better understand the impact of the proposed changes to wholesale pricing," he told Wines & Vines. "Initial esti- mates we've seen suggest that retail prices for most imported wines will rise 10% to 50%, and that the rise will be particularly significant for premium wines." The markup isn't the only change on the horizon. B.C. also plans to allow wine sales in grocery stores, with local wines favored for placement. This "could further cut into Washington wines' sales," Warner said. "Given these considerations, some wineries will likely find other markets easier to ship to." While the Washington State Wine Commission has long sought to build a market in British Colum- bia for the wines its members pro- duce, it has enjoyed a warmer reception in the eastern province of Quebec, which is the largest market for Washington wine in Canada, followed by Ontario. British Columbia has been a dif- ficult market to crack, however. While private stores carry a broad selection of Washington state wines, with products from as many as two dozen wineries of- fered at outlets across the province, the government-run liquor stores patronized by the general run of consumers carry just 32 Washing- ton wines, primarily from Chateau Ste. Michelle, Charles Smith Wines and Long Shadows Vintners. —Peter Mitham B.C.'s Higher Markups Worry U.S. Exporters " Our wineries are concerned and looking to better understand the impact of the pro- posed changes to wholesale pricing." —Steve Warner, Washington State Wine Commission